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Micro-Finance Decision Making: A Field Study of Prosocial Lending

2010; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.1634949

1556-5068

Jeff Galak, Deborah A. Small, Andrew T. Stephen,

Islamic Finance and Banking Studies

Prosocial lending in the form of micro-financing, small uncollateralized loans to entrepreneurs in the developing world, has recently emerged as a leading contender as a cure for world poverty. Our research investigates, in a field setting with real world and consequential data, the characteristics of borrowers that engender lending. We observe that lenders favor individual borrowers over groups or consortia of borrowers, a pattern consistent with the identifiable victim effect. They also favor borrowers that are socially proximate to themselves. Across three dimensions of social distance (gender, occupation, and first name initial) lenders prefer to give to those who are more like themselves. Finally, we discuss policy implications of these findings.