Micro-Finance and Social Capital: A Study Of Microfinance Institutions in Andhra Pradesh, India-2009

Year 2012, Volume: 5 Issue: 1, 67 - 84, 30.05.2016

D. Ajit Rajeev C.b.

Abstract

The study examines the economic and social impacts of microfinance program in Andhra Pradesh, India – the state which accounted for about one-fourth of the microfinance institutions in India. Using primary survey data, the study found that microfinance programs created high repayment rates but the economic impact in terms of net income was not substantial. The study explains this paradox in terms of multiple memberships in other MFIs and borrowing from non-institutional sources like money lenders which facilitates poor households to undertake double-dipping and cross-finance borrowings. But the study found women’s participation in microfinance programs helps to increase women empowerment and facilitate enhancement of social ties within the group and outside the group (in civil society). It also enabled them to undertake collective action against some of the loan-shark and unethical behavior of MFIs in the state.

Keywords

Social capital, micro finance, civil society, India, poverty.

References

• Anderson, C. L and Locker, L. (2002) “Microcredit, Social Capital and Common Pool Resources” World Development, 30: 95-105.
• Becker, G (1991) A Treatise on the Family. Cambridge: Harvard University.
• Bellemare, C and Kröger, S. (2006) “On Representative Social Capital” European Economic Review, 51: 183-202.
• Besley, T and Coate, S (1995) “Group Lending: Repayment Incentives and Social Collateral.” Journal of Development Economics, 46: 1-18.
• Bourdieu, P. (1986) “The Forms of Capital.” in Handbook of Theory and Research in the Sociology of Education, Richards, J.G. (ed.), Westport: Greenwood Press: 241-258.
• Bowles, S. and Gintis, H (2002) “Social Capital and the Community Governance.” The Economic Journal, 112: F419-F436.
• Coleman, J. (1989) “Social Capital and Poverty.” Social Capital Initiative, Working Paper No.4, Washington, DC: World Bank.
• Das-Gupta et.al (1989), Urban Informal Credit Markets in India. New Delhi: National Institute of Public Finance and Policy, February.
• Dev, Mahendra, S (2006) “ Financial Inclusion: Issues and Challenges”, Economic and Political Weekly, October 14: 4310-3413.
• Dowla, A. (2006) “In Credit we Trust: Building Social Capital by Grameen Bank in Bangladesh” The Journal of Socio-Economics, 35: 102-122.
• Fafchamps, M. and Minten, B. (2002) “Returns to Social Network Capital Among Traders.” Oxford Economic Papers, 54:173-206.
• Fine, B. (2001) “The Social Capital of the World Bank.” in Development Policy in the Twenty-first Century: Beyond the Post-Washington Consensus, B. Fine, C. Lapavistsas and Pincus, J. (eds.), London: Routledge: 1-27.
• Ghate, P. (2007a) Microfinance in India – A State of the Report, 2006, Microfinance India, New Delhi.
• _____ (2007b) Indian Microfinance: The Challenges of Rapid Growth, New Delhi, Sage.
• Ghatak, M and Guinnane, T.W. (1999) “The Economics of Lending with Joint Liability: Theory and Practice” Journal of Development Economics, 60: 195-228.
• Goetz, A.M. and Sengupta, R. (1996) “Who Takes the Credit? Gender, Power and Control over Loan Use in Rural Credit Programs in Bangladesh”, World Development, : 45-64.
• Grootaert, C and Van Bastelear, T (2002) “Understanding and Measuring Social Capital: A Multidisciplinary Tool for Practitioners.” Washington, DC: World Bank.
• Hashemi, S.M., Schulder, S.R and Riley, A.P. (1996) “Rural Credit Programs and Women’s Empowerment in Bangladesh”, World Development, 24: 635-53.
• Kabeer, N (2001) “Conflicts Over Credit: Re-Evaluating the Empowerment Potential of Loans to Women in Rural Bangladesh”, World Development, 29: 63-84.
• Krishna, A and Uphoff. N. (2002) “Mapping and Measuring Social Capital through Assessment of Collective Action to Conserve and Develop Watersheds in Rajasthan, India.” in The Role of Social Capital in Development: An Empirical Assessment, Grootaert, G and van Bastelaer, T. (eds.)Cambridge: Cambridge University Press: 85-124.
• Mayoux, L. (2001) “Tackling the Down Side: Social Capital, Women’s Empowerment and Micro-Finance in Cameroon”, Development and Change, 32: 435-464.
• Pitt, M.M., Khandker, S.R ad Cartwright, J. (2006) Empowering Women with Microfinance: Evidence from Bangladesh”, Economic Development and Cultural Change, (4): 791-831.
• Narayan, D. (2002) “Bonds and Bridges: Social Capital and Poverty.” in Social Capital and Economic Development: Well-Being in Developing Countries, J. Isham, T. Kelly and S. Ramaswamy (eds.), Cheltenham, UK: Edward Elgar: 58-81.
• Pridmore, P, Thomas, L, Havemann, K, Sapag, J and Wood, L (2007) “Social Capital and Healthy Urbanization in a Globalized World”, Journal of Urban Health: Bulletin of the New York Academy of Medicine, 84: i130-i143.
• Putnam, Robert, Robert Leonardi and Raffaella Y. Nanetti (1993) Making DemocracyWork: Civic Traditions in Modern Italy. Princeton, NJ: Princeton University Press.
• Ramesh, J. (2007) “Self-help Group Revolution: What Next?”, Economic and Political Weekly, September 8: 3621- 3624.
• Rankin, K. (2002) “Social Capital, Microfinance and the Politics of Development.” Feminist Economics, 8: 1-24.
• Rubio, M. (1997) “Perverse Social Capital – Some Evidence from Columbia.” Journal of Economic Issues, 31: 805-816.
• Sanyal, P. (2009) “From Credit to Collective Action: The Role of Microfinance in Promoting Women’s Social Capital and Normative Influence”, American Sociological Review, 74: 529-550.
• Shetty, S.L.(2005) ‘Regional, Sectoral and Functional Distribution of Bank Credit’, in Ramachandran, V.K and Madhura Swaminathan (Ed) (2005) Financial Liberalisation and Rural Credit in India, New Delhi, Tulika Books: 50-109.
• Shylendra, H.S. (2006) “Microfinance Institutions in Andhra Pradesh: Crisis and Diagnosis”, Economic and Political Weekly, May 20: 1959-1963.
• Srinivasan, N. (2009) Microfinance India – State of the Sector Report 2008, New Delhi, Sage Publications.
• Streeten, P. (2002) “Reflections on Social and Anti-Social Capital”, in Social Capital and Economic Development: Well-Being in Developing Countries, J. Isham T. Kelly and S. Ramaswamy (eds.), Cheltenham, UK: Edward Elgar: 40-57.
• Woolcock, M. and Narayan, D. (2000) “Social Capital: Implications for Development Theory, Research and Policy.” The World Bank Research Observer, 15: 225-249.