The effect of social capital on group loan repayment: evidence from field experiments

Alessandra Cassar, Luke Crowley and Bruce Wydick

Economic Journal, 2007, vol. 117, issue 517, F85-F106

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. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Date: 2007
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