2. Loan repayment and social capital
2.1. Credit groups, social ties and repayment: an overview
Hardly any scholarly literature is available on social capital or
ties and individual loans. One exception is Gine and Karlan (2006),
who find that default is lower under individual liability for those
with stronger social networks.3 Our review therefore focuses to
a large extent on social capital affecting credit groups. However,
some of the empirical findings may also be applicable to individual
loan arrangements.
Being aware of the perils of free-riding or shirking, credit institutes
working with credit group schemes usually incorporate a
number of safeguards. The most prominent of these is that credit