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

55 Pages Posted: 6 Jul 2010 Last revised: 1 Aug 2014

Jeff Galak

Carnegie Mellon University

Deborah A. Small

University of Pennsylvania - Marketing Department; Carnegie Mellon University

Andrew T. Stephen

University of Oxford - Said Business School

Date Written: December 9, 2010

Abstract

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.

Suggested Citation

Galak, Jeff and Small, Deborah A. and Stephen, Andrew T., Micro-Finance Decision Making: A Field Study of Prosocial Lending (December 9, 2010). Available at SSRN: https://ssrn.com/abstract=1634949 or http://dx.doi.org/10.2139/ssrn.1634949

Jeff Galak (Contact Author)

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States
412-268-5810 (Phone)

HOME PAGE: http://www.jeffgalak.com

Deborah A. Small

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Andrew T. Stephen

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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