The Diffusion of Microfinance

54 Pages Posted: 14 Jan 2012

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Arun G. Chandrasekhar

Stanford University - Department of Economics

Esther Duflo

Massachusetts Institute of Technology (MIT) - Department of Economics; Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Bureau for Research and Economic Analysis of Development (BREAD)

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute; Canadian Institute for Advanced Research (CIFAR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2012

Abstract

We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances.

Suggested Citation

Banerjee, Abhijit V. and Chandrasekhar, Arun G. and Duflo, Esther and Jackson, Matthew O., The Diffusion of Microfinance (January 2012). NBER Working Paper No. w17743. Available at SSRN: https://ssrn.com/abstract=1985076

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Arun G. Chandrasekhar

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
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Esther Duflo

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-544
Cambridge, MA 02139
United States
617-258-7013 (Phone)
617-253-6915 (Fax)

Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

Cambridge, MA
United States

HOME PAGE: http://www.povertyactionlab.org/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bureau for Research and Economic Analysis of Development (BREAD) ( email )

Duke University
Durham, NC 90097
United States

Matthew O. Jackson

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
1-650-723-3544 (Phone)

HOME PAGE: http://www.stanford.edu/~jacksonm

Santa Fe Institute

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Santa Fe, NM 87501
United States

Canadian Institute for Advanced Research (CIFAR) ( email )

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Toronto, Ontario
Canada

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