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

In: Bulletin of economic research, Band 75, Heft 2, S. 287-311

Abstract

AbstractThis 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.