The role of religion in online prosocial lending

The Internet has long been argued to have “flattened” the world. A variety of work, however, has shown that cross-border frictions continue to manifest through various individual level differences, e.g., cultural, demographic, and geographic. We extend this literature here, offering a novel consideration of religious differences as a significant barrier to online peer-to-peer transactions in the context of prosocial lending. Specifically, we propose a measure of religious distance between any given pair of countries. We then incorporate this measure into a standard gravity model of trade, which we use to explain country-to-country lending volumes between 2006 and 2017 at kiva.org. We demonstrate the negative and significant effects of religious differences on lending activity over and above other established factors. Moreover, we demonstrate that the effects of religious differences vary a great deal, being moderated by the social environment characterizing both a lender country and borrower country in a given time period. That is, we show that increases in the degree of social hostilities within a lender country amplifies the baseline (negative) effects of religious differences on lending activity. At the same time, we demonstrate that diversity of religion and greater physical distances attenuate the role of religious differences.