Do Microfinance Organizations Increase Social Capital? an Evaluation of the Evidence

Open Access
Author:
Bucci, Hannah Marie
Area of Honors:
Economics
Degree:
Bachelor of Arts
Document Type:
Thesis
Thesis Supervisors:
  • Bee Yan Roberts, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
Keywords:
  • microfinance
  • social capital
  • group lending
  • women
Abstract:
Since the 1980s microfinance organizations have been operating in developing countries with the goal of reducing poverty. These non-governmental organizations provide small loans to the poorest women and rely on the power of groups, as opposed to traditional physical collateral to enforce repayment. Microfinance organizations claim to socially and financially empower women through building social capital. Social capital refers to the relationships, norms, and customs in a society that make up social interactions. Higher degrees of social capital have been found to foster economic development. The literature discussing microcredit organizations’ impact on social capital is extensive and varied. This paper provides an analysis of the literature and concludes that the level of social connectedness in communities allows for different degrees and types of social capital to be built from microcredit organizations, experimental evidence produces a more compelling argument than anecdotal evidence, and that more research is needed to determine the true effect of microcredit organizations on social capital.