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Abstract

This study analyses the effect of social capital on the volume of contracts in the rural credit market. It discusses how social capital contributes to the reduction of financial intermediation’s transaction costs. A logit regression model was used to empirically test the effect of social capital on the volume of rural credit. The results indicate that the level of social capital affects the amount of rural credit. Thus, incentives to further increase and maintain social capital would increment the efficiency of financial intermediation and, as a consequence, help the rural sector’s development.

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