Business or Basic Needs? The Impact of Loan Purpose on Social Crowdfunding Platforms

Hadar Gafni*, Marek Hudon

*Corresponding author for this work

Research output: Working paperResearch

Abstract

Crowdfunding has created new opportunities for poor microentrepreneurs. One crucial question is the impact that the purpose of a loan - either business investment or basic necessities - may have on the success of a campaign. Investigating a prosocial crowdfunding platform, we find that loans taken out to meet basic needs are funded faster than business-related loans, especially for small amounts, which can be explained by the prosocial motivation of microlenders. Moreover, female microborrowers are funded faster than men, especially for basic needs loans. Our results therefore suggest an ethical blind spot, since prosocially motivated crowdlenders may unintentionally end up producing adverse effects, replicating gender role by supporting women to a lesser extent when they apply for business loans. This finding expands prosocial motivational theory in ethical finance.
Original languageEnglish
Number of pages49
Publication statusPublished - May 2020
SeriesCEB Working Paper
Number20-008

Keywords

  • Crowdfunding
  • Business loans
  • Basic necessities
  • Ethical finance
  • Microfinance
  • Microlending
  • Gender preference

Cite this