Publication

External Social Ties and Loan Repayment of Group Lending Members: A Case Study of Pro Mujer Mexico

Postelnicu, L., Hermes, N. & Servin, R., 3-Aug-2019, In : Journal of Development Studies. 55, 8, p. 1784-1798 15 p.

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We investigate how external social ties, that is, social ties with individuals outside the borrowing group, determine loan repayments of individual borrowers in joint liability group lending. We measure the resources in external ties in terms of the informal risk insurance arrangement they embed. The ties borrowers have with individuals outside the group and the informal risk insurance arrangement they represent, help to survive in general, and repay their loans in particular. The risk of losing these ties increases the willingness to repay loans, that is, these ties can be regarded as a form of collateral to stimulate loan repayment. The extent to which these external ties are effectively pledged as collateral depends on the extent to which social networks of group members are overlapping: the more borrowers' networks of external ties overlap (referred to as information channels), the higher the risk of losing the informal risk insurance arrangement in case of non-repayment. We use data from 802 mapped social networks of borrowers' internal and external ties from a microfinance institution in Mexico. We find that group borrowers with external ties, representing a strong informal risk insurance arrangement while at the same time being information channels, have lower repayment problems

Original languageEnglish
Pages (from-to)1784-1798
Number of pages15
JournalJournal of Development Studies
Volume55
Issue number8
Publication statusPublished - 3-Aug-2019

    Keywords

  • PERFORMANCE

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