The social capital in microfinance issued by commercial banks: evidence from China

ABSTRACT

The article explores a confidential group-lending dataset from a Chinese commercial bank based on a policy shock of China’s government; and evidences that social capital determinants, proxied by consanguinity, geographical and business relationship, play significant roles in improving the repayment performance of small group-loan, meanwhile commercial bank can earn favourable benefits. Our results enlighten that commercial financial institutions can alleviate poverty by combining small group-loan with the guarantees of social capital together.

KEYWORDS:

• Social capital
• group-lending
• microfinance
• commercial bank

JEL CLASSIFICATION:

• E51
• G21
• G14

Acknowledgments

Kebin Deng would like to acknowledge the financial support from the National Science Foundation of China (Grant No. 716283021). The authors are listed as joint first authors in alphabetical order, and contribute equally to this work.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Science Foundation of China [Grant number 716283021].