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

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 15min 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.

Microfinance: A bibliometric exploration of the knowledge landscape

“…Studies demonstrate significant improvements in financial access and health among microfinance-served communities [ 16 ]. The positive role of social networks and social capital in enhancing financial literacy and inclusion by microfinance banks in developing countries [ 49 ] is another key aspect discussed, highlighting the mediating effect of social networks in this relationship [ 50 , 51 ].…”