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The Role of Rating and Loan Characteristics in Online Microfunding Behaviors

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Listed:
  • Gaurav Paruthi

    (University of Michigan)

  • Enrique Frias-Martinez

    (Telefonica Research)

  • Vanessa Frias-Martinez

    (University of Maryland)

Abstract

We propose an in-depth study of lending behaviors in Kiva using a mix of quantitative and large-scale data mining techniques. Kiva is a non-profit organization that offers an online platform to connect lenders with borrowers. Their site, kiva.org, allows citizens to microlend small amounts of money to entrepreneurs (borrowers) from different countries. The borrowers are always affiliated with a Field Partner (FP) which can be a microfinance institution (MFI) or other type of local organization that has partnered with Kiva. Field partners give loans to selected businesses based on their local knowledge regarding the country, the business sector including agriculture, health or manufacture among others, and the borrower.Our objective is to understand the relationship between lending activity and various features offered by the online platform. Specifically, we focus on two research questions: (i) the role that MFI ratings play in driving lending activity and (ii) the role that various loan features have in the lending behavior. The first question analyzes whether there exists a relationship between the MFI ratings - that lenders can explore online - and their lending volumes. The second research question attempts to understand if certain loan features - available online at Kiva - such as the type of small business, the gender of the borrower, or the loan's country information might affect the way lenders lend.

Suggested Citation

  • Gaurav Paruthi & Enrique Frias-Martinez & Vanessa Frias-Martinez, 2016. "The Role of Rating and Loan Characteristics in Online Microfunding Behaviors," Papers 1609.09571, arXiv.org.
    • Handle: RePEc:arx:papers:1609.09571
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    2. Amir Sufi, 2009. "The Real Effects of Debt Certification: Evidence from the Introduction of Bank Loan Ratings," The Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1659-1691, April.
    3. Helena Marrez & Mathias Schmit, 2009. "Credit risk analysis in microcredit: How does gender matter?," Working Papers CEB 09-053.RS, ULB -- Universite Libre de Bruxelles.
    4. Linda Mayoux, 2001. "Tackling the Down Side: Social Capital, Women’s Empowerment and Micro‐Finance in Cameroon," Development and Change, International Institute of Social Studies, vol. 32(3), pages 435-464, June.
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