Social crowdfunding platforms are an important innovation in combating poverty on a global scale. For example, Kiva—the world’s largest crowdfunded microfinance platform—brings together more than 2 million lenders who collectively back 3.9 million borrowers in developing economies with a total of 1.6 billion in loans. Kiva has been especially important in supporting women entrepreneurs.

From a lender’s perspective, when deciding whether to support a microentrepreneur on the platform, there is little information to rely on. Therefore, many studies show that the choice of words in the online loan appeal can make or break a loan’s success. However, while religious narratives are commonly found in online loan appeals, and religiosity as such is actually connected to microentrepreneurs’ better performance in developing countries, it was a puzzle how such language would be received by prospective lenders in developed countries. Prof. Aaron Anglin (Texas Christian University), Prof. Hana Milanov (Technical University of Munich), and Prof. Jeremy Short (University of North Texas) collected data on 253,130 Kiva loans and conducted a large experiment to answer this question.

Their study findings show that in social crowdfunding, religious expression in loan appeals reduces funding performance, particularly for women. This is likely because religious expression conflicts with Western expectations tied to the role of a successful entrepreneur and the desire to empower women. Here, people expect entrepreneurs to be independent, proactive, and willing to bear risk, whereas religious expression is typically associated with stereotypes to the contrary: like showing concern about others, rule-obeying, and embracing the status quo. This is especially a challenge for women, who in expressing religious expression may undermine being seen as having the ‘empowerment’ potential lenders seek. Importantly, the study also shows that entrepreneurs can offset the negative influence of religious expression if they include language stressing their entrepreneurial qualities (e.g. using words like “ambitious”, “bold”, “creative”) to their loan appeals.

The study has important implications for practice. Although crowdfunded microfinance lenders may first be attracted to Kiva by nonfinancial motives (supporting the poor), entrepreneurs—and especially women—are advised to choose words that fit to the image of the “Western” entrepreneur in writing their loan appeals. This is especially important if they want to express their religious beliefs: this kind of authenticity could be damaging loan prospects (especially for women), unless loan appeals also emphasize their entrepreneurial qualities. The study also raises the importance of ‘translation’ between contexts: To the extent that religious expression is a proxy for the entrepreneur’s future performance, crowdfunded microfinance platforms and policy makers alike would benefit from understanding how to better educate lenders to recognize the ‘ingredients’ behind promising entrepreneurs.

Author: Prof. Hana Milanov, PhD
E-Mail: hana.milanov@tum.de
Chair: International Entrepreneurship

Source: Anglin, A.H., Milanov, H. & Short, J.C. Religious Expression and Crowdfunded Microfinance Success: Insights from Role Congruity Theory. J Bus Ethics (2022)