We exploit experimental variation in repayment meeting frequency across micro finance groups to show that more frequent interaction among group members builds social capital and im- proves their fi nancial outcomes. One year after the end of their fi rst loan cycle, clients in groups which met more frequently exhibit greater cooperation when off ered the choice of adding other group members in a lottery and thereby lowering own expected lottery payoff while increasing expected group payo ff. We provide evidence that this reflects higher expectations of reciprocal behavior due to an improved ability to monitor each others' actions. In parallel with this, we also find that clients who met more frequently are less likely to default.


Feigenberg, Benjamin, Erica Field, and Rohini Pande. "Building Social Capital through Microfinance." Stanford Institute for Theoretical Economics Summer Workshop, Stanford, August 13-15, 2009.