Re-visiting traditional trust measurement: using artefactual field experiments to measure trust and predict micro-lending decisions Steven Buck and Yoko Kusunose Department of Agricultural Economics, University of Kentucky, Lexington, Kentucky, USA, and Jeffrey Alwang Department of Agricultural and Applied Economics, Virginia Polytechnic Institute and State University, Blacksburg, Virginia, USA Abstract Purpose – The purpose of this work is to experimentally measure trust and study its relationship to group loan allocation within a community bank. Design/methodology/approach – An artefactual field experiment is run to capture a measure of trust that mimics aspects of trusting behavior in a community bank. The experimental design and empirical setting take into account risk and altruism, two known confounders of trust measures. Regression analysis is used to estimate the relationship between a novel measure of trust and the loan amount a borrower receives from their rural community bank. Findings – The trust measure has a statistically significant, positive relationship with loan size. A one standard deviation increase in the trust measure corresponds to a 13.3 percent increase in the loan amount. Social implications – Results of the study suggest that, for community banks, trust in a borrower plays a large role in screening applicants and therefore determining loan size. Several such banks have considered graduating to commercial credit. However, given the outsize role of trust in lending decisions, it is not clear if commercial lending models – which rely less on social capital – will work. Originality/value – A new trust game is developed that captures relationship-specific measures of directed trust that community bank members have towards each borrower. The trust measure is also context-specific as play in the game is analogous to how community bank members trust some borrowers (more than others) with larger loans. The emphasis on relationship- and context-specific trust measures is key to interpreting results from artefactual field experiments. Keywords Trust, Microfinance, Social capital, Artefactual field experiment, Group lending Paper type Research paper 1. Introduction Increasing agricultural productivity is considered to be a precondition for economic development, something that can be catalyzed by increasing the availability of credit. However, one commonality among rural communities in poorer countries is the relative scarcity of credit. Commercial lenders tend not to serve these constituencies due to the low levels of collateral assets held by would-be borrowers, the small sums that would be transacted, and the high transaction costs associated with screening, monitoring and enforcing lending contracts with individuals (Armend ariz and Morduch, 2005; Banerjee and Duflo, 2007). Where commercial lenders do not enter, other lending entities have developed organically or “moved in.” While these entities come in many forms, they can be characterized by the small amounts loaned (hence the terms “microlending” and “microfinance”) and their reliance on peer screening and social capital. The premise behind these lending models is that Re-visiting traditional trust measurement The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/0002-1466.htm Received 17 September 2019 Revised 21 January 2020 18 June 2020 Accepted 19 June 2020 Agricultural Finance Review © Emerald Publishing Limited 0002-1466 DOI 10.1108/AFR-09-2019-0104