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
Date Written: December 18, 2012
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
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