The Effect of Social Capital on Group Loan Repayment: Evidence from Field Experiments

Alessandra Cassar · Luke Crowley · Bruce Wydick

295 citations0/0 files storedThe Economic Journal

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Microfinance and Financial Inclusion Experimental Behavioral Economics Studies Social Capital and Networks

Abstract

An important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending. This research presents evidence from field experiments in South Africa and Armenia, in which subjects participate in trust and microfinance games. We present evidence that personal trust between group members and social homogeneity are more important to group loan repayment than general societal trust or acquaintanceship between members. We also find some evidence of reciprocity: those who have been helped by other group members in the past are more likely to contribute in the future.

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References

1988Social Capital in the Creation of Human Capital 2000Social Capital in the Creation of Human Capital 1993Making democracy work: civic traditions in modern Italy 1995Bowling Alone: America's Declining Social Capital 1993Making Democracy Work: Civic Traditions in Modern Italy 1995Trust, Reciprocity, and Social History 2004Field Experiments 2000Measuring Trust*

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2013Microcredit Under the Microscope: What Have We Learned in the Past Two Decades, and What Do We Need to Know?2011Microlending in emerging economies: Building a new line of inquiry from the ground up 2011What is the evidence of the impact of microfinance on the well-being of poor people?2013Group versus individual liability: Short and long term evidence from Philippine microcredit lending groups 2013Contract Structure, Risk-Sharing, and Investment Choice 2008The Benefits and Costs of Microfinance: Evidence from Bangladesh

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