Social Capital and Group Based Microfinance: A Case Study on Dedebit Saving and Credit Institution in Mekelle Zone of the Tigra Yregional State
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Date
2006-07
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Addis Ababa University
Abstract
The purpose of thi s study is to assess the relation ship between social capital and
group based micro finan ce. Ea rli er studies have predominantly focused on the
impact of microfinance schemes on the livelihoods of the participants. Much
att ention was not paid to the social processes underl ying the group based
microfi nance. Therefore, this research has been initiated to fi ll the knowledge gap
that exists in this particularly important area of development. The research was
conducted by taking the activities of Dedebit Credit and Saving Institution at
Mekelle zone of the Tigray regional state. This microfinance institution is one of
the pioneers on the practice of group based microfinance in Ethiopia.
The objective of the study was to examine different dimensions of social capital as
they pertain to the group-based mi crofin ance. Specifically, it was aimed at stud ying
the social rel ationships th at may exist between the borrowers themselves (before,
during and after their involvement in the microfinance institutions) on the one hand;
and the lender-borrowers relationship on the other hand.
In order to undertake this research, daia collection has invol ved methodological
triangulation or a combination of d ifferent methods. However, the major research
method employed for thi s study was inte rviewer-admini stered survey research. To
augment this method, individua l intervielVs, personal observations and focus group
discussions were includ ed . Relevant literature and essential documents were also
extensive ly consulted as sources of secondary in fo rmation .
Thc finding of the study shows th at peop le be long to a number of local ICIT I
assoc iations and know each othcr a great deal. These are the major sources for
people to I·orm microfinancc groups. It al so indi cntes that the microiiuancc
institution does not pay much <1ltcn tion to the local lel·el associations by lI·al· of
introducing them in to its Olin program. The otller major iinding of Ihi s study is that
social capital- in thc form of trust and rL'Cip rocity; group norms and san ction s: ,,,,<1
co lkcti\'c decision Illaking- is fnund tl) be' important rt'S l111rce in maintaining theWith regard to the lender- borrowers relation, majo rity of the respondents have
indicated that they rarely get the necessary noncredit support, neverth eless they
have a trust in the in stitution for its transparent way of doing things.
The conclusion of the study is that the Group Based Microfinance in DECSI could
be more viable option to the poor when it is complemented with taking fu ll
advantage of social capital elements at group format ion stage and the necessary
lender' s support to clients after groups have been formed.
Key wOl-ds: Social Capital , GBMF, DECSI, Group, tru st, norms
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Keywords
Social Capital, GBMF, DECSI, Group, tru st, norms