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ScholarWorks > HHS > Social Work > JSSW > Vol. 49 > Iss. 4 (2022)

 

Keywords

Social capital, credit access, extended probit, Indonesia

Abstract

This paper analyzes the relationship between social capital and individuals’ access to credit in Indonesia. We used the data from the fifth wave of the Indonesian Family Life Survey (IFLS5) and focused on the “flow” aspect of social capital, i.e., participation in various activities that can be regarded as an addition to the general “stock” of social capital. The results showed that two participation characteristics in social activities, namely “voluntary-type” and “economic-embedded” activities which affect creditmarket outcome. Using an extended probit model with correction for selection bias and endogenous regressor, we found that investment in the latter activity can improve individuals’ chance in accessing credit. Additionally, creditworthiness remains inseparable when discussing credit market outcomes. Combined together, our results lend support to the urgency of investing in social capital. Individuals who participate in these activities increase transparency of their creditworthiness. In parallel, this participation also provides individuals with the extra income that can add to their creditworthiness.

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