The Value of Financial Intermediation in African Online Debt Crowdfunding: Evidence from Nigeria
Year: 2025
Type: article
Abstract: This study investigates the role and effectiveness of financial intermediation in African online debt crowdfunding, using empirical evidence from Nigeria.Drawing on a dataset of 500 loan observations from leading Nigerian crowdfunding platforms, the research evaluates how platform-led screening, interest rate structures, and loan tenors influence loan performanceparticularly default probability.The findings reveal that platform screening significantly reduces default risk and moderates the adverse effects of high interest rates, underscoring the value of algorithmic intermediation in lowtrust, high-risk environments.While risk-based pricing is associated with increased default likelihood, longer loan tenors marginally improve repayment outcomes.These results highlight the importance of contextsensitive intermediation mechanisms in emerging markets, where traditional credit infrastructure is often weak or absent.The study contributes to the literature by demonstrating that digital platforms in Africa are not merely technological innovations but institutional substitutes that enhance credit allocation, investor protection, and financial inclusion.Policy recommendations include strengthening regulatory frameworks, promoting adaptive pricing models, enhancing platform governance, and supporting inclusive access to crowdfunding.The paper concludes by identifying future research directions, including cross-country comparisons, algorithmic fairness, and the integration of crowdfunding with climate finance and Islamic financial instruments.Overall, the study affirms the transformative potential of digital intermediation in reshaping Africa's entrepreneurial finance landscape. Objectives of the StudyThis study aims to: Evaluate the impact of platform-led financial intermediation on loan performance in Nigeria's online debt crowdfunding market.Compare outcomes between platform-screened loans and investor-selected loans.Assess the implications of intermediation for investor returns, borrower discipline, and funding efficiency. Research QuestionsDoes financial intermediation reduce default rates in African online debt crowdfunding platforms?How does platform involvement affect investor returns and time to funding?What mechanisms of intermediation are most effective in mitigating credit risk in the Nigerian context? Justification for the StudyThis study is timely and relevant for several reasons: Policy relevance: Regulators such as Nigeria's SEC are developing frameworks for crowdfunding.Evidence-based insights can inform policy design.Operational guidance: Platforms need empirical benchmarks to refine their intermediation models.Investor protection: Retail investors require transparency and risk mitigation strategies in a nascent market.
Author: Oluseun Paseda
Institution: University of Ibadan
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4413048868