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AbstractThis study empirically tests the predictions of four primary theories applicable to joint‐liability microcredit programs' repayment performance using an administrative data in a metropolitan setting. We introduce a new variable, group names, as a proxy for social capital to capture cooperation, solidarity, and drive for success, which shows a significant positive impact of 9.9% on repayment performance. Precise calculations of residential distance between group members show a deterioration of repayment performance by 1.1% with a 15‐min increase in minimum walking distance. The results also show that joint liability, sectoral diversification, type of sector that the borrowers facilitate, the ratio of new members in a group, characteristics of loan officers, loan amount, interest rate, income‐loan amount coverage ratio, the existence of senior members, average education, and diversity in income streams significantly affect repayment performance.

The first author would like to thank the University of Aberdeen and the Henderson Economics Research Fund for funding his PhD studies in the period 2011-2014 which formed the basis for the research presented in this paper. ; Peer reviewed ; Postprint

Open Access via the Wiley Jisc Open Access Agreement. We would like to acknowledge the World Bank LSMS-ISA and Central Statistical Authority (CSA) of Ethiopia for making these data available for the public and Macaulay Development Trust (MDT) for the financial support. Euan Phimister also acknowledges support under the ESRC NEXUS programme in project IEAS/POO2501/1, Improving organic resource use in rural Ethiopia (IPORE). Deborah Roberts acknowledges the support of funding from the Scottish Government's Rural and Environment Science and Analytical Services Division(RESAS). Our thanks are also due to anonymous reviewers for their constructive comments on earlier versions of the paper. ; Peer reviewed ; Publisher PDF

Deborah Roberts acknowledges the support of funding from the Scottish Government's Rural and Environment Science and Analytical Services Division (RESAS). We would like to thank the reviewers and editor for their valuable comments. All usual caveat apply. ; Peer reviewed ; Postprint