Benefit of Social Capital

Social Capital, The Credit Risk Mitigation Tool for Islamic Bank

As a profit institution, Islamic Bank has a credit risk before financing the money. Data shows around 60% Indonesian populations have no financial access, the main problem is the collateral (BI: 2011). In relation to the fulfillment of collateral, in group lending methods such as interpersonal relations and cooperation among group members can become 'social collateral', substituting the lack of poor people to physical collateral. The paper tries to avail guidelines or the schemes for risk mitigation tool in Islamic Banks especially in credit risk.

Keywords: Social Capital, Credit Risk, Islamic Bank

JEL: G02, G18, G21