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 and microfinance games. We present evidence that personal trust between group members and peer homogeneity are more important to group loan repayment than general societal trust or acquaintanceship between members. We also find some evidence of reciprocity: those who have been helped by other group members in the past are more likely to contribute in the future.
Alessandra Cassar, Luke Crowley and Bruce Wydick. The effect of social capital on group loan repayment: evidence from field experiments. The Economic Journal. Volume 117, Issue 517, pages F85–F106, February 2007. DOI: 10.1111/j.1468-0297.2007.02016.x