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Repayment performance of joint‐liability microcredits: Metropolitan evidence on social capital and group names

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  • Selay Sahan
  • Euan Phimister

Abstract

This study empirically tests the predictions of four primary theories applicable to joint‐liability microcredit programs’ repayment performance using an administrative data in a metropolitan setting. We introduce a new variable, group names, as a proxy for social capital to capture cooperation, solidarity, and drive for success, which shows a significant positive impact of 9.9% on repayment performance. Precise calculations of residential distance between group members show a deterioration of repayment performance by 1.1% with a 15‐min increase in minimum walking distance. The results also show that joint liability, sectoral diversification, type of sector that the borrowers facilitate, the ratio of new members in a group, characteristics of loan officers, loan amount, interest rate, income‐loan amount coverage ratio, the existence of senior members, average education, and diversity in income streams significantly affect repayment performance.

Suggested Citation

  • Selay Sahan & Euan Phimister, 2023. "Repayment performance of joint‐liability microcredits: Metropolitan evidence on social capital and group names," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 287-311, April.
    • Handle: RePEc:bla:buecrs:v:75:y:2023:i:2:p:287-311
    DOI: 10.1111/boer.12352
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