Can Social Disconnectedness Inhibit Online Trade? Examining the Effects of Digital Distance on Peer-to-peer Lending

The extant literature has shown that offline group proximity manifests in online peer-to-peer lending platforms, inhibiting online transactions in those markets. The findings of this research suggest that digital distance, as measured by the rate of Facebook friendship between country pairs, can also influence lending actions in bi-country lending. Building on a dataset from Kiva.org, we show that digital distance significantly and negatively affects bi-country lending actions, on top of other distance-related barriers discussed in the literature. The results also shed light on the role of government policies regarding local IT infrastructure and Internet freedom, revealing that greater levels of IT infrastructure and Internet freedom can compensate for the negative effect of digital distance on prosocial lending

The Role of Religion in Online Prosocial Lending

The Internet has long been argued to have “flattened” the world. A variety of work, however, has shown that cross-border frictions continue to manifest through various individual level differences, e.g., cultural, demographic, and geographic. We extend this literature here, offering a novel consideration of religious differences as a significant barrier to online peer-to-peer transactions in the context of prosocial lending. Specifically, we propose a measure of religious distance between any given pair of countries. We then incorporate this measure into a standard gravity model of trade, which we use to explain country-to-country lending volumes between 2006 and 2017 at kiva.org. We demonstrate the negative and significant effects of religious differences on lending activity over and above other established factors. Moreover, we demonstrate that the effects of religious differences vary a great deal, being moderated by the social environment characterizing both a lender country and borrower country in a given time period. That is, we show that increases in the degree of social hostilities within a lender country amplifies the baseline (negative) effects of religious differences on lending activity. At the same time, we demonstrate that diversity of religion and greater physical distances attenuate the role of religious differences

THE IMPACT OF TEAM RANKING ON TEAM LENDING PERFORMANCE: AN EMPIRICAL STUDY ON KIVA

Prosocial crowdfunding, such as Kiva, puzzles researchers regarding what motivates online peers to lend for free, and how voluntary online participation could be organized to create great social goods. A common practice of prosocial lending websites is to enable self-organizing teams. In this paper, we are interested in the impact of team ranking, and thus team reputation on its lending performance. Contradicting predictions could be derived depending on the theoretical lenses. While social identity theory suggests that better ranking strengthens individual identification and promotes lending participation; economic theory on public goods indicates that good ranking may trigger a crowd-out effect. To empirically explore the relationship between team ranking and team performance, we collected data from Kiva, the largest prosocial crowdfunding platform. Kiva enables lenders to form teams, and teams are ranked monthly on both lending performance and member recruitment. Our data analysis suggests that appearance on the top ranking list leads to a reduction in future team lending indicating that good team-rank triggers the crowd-out effect. Meanwhile, salience on the member recruitment list does not show any significant impact on lending performance. Our finding suggests that team reputation may not promote identification in this context

The Role of Online Peer-to-Peer Lending in Crisis Response: Evidence from Kiva

Online peer-to-peer (P2P) lending, a new form of microfinance, has been touted as to its prominent potential for reducing world poverty. Although a growing body of research has been devoted to examining online P2P lending, how such platforms actually make a difference in curbing poverty has yet to be fully explored. The Ebola outbreak of 2014 provides us a unique empirical opportunity to explore such broader impacts of online P2P lending. We investigate how the demand and supply sides of P2P lending platforms react to an unpredictable crisis. Employing a difference-in-difference identification strategy with data from Kiva.org, we conduct country- and loan-level estimations. Results show upward trends on both demand and supply sides of P2P lending; borrowers request more financial capital and lenders are more active in their lending behaviors in the post-crisis period. We extend online P2P lending literature by investigating the influences of “off-platform shocks on within-platform behaviors

The devil is in the details: The effect of nonverbal cues on crowdfunding success

Many reward-based crowdfunding platforms encourage entrepreneurs to introduce their projects and make a personal appeal with a video clip. In this study, we investigate the impact of such a pitch video on financing outcomes. Grounded in social perception literature, we propose that effective use of nonverbal cues in a pitch video increases funding success. We coded and analyzed videos of crowdfunding campaigns and found that an entrepreneur could improve the funding outcomes by gazing less, appearing early, and reducing speech hesitations in a pitch video. We also found that smiling has no impact on funding success

P2P lending and Natural Disasters: Is Altruistic Behavior conditional?

In the aftermath of natural disasters, borrowers seeking credit from traditional sources, such as banks, may encounter higher interest rates than in pre-disaster periods. We examine the lending behavior of peer-to-peer (P2P) platforms in the wake of disasters. Since P2P platforms involve individual investors in making lending decisions, they accommodate both profit motives and empathetic responses. Empirical evidence from psychology suggests that empathy can lead to prosocial behavior. Consistent with this assertion, we find that loans affected by natural disasters have lower interest rates than comparable loans not issued in the wake of disasters. Our study finds that lenders are involved in a prosocial behavior and are ready to give away some part of their interest income to help the communities in need

Crowdfunding: A novel source of finance? Lessons for small firms from a synthesis of the literature

Crowdfunding is an emerging phenomenon whereby agents make an open call for funding to large numbers of potential contributors (‘the crowd’), usually via online intermediaries known as platforms. While the size and variety of global crowdfunding practices continue to grow rapidly, academic research is only now beginning to form a coherent body of knowledge relating to this potentially disruptive financial phenomenon. This aim of this study is to bring together the research literature on crowdfunding from a wide variety of different disciplines and subject areas into a collective whole with the specific aim of providing advice and guidance to small firms seeking to raise entrepreneurial finance. From summarising the current state of knowledge on crowdfunding and providing advice to entrepreneurs, our study contributes to the literature by stimulating various conventional thinking and beliefs in the field

Judging Online Peer-To-Peer Lending Behavior: An Integration of Dual System Framework and Two-Factor Theory

The past decade has witnessed a growing number of business models that facilitate economic exchanges between individuals with limited institutional mediation. One of the important innovative business models is online peer-to-peer (P2P) lending, which has received widely attention from government, industry, investors, and researchers. Based on dual system framework and two-factor theory, this research proposes a research model to investigate the role of various signals from the P2P platform in affecting lender’s investment decisions. With data collected from PPDAI, a popular Chinese P2P lending site, we test the proposed model with logistic regression and hierarchical linear model. The results reveal that most of the factors perform significantly in lenders’ decision making. We also find the specific information of an auction itself is more important than borrower’s characteristics to a large degree. Finally, the research emphasizes that bid number performs well in moderating most of the relationships between variables

Crowdfunding and Sustainable Development: a good match?

This dissertation sets out to explore the role of crowdfunding in promoting sustainable development. It explores the role of specialized crowdfunding platforms in contributing to SD and under which conditions they can contribute to SD by considering both platform-related and founder/product-related factors. The dissertation employs two articles in order to explore this. The first is a conceptual paper based on a deductive reasoning approach which investigates a specific type of crowdfunding platforms (i.e. Islamic crowdfunding platforms) and their potential contribution to sustainable development through a conceptual typology. The second is an empirical paper exploring how crowdfunding could benefit developing countries in moving toward sustainable development. It investigates whether and how geographical factors (specifically the distinction between developed and developing countries) may have an impact also in a crowdfunding context, i.e., on the success of prosocial crowdfunding campaigns. The dissertation finds that crowdfunding contribution to sustainable development is not granted, and it is context-specific. Crowdfunding platforms play a critical role in contributing to sustainable development through the several actions and strategies they adopt. How the crowdfunding platform promotes itself and the type of crowd it targets could impact its sustainable development contribution and the sustainable development goals to which it contributes. Moreover, founder/product-related factors have an impact on the success of crowdfunding campaigns aiming to contribute to sustainable development. Donors’ decision-making behaviours could be influenced by home bias and the perceived credibility of the project initiator, as signalled by the country of origin. Thus, donors prefer allocating their donation budget to developed countries and, when allocating their budgets to developing countries, support project initiators from developed countries rather than from developing countries. Therefore, although crowdfunding possesses considerable potential to contribute to sustainable development, it must overcome numerous obstacles in order to become a genuine driving force for sustainability. The dissertation contributes to the literature in various capacities. Firstly, it contributes to the literature which investigates the innovation potential of CF in contributing to SD, to the literature on CF literature and geography, as well as to charitable-giving literature in the online context. Second, it provides a typology for Islamic crowdfunding platforms to understand the role of these platforms in contributing to sustainable development, which could help policymakers and international development actors to make more informed decisions about which type of Islamic crowdfunding platforms they should regulate and/or support. Finally, it shows the challenges of specialised crowdfunding platforms in contributing to sustainable development in developing countries and the role of geography in the success of prosocial crowdfunding campaigns

An Economic Analysis of Disintermediation on Crowdfunding Platforms

Prosocial crowdfunding platforms can work through direct peer-to-peer (P2P) lending or through intermediaries, incurring different costs to borrowers and lenders. This study investigates the incentives of lenders and borrowers’ and how they would choose between the two types of platforms. We model the intermediary as a profit maximizer who filters projects, provides high quality borrowers with access to the platform, and ensures repayment rate to lenders. Our initial findings suggest that the introduction of direct P2P lending platform enables the intermediary to reduce its interest rate and to raise its screening threshold on the intermediated platform. The P2P lending platform also incentivizes more altruistic lenders to shift to the direct funding platform, which enables riskier borrowers to get funded. These findings suggest that the introduction of disintermediated P2P platform improves social welfare on the prosocial crowdfunding platforms