This study shows how social capital affects the outreach and operational self-sufficiency of microfinance institutions (MFIs) around the world. Borrowing from the literature, this thesis defines social capital as those features of human relationships—specifically social networks, social norms, and trustworthiness—which help a community to achieve economic development. This research uses quantitative data from the Microfinance Information Exchange and the World Values Survey as well as qualitative data collected during a ten-day case study with the Adelante Foundation in La Ceiba, Honduras. The regression model shows which aspects of social capital have the greatest influence on MFI performance, accounts for explanatory variables, and tests for an endogenous peer effect between MFIs. Results show that social capital—particularly friend networks and trust—has a direct influence on MFI performance, suggest that there is a tradeoff between outreach and sustainability, and proves that there is an endogenous peer effect between MFIs.