Kiva: Crowd-Sourced Microfinance and Cooperation in Group Lending

This study evaluates the extent to which solidarity impacts social behavior, focusing specifically on Kiva.org.

Altruistic peer-to-peer lending, or crowd-sourced internet microfinance consists of geographically diverse individuals who coordinate to provide capital to others in need, often for minimal or zero financial return. At the end of 2008, Kiva.org announced the creation of Lending Teams, or cohesive open or closed membership groups. The study evaluates the impact of 120 Lending Teams on group lending behavior, and the extent to which group openness, size, and categorization alters online cooperative behavior. Findings highlight significant differences between open and closed dynamics for the Lending Teams. Findings include:

• Closed Lending Teams have a greater per capita lending average until they reach a membership size of 10 members;
• Open Lending Teams are more effective when membership crosses 10 members;
• Open Lending Teams that reach a critical mass of 20 have higher message board coordination, and on-site cooperation that improve team solidarity.

The study recommends that, in order to have top performing teams, Lending Team founders opt for the closed status until they reach a membership of 10 individuals, and then select the open status.