Theme Five Wrap-Up: Increased Social Capital & Improved Self-Confidence?

by Lynne Davidson Jarrell

Lynne has graciously volunteered to summarize the posts under Theme Five, from her perspective rather than mine. Note that she points to the posts relevant to each topic she covers (the numbers are hyperlinks). Each post on this blog is assigned a unique number in chronological order of posting, and all the posts for each theme are listed by number and title on the right side of this page under “View by Theme.” Next, I will discuss what Theme Five means for Freedom from Hunger. Then on to Theme Six!

Now we seek evidence to show that microfinance services can help build social capital and empower women. Here we define social capital as “the norms and networks facilitating collective action for mutual benefit” or “the nature and extent of a community’s personal and institutional relationships” (post # 54). We consider Woolcock’s four dimensions of social capital. The first two, integration and linkage, tell us how individuals in the community get along with each other and outsiders. The other two dimensions, organizational integrity and synergy, tell us, in this context, about how the microfinance organization maintains its effectiveness and engages with the community. Woolcock suggests that in order for microfinance to succeed in building social capital, all four dimensions must be operating at a “high” level.

Because we require social capital going into the process of development, and it is also an outcome of a good intervention, we can expect to struggle when trying to tease out cause and effect. Chris suggests, therefore, that we examine empowerment – that is, if we see evidence that an intervention has led to empowerment, then we might conclude that we have increased social capital.

So what is empowerment? Here we are talking about a change both to one’s “sense of self and autonomy,” and to “social status and power relationships” (post # 55). Microfinance might empower people by helping create or expand upon income-generating opportunities, which, in turn, mean greater economic security. Microfinance might also link clients to networks beyond those with which they are normally linked (those outside of their immediate communities). If both of these factors exist, we should see an increase in self-reliance and self-confidence – empowerment.

The following is a summary of the evidence that microfinance programs help build social capital and empower their clients (and a bit of tentative evidence that group borrowing is not empowering).

Chris offers several reasons why empowerment can be difficult to define across different cultures, settings, etc., and consequently difficult to observe and measure. That said, Freedom from Hunger captures a definition that allows them to look for evidence of empowerment as a result of Credit with Education programs in Ghana, Bolivia and Burkina Faso (post # 56). In Ghana, participants were more likely than non-participants to report that in the last six months they had helped a friend with his or her work and given advice about health/nutrition and/or business (self-confidence), and been a member of a non-family group or association (social status and new networks). They also were more likely to report in the last month having attended a funeral for someone outside the family or having made a cash contribution to such a funeral. Qualitative interviews also provided evidence of improvements in women’s self-confidence, self-perception and attitude.

Increased self-confidence, social status, and outside networks were also evident in Bolivia. Here, participants were more likely to have helped a friend with his or her work, given advice about health/nutrition and/or business, been a member of a non-family group or association, been involved in community political life, spoken at the community’s General Assembly meeting, run for public office, and traveled to La Paz.

There also was evidence of empowerment in Burkina Faso, where participating women had contributed to the funding and implementation of village improvement projects.

A study of the effects of Grameen Bank and BRAC membership (rural Bangladesh) found that Grameen Bank membership was highly correlated with empowerment score, the participant’s financial contribution to the family, and use of modern contraceptives (post # 57). Causation, however, is unclear.

Others have (tentatively) concluded that group borrowing is less empowering than individual borrowing. The author of one such study (again with Grameen Bank members in Bangladesh) based this conclusion on a measure of solidarity – one narrowly defined dimension of empowerment (post # 58). She found that group membership does not create more solidarity across members of the group (e.g., helping each other in hard times), but did not conclude anything about empowerment more broadly defined.

A randomized trial of XacBank program participants in Mongolia found that access to group loans meant more enterprise formation, more success with those enterprises, and more and healthier food for participants. Those with individual loans did not show these results (post # 58). So, there is something about groups that seems to matter.

Research of FINCA participants in Peru shows that one dimension of social capital – one that this researcher called “connectedness” (similar to “integration” discussed above) – is an important input for successful group microfinance (post # 59). Participants with a higher level of connectedness were more likely to make their payments on time and significantly less likely to leave their groups, even if they had missed payments.

Clients of the Village Welfare Society in India were randomly assigned to meet either weekly or monthly, then the groups were followed for two years (post # 59). A study of these participants found that the group members who met weekly were more likely to socialize together and more likely to say they would help one another in an emergency than those who met monthly. This increased interaction was associated with a reduction in default rates and more economic cooperation among clients. So, in this case, we see an increase in social capital as an output of the microfinance group and as a factor in making that group more successful.

A study of Green Bank of Caraga participants in the Philippines compared repayment rates and social ties in joint liability and individual liability situations (where individuals from groups were then randomly assigned to either a joint or individual liability loan, or to a hybrid-type program, post # 59). The result – there was no difference in payment rates across types. Interestingly, those who moved to the individual liability loan experienced stronger social ties between group members, so much so that the field officers had to take on the role of “bad guy” with the defaulters – a role normally played by other members of the group in joint liability programs.

Another study included a review of savings groups with no external credit and no pressure to meet and repay (post # 59). Here the evidence showed an increase in social capital (especially solidarity) and individual empowerment due to membership.

In Theme Five, we examine the evidence that microfinance builds social capital or empowers women, thereby giving us more confidence that such programs offer participants a way to reduce their own vulnerability to the hardships of poverty. While these are difficult concepts to observe and measure, it is fairly clear that there is something positive going on here that is distinct from the financial effects of microfinance. Attitudes change, participants develop new relationships within and outside of their communities, and women have greater input into the quality of life in their communities.


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