Social Capital, Credit Access and Household Nonfarm Enterprises in Nigeria: A new Empirical Evidence

Abstract

This paper investigates the effects of social capital on access to credit by household nonfarm small enterprises in Nigeria. Specifically, the paper tries to ascertain how social capital determines ability of household small businesses to borrow from formal and informal sources and the amount of credit accessed. The study uses data from the General Household Survey to estimate probit and Heckman selection model that form the basic models of the study. Specifically, the results show that belonging to informal groups increases the probability of accessing credit by 1.88%, and also has significant positive impact on the probability of using the loan to operate the enterprise. Also, membership of cooperatives significantly increases the probability of accessing enterprise loan. The results show that belonging to cooperatives and informal groups are the only social capital variables that have statistically significant impact on the amount borrowed.

KEYWORDS:

• Household
• nonfarm enterprise
• social capital
• credit

JEL CODES:

• D12
• D13