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

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Author Info
Alessandra Cassar
Lucas Crowley
Bruce Wydick
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 games and a microfinance game. We present moderately strong evidence that personal trust between group members and peer homogeneity are more important to group loan repayment than general societal trust or mere acquaintanceship between members. We also find some evidence of reciprocity in groups: those who have been helped by other members are more likely to contribute themselves.

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Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 0032.

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Length: 27 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:feb:artefa:0032

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Find related papers by JEL classification:
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology

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  1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  2. Wydick, Bruce, 2001. "Group Lending under Dynamic Incentives as a Borrower Discipline Device," Review of Development Economics, Blackwell Publishing, vol. 5(3), pages 406-20, October. [Downloadable!] (restricted)
  3. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 495-526, July. [Downloadable!] (restricted)
  4. Van Tassel, Eric, 1999. "Group lending under asymmetric information," Journal of Development Economics, Elsevier, vol. 60(1), pages 3-25, October. [Downloadable!] (restricted)
  5. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital And Predict Financial Decisions," Working Papers 909, Economic Growth Center, Yale University. [Downloadable!]
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  6. Abbink, Klaus & Bernd Irlenbusch & Elke Renner, 2002. "Group Size and Social Ties in Microfinance Institutions," Royal Economic Society Annual Conference 2003 1, Royal Economic Society. [Downloadable!]
  7. Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2006. "Group Size and Social Ties in Microfinance Institutions," Economic Inquiry, Oxford University Press, vol. 44(4), pages 614-628, October. [Downloadable!] (restricted)
  8. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 811-846, August. [Downloadable!] (restricted)
  9. Banerjee, Abhijit V & Besley, Timothy & Guinnane, Timothy W, 1994. "Thy Neighbor's Keeper: The Design of a Credit Cooperative with Theory and a Test," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 491-515, May. [Downloadable!] (restricted)
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  10. de Aghion, Beatriz Armendariz & Gollier, Christian, 2000. "Peer Group Formation in an Adverse Selection Model," Economic Journal, Royal Economic Society, vol. 110(465), pages 632-43, July. [Downloadable!] (restricted)
  11. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February. [Downloadable!] (restricted)
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  12. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
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This page was last updated on 2009-11-25.

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