Digital Lending and Bank Profitability in Selected Asian Countries

Abstract

Digital lending is considered vital for innovation and economic growth. Many countries have experienced digital lending as alternative to formal financing channels. The growth in digital lending may have implications for banks. In this research we estimate the impact of digital lending on bank profitability in three south Asian countries. We collect banking and macro data from 2012-2023 and run panel model regression. Our results are that digital lending reduces bank profitability in our sample of banks. Our results imply that banks should adopt digital lending so they may compete with digital platforms.