Microfinance & Social Capital

by Michael Rivera

This is the cool project Alex Hughes mentioned he’s working on.  Enjoy!

Union MicroFinanza (UMF).  Hughes’ brother is running the organization.

The motivating idea behind the organization is that microfinance companies often give group based loans, using social capital as collateral on the loans, but they do it without a clear idea of a.) what social capital is, or b.) how to measure social capital within the target community.  Union MicroFinanza is making an attempt at measuring the social capital in the towns it provides loans to by measuring the social structure.  It is sort of as if UMF is appraising the collateral it takes on the loans; if a town is found to have very weak measures of social capital, UMF can alter its lending practices to ensure full recovery of its capital, and if a town is found to have strong measures of social capital, which Putnam would say is worth more, UMF can make larger investments into the town.

Friendship and marriage ties in 500 person town.  Friendship ties are in black.  Marriage ties in blue.


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