Competition Between Microfinance NGOs: Evidence from Kiva

SummaryThis paper investigates empirically the effect of competition between microfinance NGOs seeking subsidized capital from individual social investors. Although NGO behavior in competitive environments is often subject to controversy, there is little formal empirical evidence to illustrate theoretical findings and inform policy. Using data from Kiva, an online peer-to-peer (P2P) microfinance platform, we find that competition has a sizable negative impact on projects’ funding speed and that the effect is stronger between close substitutes. This is important because competition for subsidized capital implies organizational pressures similar to those faced when NGOs compete for donations.