Launching Prosocial Crowdfunding Campaigns: The Final Countdown

ABSTRACT

Prosocial crowdfunding has achieved a growing audience by providing a financing source for entrepreneurs in the microfinance space. Using data from Kiva, a leading prosocial crowdfunding platform, we examined whether there is a right time to launch a crowdfunding campaign. This is the first study to unravel the role of temporal patterns in securing funds in emerging markets. Our results indicate a reverse turn-of-the-month effect on the fully funded campaigns. We further identified a “positive winter prosocial effect” and a “positive first-half-of-the-week effect” on successful fundraising. As such, our study highlights relevant similarities between financial markets and crowdfunding.

KEYWORDS:

• Microfinance
• prosocial lending crowdfunding
• time effects
• calendar anomalies
• Kiva

JEL:

• G21
• G40
• G41

Acknowledgments

We acknowledge the financial support of Fundação para a Ciência e a Tecnologia (UBI PTDC/EGE/OGE/31246/2017; UIDB/04630/2020; UIDB/04105/2020; UIDB/00315/2020).

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Statements and Declarations

All the authors read and approved this version of the manuscript. The views expressed in this chapter are the authors’ and do not necessarily represent the views of the institutions with which they are affiliated.

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2023.2278645

Notes

1. An anomaly is a situation where financial markets performs contrary to the notion of the efficient market hypothesis (Fama 1970).

2. The high volatility of the stock markets registered in 2019–2020 was seen as sign of serious economic troubles raising serious concerns about effects of externality on philanthropy activities, namely on the fundraising, grant making, endowments, and so one (https://www.philanthropy.com/article/how-stock-volatility-could-take-a-swipe-at-charitable-giving-and-grant-making/. Accessed: July 25, 2023).

3. FPs are local organizations (nonprofits, microfinance institutions, schools, social enterprises, and NGOs) that administer loans and support borrowers in setting up and launching the campaign. In several cases, field partners also pre-disburse the campaign’s amount requested by entrepreneurs, acting as microfinance institutions. If these campaigns are funded from the crowd of lenders, the amount raised is used to reimburse the amount the field partners pre-disbursed. Thus, field partners act as the vertex of a triangular system whose refinancing depends on the success of the campaigns with the lenders. Therefore, a higher and faster success of campaigns means that reimbursement occurs more quickly, therefore allowing field partners to recycle the capital invested to help more and more entrepreneurs in need through pre-disbursements.

4. Not only does crowdfunding present itself as a financing alternative, as it can provide demand information and, therefore, generate incentives to entrepreneurs, it also helps to improve product quality and helps investors to decide whether to launch a new product (Liu and Wang 2018).

5. Based on data collected data from Kiva’s Application Programming Interface on lenders that shared their nationality (https://www.kiva.org/build/data-snapshots).

6. For an overview of extant research on the determinants of crowdfunding success in different crowdfunding models, see Deng et al. (2022).

7. That translates into campaigns exhibiting the possibility to be launched at any hour of the day and on any day of the week. Thus, crowdfunding markets differ from conventional financial markets but operate similar to cryptocurrency markets.

8. https://www.kiva.org/about/impact (Accessed July 25^th, 2023).

9. https://www.kiva.global/ (Accessed July 25^th, 2023).

10. These exclusion criteria were applied for the full sample of 1,399,340 loan campaigns, thus excluding 419,575 campaigns that did not meet the criteria.

11. Since for many countries and years the percentage of funded campaigns is 100% (see Table A1, Panels A and C, in supplementary online material), the number of observations included in the estimation model for Funded was reduced to 971,945 due to perfect collinearity.

12. Funding time is defined by the number of days between the moment the campaign was launched and the moment it gets fully funded.

13. Descriptive statistics of each dependent variable are reported at the bottom of each table, respectively.

14. The statistically significance test is influenced by sample size. If the sample size is very large, virtually any population difference will result in statistical significance. On the other hand, the smaller the sample size, the larger must be the population differences to achieve statistical significance (Lindley 2000).

15. Overrepresentation biases in statistical inferences and forecasts is also a concern, also in the field of finance, leading some researchers to run empirical models based on trial random subsamples (e.g., Duarte, Gama, and Gulamhussen 2018).

16. We acknowledge an anonymous referee for this contribution.

17. https://www.tableaudor.com/kiva-lenders (Accessed Jul. 25^th, 2023).

Additional information

Funding

The work was supported by the Fundação para a Ciência e a Tecnologia [UBI PTDC/EGE/OGE/31246/2017; UIDB/04630/2020; UIDB/04105/2020;UIDB/00315/2020]