Environmental Factors and Adoption of Prosocial Crowdfunding in Microfinance Institutions in Tanzania

Abstract

Prosocial crowdfunding is a crowdfunding model whereby organizations, mostly microfinance institutions (MFI) use digital media to access funds from individual lenders with a social mission. Although it has several potential advantages to MFIs such as providing cheap access to sources of funds, a high success rate, providing an opportunity to transfer credit default risk from MFIs to social investors, and improving both outreach and sustainability of MFIs, its diffusion in developing countries is relatively low, and little is known about factors influencing its adoption. Therefore, this study investigates the role of four environmental factors namely, client readiness, supplier support, competitive pressure, and regulatory support in influencing prosocial crowdfunding adoption in MFIs in Tanzania. The study employed a cross-sectional survey to collect data from 228 MFIs from five big cities in Tanzania (Dares Salaam, Mwanza, Arusha, Mbeya, and Dodoma). The study used partial least square structural equation modeling (PLS-SEM) for data analysis. The study revealed that while two environmental factors, client readiness, and supplier support have a significant effect on MFI's intention to adopt prosocial crowdfunding, the effect of the two remaining factors was insignificant.