Social capital and the financing performance of farmer cooperatives in Fujian Province, China

Abstract

Abstract Although social capital is commonly believed to affect cooperative financing, empirical results are sparse. Using data from surveys of members of 60 cooperatives in Fujian province, China, this study shows that social capital is related to cooperative financing performance, interpreted as (1) members’ willingness to provide equity, (2) loans from members and from banks, and (3) cooperatives providing financing services to members. Three dimensions of social capital are identified; external, relational, and cognitive. The findings indicate that Chinese cooperatives obtain bank credit more easily if they have been granted government “honors” and if the chairperson has government contacts (external social capital). Loyal members (relational social capital) are more likely to obtain financial services, such as guarantees for member loans. Cooperatively convinced members (cognitive social capital) are more willing to provide capital. [EconLit citations: A13; P13; Q14].