Are there better ways to help consumers solve social and environmental problems?
The techniques used by online microfinance platforms to stimulate user participation could be useful in helping organizations persuade people to behave in a way that benefits both society and the environment.
Microfinance platforms have popularized the idea that ordinary people can become bankers for the poor. Communities of lenders meet every day to crowdfund microloans to underprivileged micro-entrepreneurs by investing small sums of only around $25.
A new study delves into the world of these microlending platforms to determine how they manage to attract investors and perpetuate their enthusiasm for addressing social issues like poverty.
Researchers from the Universities of Birmingham and Southern Denmark have identified two main ways in which platforms maintain and potentiate loans. Their findings are published in the Journal of Consumer Research.
First, the platforms bring together resources that work as an “affirmation device” – providing first-hand evidence of impact that helps consumers imagine the benefits of their actions, thereby creating a sense of empowerment.
Second, the platforms translate complex and distant social issues, such as poverty, into personal encounters between lenders and borrowers – creating a sense of connection and familiarity through photographs, stories and loan updates. This set of techniques is theorized as the “relatability apparatus”.
Co-author Dr Pilar Rojas-Gaviria, Lecturer in Marketing at the University of Birmingham, comments: “Organizations such as microcredit platforms, which strive to engage responsible consumers, face two challenges. keys: overcoming the helplessness felt in the face of daunting problems and removing a feeling of disconnection from “distant” problems.
“Complementing the power of ideas and knowledge with personal stories that inspire hope and aspiration, affinity and connection are powerful techniques that could be useful in inspiring consumers to participate more actively in efforts to resolve social and environmental issues, such as climate change.”
Through storytelling, imagery, platform design, and communication, the researchers note that online microlending platforms nurture a sense that real change is possible through affordable action. They also develop a sense of affinity and empathy between potential investors and aspiring micro-entrepreneurs, especially those in low- and middle-income countries (LMICs).
For example, platforms post loan applications to feature individual borrowers with first names, photographs, and short biographies. This personalized strategy effectively frames microcredit as a virtual encounter with a borrower and their micro-entrepreneurship story. Celebrities, such as actress Natalie Portman, have in recent years helped the microfinance industry promote microloans as an act of hope that lifts the resourceful poor out of poverty.
Co-author Domen Bajde, University of Southern Denmark, comments: “The advent of online microcredit has widened the pool of potential investors to anyone with internet access and $25 in reserve.
“After learning that lenders were more interested in ’emotional returns’ rather than financial gain from their loans, platforms began to dramatize microcredit as an act of hope and affinity for poor entrepreneurs.”
The research is also important for charitable giving, noting that donors are more likely to contribute when they view their donations as a way to empower the disadvantaged and when donations are experienced as high-impact investments.
Notes to editors:
- For more information, please contact Tony Moran, Head of International Communications, University of Birmingham on +44 (0)782 783 2312 or . Outside opening hours, please call +44 (0) 7789 921 165.
- The University of Birmingham is ranked among the top 100 institutions in the world. His work brings people from all over the world to Birmingham, including researchers, teachers and over 6,500 international students from over 150 countries.
- “Creating responsible subjects: the role of mediated affective encounters” – Domen Bajde, Pilar Rojas-Gaviria is published in the Journal of Consumer Research.