Risk Preference, Social Capital and Microcredit Lending Risk

must be created and nurtured appropriately by implementing specific policies.

Thus, it can be said that social capital has a great impact on many areas in an economy as well as in society. However, regarding the issue of risk in microfinance lending, how does it manifest itself and how is it measured? This is also the issue that I am interested in researching in this thesis.

In addition, similar to risk preference, social capital has also been studied in many subjects and many different fields and industries such as stock investment, microfinance, production, consumption, health, medicine, education, games, gambling... In terms of space, it also includes many areas including urban and rural areas. The results also show that there are many differences in the study subjects, locations and different fields. However, there has not been any specific and detailed study to compare the differences between rural and urban areas. Akram and Routray (2013) investigated the causal relationship between social capital and participation in microfinance from 191 rural households in Pakistan with the group lending method, the result was that there was an insignificant relationship between social capital and participation in microfinance programs.

In summary, studies on risk preferences and social capital are related to many subjects and fields such as securities, education, microfinance, production, consumption, games, gambling, etc. The results also show that there are many differences for different subjects and fields. However, the impact of behavioral factors such as risk preferences and social capital, differences in place of residence, gender, age, relationships with the government, with society, personal reputation, etc. on microfinance lending risks has not been studied in Vietnam. Thus, it can be said that: Social capital has a great impact on many fields in an economy as well as in society. However, how does the risk in microfinance lending activities of microfinance institutions manifest itself and how is it measured? This is also the issue that I am interested in researching in this thesis.

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1.2. Research problem.

Previous studies in Vietnam mainly studied and analyzed the actual activities of microfinance institutions, formal and semi-formal, and the time and data were still fragmented and not continuous. There has not been a comprehensive and systematic study of the factors affecting the behavior, risk preferences, social capital, gender, and age of microfinance borrowers on the development of microfinance institutions or microfinance lending in Vietnam. Risk is common in decision making and risk preferences are measured by an individual's risk tolerance. Therefore, in analyzing economic activities or setting policies, evoking, measuring, and evaluating risk preferences is particularly important and has great influence. At the same time, to maintain norms and rules in social life, evoking and measuring factors of social capital as well as social preferences will have positive impacts and contributions. Currently, in Vietnam as well as many countries in the world, microfinance is recognized as an effective tool in the process of supporting and helping the poor in areas with difficult conditions to improve their lives. There are many studies on factors affecting the effectiveness and access to microfinance services of the people and analyzing and evaluating the microfinance activities of microfinance organizations. However, there are few studies on the characteristics and behaviors of microfinance borrowers, especially those with bad debts. Generally speaking, among the behavioral characteristics are risk preferences, factors related to social capital, gender, age, social relationships, personal reputation, etc. of microfinance borrowers. This is also the idea that formed the topic of this thesis. Therefore, I decided to choose the topic: " Risk preferences, social capital and risks of microcredit lending - Experimental study in the Mekong Delta" as the topic of my doctoral thesis.

1.3. Research objectives.

The general objective of this study is to study, analyze and evaluate the behavioral impacts of TDVM borrowers in the Mekong Delta region on the risk issues in lending activities.

From there, through collecting and analyzing data from field experiments to analyze the impacts of behavioral factors including risk preferences, social capital as well as other social and demographic factors - including considering the differences between rural and urban areas - on the risks in the lending activities of microfinance institutions and organizations with lending activities of microfinance institutions.

From that objective, answer the following research question:

(1)- How do risk preferences and other socio-demographic factors of borrowers affect the risks in microfinance lending activities of microfinance institutions?

(2)- How do social capital and other socio-demographic factors of micro-borrowers affect the risks in micro-credit lending activities of microfinance institutions?

1.4. Research methods.

The research method in the thesis is implemented by the author in the following order: First, the author reviews documents related to the research topic to find the gaps and gaps of the problem as well as the urgency of the problem in the area where the experimental survey is planned, thereby identifying the issues that need to be researched. Next, based on the relevant theoretical framework as well as the results of previous studies to propose research hypotheses. In this study, the author uses the method of direct field experiments to collect data. The implementation steps are described in detail in chapter 3 of the thesis.

After determining the research method, the author began to conduct surveys and conduct field experiments in the selected research areas. After collecting enough expected data in the research area, the author synthesized, compiled and processed the data. The author used the regression analysis method with the binary variable Binary Logistic as well as the Probit model analysis method to verify the stability of the Logit regression results. From the results obtained, the author screened, discussed and interpreted

interpret the calculated results and from there, propose policy implications for relevant authorities based on the collected research results. At the same time, it also points out the limitations of the study to serve as a premise for future research.

To conduct the experiment, the author used 3 games (described in detail in chapter 3). The author chose the method of Eckel and Grossman (2002) to conduct the experiment to stimulate risk preferences. As for the experiment to stimulate social preferences, the author used the experiment to contribute to the community (Public Goods Game) and the experiment on trust (Trust Game) based on the experimental method of Camerer and Fehr (2003).

1.5. Research object and scope.

- Subjects: Including microfinance loan customers of credit institutions with microfinance lending activities, formal and semi-formal microfinance institutions are the direct research subjects to study the impact of risk preferences and social capital of microfinance borrowers on risks in microfinance lending activities.

- Scope of research: This study includes 176 TDVM loan customers mainly concentrated in 6 provinces in the Mekong Delta region including both rural and urban areas. Including: Kien Giang, Hau Giang, Vinh Long, Tien Giang, Ben Tre and Long An.

- The implementation period of all 6 surveys and experiments mentioned above was from May 2017 to October 2017.

1.6. Contributions of the thesis.

1.6.1. Academically.

To date, the use of field economic experiments on participant behavior through games to assess socio-economic issues has been widely used by economists. Thereby, the significant impact of individual behavior on economic issues as well as social issues is seen.

in general. However, this method has not been widely applied in research on behavioral economic issues in Vietnam.

In his experiment, the author chose the method of Eckel and Grossman (2002) to conduct the experiment to stimulate risk preferences. Regarding the stimulation of social preferences, the author used the experiment of contributing to the community (Public Goods Game) and the experiment on trust (Trust Game) based on the experimental method of Camerer and Fehr (2003). In Vietnam, field experimental studies applying these methods are still limited, especially in the research on TCHV and TCVM. The author applied the experimental method using 3 games, selectively and provided reward and punishment levels suitable to the reality of Vietnam as well as the research area to consider and evaluate the impact of factors on the risk of lending to TDVM in the activities of TCVM in the Mekong Delta. From there, some theoretical bases on TCHV related to the impact of risk preferences, social capital on the risk of lending to TDVM in the activities of TCVM in the Mekong Delta.

1.6.2. In practice.

Through the results of the general research on the development of the microfinance sector in Vietnam, it is clear that the demand for using microfinance services in Vietnam, including microfinance lending, small loans, especially in rural areas, is still very large, while the official supply is very modest. The activities of microfinance institutions in Vietnam still face many difficulties and obstacles, requiring active support from the State's policies, especially at present, financial companies are forming and the boom in consumer lending activities in Vietnam has been causing many inadequacies and many negative consequences for the economy.

From the theoretical basis and through the results of direct experimental analysis in the field, the author has drawn conclusions about the influence of risk preferences and social capital on the lending activities of credit institutions with lending activities as well as microfinance organizations. People who contribute a lot to the community, people who trust and give money to partners a lot have less debt.

bad and vice versa. When the loan size is high, the bad debt ratio decreases, there is no significant difference in bad debt between urban and rural areas.

From the research results, the author has given policy implications related to microfinance activities as well as made recommendations to contribute to the development of the microfinance sector in Vietnam in the coming time to achieve the best results, contributing to poverty reduction in disadvantaged areas and economic development in Vietnam.

1.7. Structure of the thesis.

The thesis consists of 5 chapters with the following structure:

Chapter 1: General introduction to the research. In this chapter, the author has analyzed the overview, through a brief review of previous studies, from which he analyzed and evaluated to find out the gaps of research interest in order to determine the content of the research topic. Thereby, the author has also analyzed, selected and presented the objectives, research questions, research methods, determined the object and scope of the research topic. From there, the author also gave the academic and practical contributions of the thesis. Finally, the author also summarized the presentation structure of the entire thesis.

Chapter 2: In this chapter, the author presents the theoretical basis, theoretical framework of risk preferences, social capital and credit risk of microfinance in microfinance activities. The author also introduces the general prospect theory of Tversky and Kahnerman (1979), a theory considered the foundation of behavioral finance science. Through a brief review of previous studies at home and abroad to set out the research objectives. At the same time, the author also analyzed in depth the factors affecting credit risk of microfinance from both the lender and the borrower to evaluate and measure the effectiveness and risk of microfinance lending in microfinance activities. Analyze and evaluate issues related to social capital that affect the risk of microfinance in microfinance activities. The author also presented

criteria for measuring and evaluating the risks of TCVM in their research.

Chapter 3: Research design. In chapter 3, the author has reviewed previous research methods on risk preference elicitation, assessment and measurement of social capital; thereby analyzing, evaluating, and screening to select experimental methods applying games suitable for the research topic. The author also presents the research method, method of measuring risk preference, social capital, data collection method and proposes a research model as well as research hypotheses to solve the research problem. At the same time, he also describes in detail how to organize and conduct experiments on selected games to collect the necessary data for the research. The author also introduces the regression method chosen to be implemented, which is the regression analysis method with binary variables - Binary Logistic and uses the Probit model analysis method to test the stability of the regression results through SPSS software.

Chapter 4: In this chapter, the author presents the research results obtained through analysis and testing of descriptive statistics and regression results from research models. Thereby, analyzing in detail the hypotheses set out to draw conclusions in this chapter, and at the same time, chapter 4 is also the chapter that answers the questions and clarifies the objectives of the research.

Chapter 5: In this chapter, the author synthesizes the research results of the thesis, at the same time, based on that, discusses the achieved results and proposes some recommendations and policy implications for Government organizations, the State Bank of Vietnam, relevant government organizations and microfinance organizations. At the same time, the author also evaluates and comments on the limitations and shortcomings of the thesis and future research directions for the topic.

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CHAPTER 2: RISK PREFERENCE, SOCIAL CAPITAL AND MICRO CREDIT LENDING RISK

In an economy in general, all activities have to face risks, challenges, and uncertainties that may not be fully foreseen. And each individual in a society has different behaviors, perspectives, and decisions or follows a certain pattern. Each individual's risk preferences reflect each individual's attitudes and behaviors towards the issues they approach and depending on many different factors, there will be different decisions. According to economists, social capital is currently considered a type of capital in economic activities and studies have also shown that it has great influences and impacts on the economy. The next part will delve into the analysis of risk preferences, social capital, and the impacts of these factors on the credit risk of credit institutions participating in credit activities as well as in credit activities.

2.1. Risk preference and risk in microfinance lending activities.

In human society, risk always exists in all activities. Scientists consider risk as an unexpected uncertainty that is difficult to predict in general. Each person's attitude towards risk is different, so it can be used to speculate on that person's economic decisions and behavior. It has a direct impact on the behavior and activities of borrowers on risk such as investment, production, consumption and risk behavior. In addition, there are also influences from borrowers' resources including demographic factors, financial, physical and social capital.

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