Does social capital positively influence loan performance even during a crisis?

Document Type

Article

Publication Title

Journal of Development Economics

Abstract

Theoretically, it is unclear whether group loans outperform individual loans in terms of delinquency, especially during a crisis. It is difficult to test the hypothesis due to differences in the types of borrowers of the group and individual loans and likely differences in their behavior between crises and normal times. We overcome the challenge by comparing simultaneous group and individual loans of the same individual before and during the Covid-19 crisis in India. We find that the delinquency rate of group loans is significantly lower. Further tests suggestively indicate that the outperformance is due to the “peer pressure” channel. © 2024

Publication Date

1-1-2025

Publisher

Elsevier

Volume

Vol.172

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