Social Capital as a Risk Mitigation Factor: capturing social goodwill in financial return

This study investigates social impact investment strategies that lead to social development within local communities and argues that the three dimensions of social capital (relational, cognitive and structural) serve as a risk mitigation factor in the credit lending decision-making processes. The exploratory study highlights how each dimension of social capital mitigates the credit risk, especially the counterparty risk, which is typical of the creditworthiness evaluation process under analysis. The study addresses the relevance of capturing social goodwill in terms of co-participation and engagement within communities in credit lending and investment decision-making processes. More specifically, the study demonstrates that social goodwill is a deciding factor to develop successful credit lending decision-making processes as virtuous cycles.