1 Do Philanthropic Citizens Behave like Governments? Internet Platforms and the Diffusion of Private International Aid Raj M. DesaiHomi Kharas Georgetown UniversityBrookings Institution 2009 RUBIN SYMPOSIUM The Privatization of Development Assistance December 4-5, 2009 NYU School of Law

Outline ODA vs. private aid Internet-based aid (GlobalGiving and Kiva) Comparison with official development flows The supply of private aid and microfinance The internet and donor fragmentation Conclusions 2

3

Overview Provision of aid from a rapidly diversifying set of actors Little known about cross-country and sectoral preferences/selectivity of philanthropic individuals Collect data from two popular internet- based platforms for international giving Use panel-regression and survival analysis to demonstrate that individuals do not behave like governments 4

New Private Aid Mega-charities can reduce various costs Recent growth in private aid occurring at all levels Proliferation of new forms of private aid Raises questions regarding coordination and what drives preferences of individual citizen-philanthropists 5

Public and Private Aid 6 Total Official and Private Giving, 2007 DAC-Bilateral, $73 bn. Non-DAC, $10 bn. Multilateral, $28 bn. Private Sources, $60 bn. US Official and Private Giving, 2007

Two Peer-to-Peer Platforms GlobalGiving Project grants Funds channel through “partner” organizations or direct Unlimited grant size Unlimited time on website to attract donors Kiva Loans to individuals or groups Funds channeled interest-free through MFI (who then on- lends) Maximum loan size between $1,200 - $3,000 Maximum time on website limited to 30 days 7

GlobalGiving Portal 8

Kiva Portal 9

P2P Giving Trends P2P Giving Trends 10 Kiva and Global Giving, Monthly Disbursements m12005m12006m12007m12008m12009m1 Monthly Disbursements ($ millions) Kiva Global Giving

Summary Indicators AverageGlobalGivingKiva Amount requested$5,935$725 Funding rate ($/hour) Hours per grant/loan11,00052 US-based donor share New projects, by month (2008) 122,229 % funded, by project (2008) 9.5%100% 11

GlobalGiving Requested/Funded Projects 12

Kiva Requested/Funded Loans 13

ODA vs. Private Aid Compared GlobalGiving and Kiva disbursements vs. “project” ODA and official microfinance Comparison in terms of sensitivities of allocations to country-specific factors:

Democratic Institutions 15

GDP per Capita 16 GlobalGiving Sample Percentile Disbursements

Survival Analysis Panel only describes if funding happens and to what magnitude…does not capture “duration” of a project/recipient on the web-platform Rate of funding reveals information about the preferences of donors with respect to project/recipient Estimate the effects of covariates on the time (duration) it takes for “failure” (i.e., a project/loan being fully funded) 17

GlobalGiving Funding Rates 18 By region (ECA in bold) By project size dummy (large project in bold) By polity score category By investment grade dummy

Kiva Funding Rates 19 By region (ECA in bold) By project size dummy (large project in bold) By polity score category (-10 to - 5 in bold) By investment grade dummy (investment grade in bold) By MFI Rating (1 of 5 in bold) By gender (female in bold)

GlobalGivingKiva Amount –– Amount 2 ++ No. of Borrowers + Gender (% female) + Loan term (months) – Sovereign Risk 0– GDP per Capita (log) ++ Polity Score 0+ ODA per Capita (log) ++ Dow Jones Change 0– 20 Hazard Rates

SUR KivaGlobalGiving (1)(2)(1)(2) $/hourHerfindahl$/monthHerfindahl Amount––+– Amount No. of Borrowers0+ Gender (% female)+– Loan term (months)–+ Sovereign Risk+000 GDP per Capita (log)–+00 Polity Score0000 ODA per Capita (log)

SUR (Funding Rates over Time) 22

Conclusions Countries vs. projects vs. people: new private aid transactions different on both donor and recipient sides What doesn’t seem to matter: country- specific factors, sectors Intermediation capabilities in the field are important, but quality is less so 23