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.
This thesis explores the relationship between social capital and innovation across 40 regions in the United States. Data is drawn from the Social Capital Community Benchmark Survey, compiled by the John F. Kennedy School of Government and the Saguaro Seminar, and the MicroPatent CD-ROM Database from the USPTO. Innovative activity is modeled as a function of knowledge stocks, human capital, four aspects of social capital, and other control variables across six industries over 38 years. The results suggest that certain manifestations of social capital, such as levels of trust and cooperation, consistently have a positive impact on innovative activity. Furthermore, communities with greater levels of cooperation and better-established networks innovate even more in the presence of previous local knowledge.
This thesis seeks to investigate the possibilities of joint liability lending in the United States and if there is the necessary social capital to support a successful group lending structure. Since joint liability lending has enjoyed great success in foreign countries, I thought it was important to look into the positive effect that joint liability lending could have on the unbanked population in the U.S. I developed a questionnaire regarding joint liability lending's potential in the United States and sent it to six of the most highly regarded microfinance institutions in the U.S. Though I anticipated that joint liability lending would be successful in the United States, as it was abroad, the input I received from the microfinance institutions in my sample indicated that the U.S. would not be able to support joint liability lending. These institutions saw lack of social capital as the main reason that group lending would not be successful in the United States.