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Peer to peer (P2P) microfinance connects philanthropic citizens with poor entrepreneurs in the developing world. Although its popularity has grown exponentially with the creation of several competing online platforms, very little is known about how individual lenders behave and whether their priorities differ from those of traditional development practitioners. This paper presents evidence on how individual lenders choose between borrowers, and how lenders' preferences relate to the objectives of the microfinance sector. Using data from Kiva.org, we present estimates of the impact of publicly visible project characteristics on funding speed. Results suggest that Kiva lenders rationally consider indicators of the likelihood of repayment as well as borrowers' need. Smaller loans, groups and women get funded faster as do loans to sectors of activity with low entry costs. Meanwhile, loans requested to finance education and health projects or those advertised by NGOs with better risk ratings, and lower default and delinquency rates, fund faster. The results imply that policy makers and practitioners who seek to use microfinance as a poverty alleviation tool should invest in the P2P approach.

This paper investigates the effect of competition between NGO projects on their ability to raise funds, using the case of Kiva, an online peer-to-peer (P2P) microlending website. Although NGO behavior in competitive environments is often subject to controversy, there is little formal empirical evidence to illustrate theoretical findings and inform policy. We find that competition has a sizable negative impact on projects' funding speed and that the effect is stronger between close substitutes. These results illustrate several key findings in the theoretical literature and suggest that regulating the entry of projects on charitable P2P platforms may sometimes improve welfare. Furthermore, we find that increases in the lender side of the market generated by media exposure improve funding speed and relax the impact of competition. Our findings shed light on the way media exposure affects NGOs' fundraising success.

Non Governmental Organizations (NGOs) have various sources of income and expenditure. They have donated and commercial incomes, and they spend them on both charitable and non-charitable expenditure. Standard economic theory implies that different sources of income are fungible, which means that income elasticities should be the same across income and expenditure categories. This paper seeks to test that assumption using panel data on 74 UK-based international NGOs. I find that changes in donated income primarily affect charitable expenditures, while changes in commercial income sources seem to affect mostly expenditures that relate less to the NGO's charitable mission. These findings suggest that income is not fungible but that NGOs have mental accounts.