In microfinance, the success of in group lending is partly based on the strong social connections that unite members of the group. It is believed that the social capital thus created will help groups in disciplining members and enforcing repayments. We will first attempt to better define the concept of social capital in this context, and then will investigate its possible effects on group repayments. In particular, while social sanctions can indeed promote repayment, we will also see that (1) group lending may still be dominated by individual lending, (2) social capital may also promote group collective default and (3) lenders can attempt to exploit social capital at the expense of the borrowers.