It's Not What You Know, It's Who Knows What You Know: An Econometric Analysis of the Effectiveness of Microfinance in the Presence of Endogenous Peer Effects

Colorado College Working Paper No. 2012-17

18 Pages Posted: 25 Dec 2012  

Lisa Sundeen

Colorado College

Daniel K. N. Johnson

Colorado College - Department of Economics and Business

Date Written: December 18, 2012

Abstract

This study shows how social capital affects the outreach and operational self-sufficiency of microfinance institutions (MFIs) around the world. Defining social capital as social networks, social norms, and trustworthiness, this research merges quantitative data from the Microfinance Information Exchange and World Values Survey to empirically test a which aspects of social capital have the greatest influence on MFI performance in the presence of an endogenous peer effect between MFIs. Regression results show that aspects of social capital have a direct influence on MFI performance, suggesting a tradeoff between outreach and sustainability, and display a strong endogenous peer effect.

Keywords: Social Capital, Microfinance, Social Networks, Endogenous Peer Effect

JEL Classification: G21, F65

Suggested Citation

Sundeen, Lisa and Johnson, Daniel K. N., It's Not What You Know, It's Who Knows What You Know: An Econometric Analysis of the Effectiveness of Microfinance in the Presence of Endogenous Peer Effects (December 18, 2012). Colorado College Working Paper No. 2012-17. Available at SSRN: https://ssrn.com/abstract=2191135 or http://dx.doi.org/10.2139/ssrn.2191135

Lisa Sundeen

Colorado College ( email )

14 East Cache La Poudre Street
Colorado Springs, CO 80903
United States

Daniel Kent Neil Johnson (Contact Author)

Colorado College - Department of Economics and Business ( email )

14 E Cache La Poudre Street
Colorado Springs, CO 80903
United States
719-389-6654 (Phone)
719-389-6927 (Fax)

HOME PAGE: http://faculty1.coloradocollege.edu/~djohnson

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