Relational Governance of Credit Risk: Social Capital and Loan Approval Decisions in Savings and Loan Cooperatives

DOI

10.2991/978-94-6239-809-2_15How to use a DOI?

Keywords

Credit Cooperatives; Credit Risk Governance; Relational Credit Risk Governance; Social Capital; Savings; Social Collateral

Abstract

This study explores how credit risk governance is shaped through the interaction of formal and social mechanisms in crsedit management practices within savings and credit cooperatives. Unlike conventional financial institutions that primarily rely on administrative procedures and financial assessments, cooperatives operate within social environments characterized by membership ties, trust, collective norms, and community networks that influence credit-related decisions. While previous studies have highlighted the importance of social capital in reducing credit risk and enhancing lending performance, limited attention has been given to how these social mechanisms operate in everyday credit governance practices. This research adopts an interpretive qualitative approach. Data were collected through in-depth interviews, observations, and document analysis related to credit approval, monitoring, and loan resolution processes. The data were analyzed using thematic analysis to identify patterns of interaction between formal procedures and social considerations in credit management. The findings indicate that credit risk governance is not determined solely by formal mechanisms such as credit policies, administrative requirements, and creditworthiness assessments. It is also shaped by trust, member reputation, community norms, and social networks. These social mechanisms function as a form of social collateral that complements formal guarantees in managing credit risk. This study introduces the concept of relational credit risk governance, which integrates organizational control mechanisms with socially embedded governance practices within member communities. The findings contribute to a deeper understanding of credit risk governance in cooperative financial institutions.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - I Made Agus Putrayasa
AU  - Made Dana Saputra
AU  - I Made Marsa Arsana
AU  - Ni Made Sri Yadnya Wati
AU  - Ni Putu Meiling Utami
PY  - 2026
DA  - 2026/10/24
TI  - Relational Governance of Credit Risk: Social Capital and Loan Approval Decisions in Savings and Loan Cooperatives
BT  - Proceedings of the International Conference on Sustainable Green Tourism Applied Science - Social Applied Science 2026 (ICoSTAS-SAS 2026)
PB  - Atlantis Press
SP  - 145
EP  - 155
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-94-6239-809-2_15
DO  - 10.2991/978-94-6239-809-2_15
ID  - Putrayasa2026
ER  -