The impact of prosocial microlending on entrepreneurship in emerging economies: A cross-national natural experiment

Microfinance is deemed as a viable means to alleviate poverty through encouraging entrepreneurial activity. Recently, a new form of microfinance, namely prosocial microlending, is gaining popularity. Different from traditional for-profit microfinance, prosocial microlending is both financial and prosocial in nature. Despite its rapid expansion, there is a lack of understanding on whether and how this new form of microfinance affects entrepreneurship in emerging economies. In this study, we evaluate the impact of the introduction of the world's largest prosocial microlending platform (i.e., Kiva.org) into emerging economies on entrepreneurial activity. Using a cross-national research setting, our results show that the introduction of Kiva.org into emerging economies has a positive effect on entrepreneurial activity. More interestingly, this relationship is contingent on the socioeconomic development of countries (i.e., political, economic, and social institutions). Our study makes both theoretical and practical contributions to the understanding of microfinance, socioeconomic development, and entrepreneurship in emerging economies.