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Institutions and social capital in group lending

Author

Listed:
  • Michael Alexeev

    (Indiana University, Bloomington, United States of America
    Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Mira Nurmakhanova

    (KIMEP University, Almaty, Kazakhstan)

  • Leonid I. Polishchuk

    (HSE University, Moscow, Russia)

Abstract

Formal institutions and social capital interact with each other in multiple ways. We argue and show empirically at the cross-country level that in the case of group lending, contract enforcement complements bonding social capital and substitutes for bridging one. It means that payoff to social capital in group lending depends on social capital type and is contingent on the quality of contract enforcement which serves as a sorting factor, working in the opposite directions for different stripes of social capital. These results are robust to various estimations, sets of controls, and social capital measures.

Suggested Citation

  • Michael Alexeev & Mira Nurmakhanova & Leonid I. Polishchuk, 2021. "Institutions and social capital in group lending," Russian Journal of Economics, ARPHA Platform, vol. 7(4), pages 269-296, December.
    • Handle: RePEc:arh:jrujec:v:7:y:2021:i:4:p:269-296
    DOI: 10.32609/j.ruje.7.76647
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    References listed on IDEAS

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    1. Rafael Gomez & Eric Santor, 2003. "Do Peer Group Members Outperform Individual Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data," Staff Working Papers 03-33, Bank of Canada.
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    More about this item

    Keywords

    social capital contract enforcement microfinance.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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