n Journal of Public Administration - Social structures and financial service delivery to poor households in South Africa




Financial institutions play an important role in the delivery of financial services, particularly credit. However, this role is hampered by uncertainty associated with asymmetric information, collateral constraints and high transaction costs. Faced with uncertainty about future prospects and the illiquid and irreversible nature of assets, poor households in South Africa become vulnerable to social and economic shocks. Using a sample of successful practices in different countries, this article employs a theoretical approach to determine how social structures apply the minimalist group lending method to help the poor to mitigate these shocks. Based on the social connections, trust and reputation embedded in groups, the researcher finds evidence that group lending successfully overcomes the barriers to financial service delivery and reduces poverty.


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