Conference Agenda

We model crowdfunding as a device that commits stakeholders to their ESG preferences. We test the model predictions in the context of crowdfunded microfinance by constructing a novel dataset of partnerships between the Kiva crowdfunding platform and 112 microfinance institutions (MFIs) worldwide. In each partnership, Kiva crowdfunders extend MFI-intermediated loans to necessity entrepreneurs in developing countries. Kiva lenders have strong non-pecuniary preferences: they collectively prefer funding female entrepreneurs and demand zero interest on their loans. In our triple-difference framework, we show that the MFIs that crowdfund a large share of their loan portfolios have more non-performing loans, lower asset utilization rates, and higher labor costs than low take-up counterparts. Importantly, the gender gap in financial inclusion narrows, primarily due to less inclusive MFIs catching up. Our results suggest a costly financial inclusion driven by entrepreneurs left behind by banks but picked up by the Kiva lenders with ESG preferences.