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The purpose of this work is to experimentally measure trust and study its relationship to group loan allocation within a community bank.

An artefactual field experiment is run to capture a measure of trust that mimics aspects of trusting behavior in a community bank. The experimental design and empirical setting take into account risk and altruism, two known confounders of trust measures. Regression analysis is used to estimate the relationship between a novel measure of trust and the loan amount a borrower receives from their rural community bank.

The trust measure has a statistically significant, positive relationship with loan size. A one standard deviation increase in the trust measure corresponds to a 13.3 percent increase in the loan amount.

Results of the study suggest that, for community banks, trust in a borrower plays a large role in screening applicants and therefore determining loan size. Several such banks have considered graduating to commercial credit. However, given the outsize role of trust in lending decisions, it is not clear if commercial lending models – which rely less on social capital – will work.

A new trust game is developed that captures relationship-specific measures of directed trust that community bank members have towards each borrower. The trust measure is also context-specific as play in the game is analogous to how community bank members trust some borrowers (more than others) with larger loans. The emphasis on relationship- and context-specific trust measures is key to interpreting results from artefactual field experiments.

The purpose of this study is to examine the effect of loans provided by Benin's largest microlender.

A pipeline design and matching techniques contribute for identifying the causal effect. The loan treatment considered is loan experience. It includes program entry timing, take-up frequency and the amount obtained over six years. The study uses a cluster analysis to create comparison groups.

Experience with agricultural loans has a statistically significantly positive effect on recipients' farm income, food security and women's empowerment. Though unusual, these positive results can be credited to the very low rate of loan repurposing and mostly to the lender's rigorous loan implementation strategy.

The study results validate the hypothesis underlying development strategies that target women regarding loan programs. The study provides a simple yet valuable lesson for future credit impact evaluations: the context of the loan program as well as the evaluation indicators is essential.

This study’s findings suggest that microcredit, when offered judiciously and with support, can improve farmers' conditions.

Given the relatively long period studied, the analysis has been innovative in defining loan treatment and creating reliable treatment groups. Also to the best of the authors’ knowledge, this study is the first of its kind in Benin.