Micro-Finance Decision Making: A Field Study of Prosocial Lending
Carnegie Mellon University
Deborah A. Small
University of Pennsylvania - Marketing Department; Carnegie Mellon University
Andrew T. Stephen
University of Pittsburgh
December 9, 2010
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.
Number of Pages in PDF File: 55working papers series
Date posted: July 6, 2010 ; Last revised: April 11, 2012
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