Citation

Kizige, Joshua Abraham and Nguyen, Lan Thi Phuong and Kwan, Jing Hui (2026) SME credit risk assessment in fintech lending: The role of paid-up capital. Journal of the International Council for Small Business. pp. 1-25. ISSN 2643-7015

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Abstract

Financial technologies (fintech) lending platforms increasingly rely on internal credit models to assess small and medium-sized enterprise (SME) risk, raising questions about the role of traditional financial signals. Drawing on signaling theory, this study examines whether paid-up capital serves as a credible indicator of SME creditworthiness in peer-to-peer (P2P) lending using data from Funding Societies Malaysia. Analyzing 757 SME loan applications with ordinal logistic regression, the results show that higher paid-up capital significantly reduces the likelihood of receiving riskier loan grades. Loan amount, duration, interest rates, and industry sector also significantly influence risk assessments. Unexpectedly, older and larger firms are associated with higher risk, suggesting platform-specific evaluation dynamics. These findings indicate that digital lending environments may interpret conventional risk indicators differently from traditional systems. The study provides early empirical evidence on the role of paid-up capital in fintech credit evaluation and highlights its importance in SME risk assessment within P2P lending markets.

Item Type:	Article
Uncontrolled Keywords:	Small and medium-sized enterprises (SMEs), Paid-up capital, Peer-to-peer (P2P), lending
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management > HD62.2-62.8 Management of special enterprises
Depositing User:	Ms Suzilawati Abu Samah
Date Deposited:	04 Sep 2026 02:05
Last Modified:	04 Sep 2026 02:05
URII:	http://shdl.mmu.edu.my/id/eprint/16675

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