International Review of Business Research Papers
Vol. 12. No. 2., September 2016, Pages: 77 – 87
External Social Ties and Repayment Performance of Microfinance Group Borrowers in Tanzania
The purpose of this research paper is to examine the influence of external social ties on repayment performance of microfinance group borrowers by using personal network analysis technique. The data for this study were collected from PRIDE Microfinance in Tanzania. In order to map external social ties, borrowers’ personal network data were collected from 351 borrowers through self-administered questionnaire using social capital measurement questions known as name generator. Using logit regression analysis, the findings of the study show that among external ties variable; role relationship, duration of relationship, frequency of contact and information sharing between borrower and his external ties to be significant and influence repayment performance. However, duration of relationship shows negative influence. Conversely, there was positive influence of financial and social support that borrowers received from their external social ties on repayment performance but the results were not significant. Our results confirm the supportive function of borrower’s external social ties as informal insurance as well as information channel that help borrower when screening, monitoring and enforce loan repayment.