Social Collateral and Loan Repayment in CGSL Groups: Testing Group Lending Theory in a South Sudanese Context

This paper investigates how social collateral supports loan repayment in Community Group Saving and Lending (CGSL) groups in rural South Sudan. The study draws on field survey data from Eastern Equatoria, Jonglei and Lakes State, where formal rural finance remains limited and smallholder farmers rely heavily on community-based savings, lending and mutual-support structures. Using group lending theory, social capital theory and financial inclusion theory, the paper tests whether the CGSL model operates as a practical substitute for physical collateral by converting trust, reputation, repeated meetings and mutual guarantees into repayment discipline. The empirical base consisted of 81 valid survey responses from a target sample of 85 respondents and 17 qualitative interviews. Descriptive findings show that 91% of respondents associated CGSLs with small regular savings, 81% agreed that collective savings are used for loans, 75% agreed that lending groups provide affordable credit and 66% agreed that creditors prefer lending to groups. A reported chi-square result indicated significant association between CGSL participation and agricultural productivity indicators, χ² = 15.92, p = 0.0001, while logistic regression showed that access to credit was a statistically significant predictor of farmers' investment in modern agricultural technology, β = 1.9459, p = 0.026. The model-implied odds ratio suggests that respondents with CGSL credit access were approximately seven times more likely to invest than those without access. Qualitative evidence further indicates that repayment is sustained not only by interest incentives but by peer monitoring, community reputation, meeting discipline and the fear of losing future group access. The paper concludes that social collateral is central to CGSL loan performance, but it is strongest when supported by transparent records, fair leadership, practical loan sizes and pathways from short-term community credit to longer-term agricultural finance.