Lending Groups and Different Social Capitals in Developed and Developing Countries

Abstract

ResumoGrupos de empréstimo (GEs) e capital social são elementos primordiais para as muitas soluções em operações de microfinanças ao redor do mundo. No entanto, a capacidade dos GEs para reduzir os custos e os riscos de transações das instituições de microfinanças (IFM) são mediados pelo ambiente institucional. A partir desse pressuposto, discutimos as interações existentes entre os ambientes institucionais dos países desenvolvidos (anglosaxões e comunitários) e os países em desenvolvimento com diferentes estoques de capital social (individual, em rede e institucional), bem como as influências dessa interação sobre a eficácia dos GEs. Para tanto, construímos, a partir da perspectiva institucional de O. Williamson, um framework teórico que coloca em interação todos esses elementos e que permite analisar as suas principais relações dentro do contexto deste estudo. Com base nesse framework, propomos que, nos países em desenvolvimento e nos países anglo-saxões, tanto o estoque de capital social individual quanto o em rede são os mais importantes para a eficácia dos GEs. No entanto, em países anglosaxões, esses dois estoques de capital social são complementados por dispositivos formais de contratação. Nos países comunitários desenvolvidos, porém, os estoques de capital social institucional têm um impacto positivo mais forte sobre a dinâmica dos GEs.Palavras-chave: microfinança; grupos de empréstimo; capital social; ambiente institucional. AbstractLending groups (LGs) and social capital are two central elements to the many microfinance solutions operating around the world. However, LG effectiveness in reducing transaction costs and lending risks for microfinance institutions (MFIs) is mediated by institutional environments. Starting from this assumption, we discuss the existent interactions between the institutional environments of developed (Anglo-Saxon and communitarian) and developing countries with different stocks of social capital (individual, network and institutional) and the influences of this interaction on LG effectiveness. In order to do so, we applied the institutional perspective of O. Williamson to build a theoretical framework to examine the interaction of all these conditions, allowing for analysis of their main relations within the microfinance context. Based on this framework, we propose on the one hand that in developing and Anglo-Saxon developed nations, stocks of both individual and network social capital are the most important for an LG's effectiveness. However, in Anglo-Saxon countries, these two stocks of social capital are complemented by formal contracting devices. In communitarian developed countries, on the other hand, the stocks of institutional social capital have a stronger positive impact on LG dynamics.

Institutions and social capital in group lending

“…According to Haldar and Stiglitz (2016), both the conventional external enforcement 4 and social capital (due to joint liability) play their roles in collective loan repayment, and excessive reliance on one of these factors and neglect of the other puts group lending in jeopardy. Marconatto et al (2016) argue that in developing countries with weaker formal institutions "network social capital" is essential for the success of group lending, pointing to substitution between formal institutions and social capital. The same authors, however, find that stronger contract enforcement in common law countries increases the payoff to social capital, which suggests that formal institutions and social capital could also be complements.…”

“…As argued in the Introduction, since group lending is a collective undertaking, the capacity for collective action, known as social capital, should be relevant for the success of this MFI instrument. Indeed, the concept of social capital, variously defined and interpreted, features prominently in the microfinance and group lending literature (see, e.g., surveys in Postelnicu et al, 2014;Marconatto et al, 2016; for a general discussion of the role of social capital in group lending see Haldar and Stiglitz, 2016). Various empirical studies provide massive evidence that social connectedness, strength of peer pressure and grassroots sanctions, likelihood of opportunistic behavior and other measures and/or correlates of social capital are essential parts of "social collateral" and hence have significant effect on group lending.…”

“…First, obtaining and repaying a group loan is a quintessential collective action, and as such, it should be rooted in social capital, which embodies social collateral (similarly to physical capital pledged as a conventional tangible collateral in individual lending). Indeed, mutual trust, shared values, social networks, peer monitoring and other ingredients of social capital are all prominent features and prerequisites of collective lending (Postelnicu et al, 2014;Marconatto et al, 2016;Haldar and Stiglitz, 2016). Second, despite the common perception of group lending as a largely informal financial instrument, owing its popularity to a failure of formal institutions to supply property titles over assets that households and businesses own de facto (De Soto, 2003), institutions maintain a substantial role in group lending, which involves loan agreements subject to third-party enforcement, credit score systems, etc.…”