Digital Paths to Prosocial Lending: The Impact of Social Connectedness and Digital Inclusion
Abstract
This study investigates the role of cross-country social connectedness via social media in influencing peer-to-peer (P2P) prosocial lending. While existing literature highlights social distances (e.g., cultural and religious differences) as one of the factors that reduce uncertainty for lenders, we complement this by examining the overlooked role of information exchange on social media. Building on the uncertainty reduction theory (URT), we argue that social connectedness through platforms such as Facebook enhances information flows, thereby increasing cross-country lending activities. Using panel data from Kiva and the Facebook Social Connectedness Index (SCI), our findings demonstrate that higher social connectedness is positively associated with increased lending volumes. These results are robust across different measures of SCI, various P2P platforms, and several econometric models. Furthermore, we show that digital inclusion—measured by i) access to Internet infrastructure, ii) autonomy in Internet use, and iii) the ability to use the Internet—moderates this relationship, reducing lenders’ reliance on social connectedness and encouraging more balanced lending behavior. These findings deepen our theoretical understanding of how online users utilize different information-seeking avenues to reduce uncertainty and provide implications for policy and practice.
