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

22 Pages Posted: 3 Apr 2007

See all articles by Alessandra Cassar

Alessandra Cassar

University of San Francisco - Department of Economics

Luke Crowley

Innovations for Poverty Action

Bruce Wydick

University of San Francisco - Department of Economics

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.

Suggested Citation

Cassar, Alessandra and Crowley, Luke and Wydick, Bruce, The Effect of Social Capital on Group Loan Repayment: Evidence from Field Experiments. Economic Journal, Vol. 117, No. 517, pp. F85-F106, February 2007. Available at SSRN: https://ssrn.com/abstract=976774 or http://dx.doi.org/10.1111/j.1468-0297.2007.02016.x

Alessandra Cassar (Contact Author)

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

Luke Crowley

Innovations for Poverty Action ( email )

188 Livingston Street
New Haven, CT
United States

HOME PAGE: http://www.poverty-action.org/aboutus/staff.php

Bruce Wydick

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

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