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Social Trust Formation and Credit Accessibility—Evidence from Rural Households in China

Tong Zhang (), Huiting Liu () and Pinghan Liang ()
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Tong Zhang: National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China
Huiting Liu: College of Economics and Management, South China Agricultural University, Guangzhou 510642, China

Sustainability, 2020, vol. 12, issue 2, 1-14

Abstract: Trust as a form of social capital plays an important role in improving the cooperation between agents, especially in credit lending activities. Trust building has attracted significant research interest, and gift giving has been shown to be one of its main drivers. Nonetheless, the mechanism of gift giving in the formation of trust networks and the channels through which gift giving and trust affect cooperation require further investigation. In this paper, we first separate social trust into community trust and personal trust, and we examine how gift giving affects the formation of each level of trust. We then explore how trust and gift giving affect rural households’ access to formal and informal sources of credit. Our results show that gift giving mainly helps in forming trust at the personal level rather than the community level. In turn, personal and community trust can facilitate access to informal and formal sources of credit, respectively. In addition, personal trust facilitates access to informal loans for consumption and medical expenses but not production. Overall, our findings show that gift giving is mainly used to build personal trust which facilitates access to informal lending for risk-sharing purposes.

Keywords: social capital; trust; credit accessibility; gift giving; informal lending; community trust; personal trust; network formation; risk sharing (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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