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Microcredit, Social Capital, and Common Pool Resources

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Type: Conference Paper
Author: Anderson, C. Leigh; Locker, Laura; Nugent, Rachel
Conference: Constituting the Commons: Crafting Sustainable Commons in the New Millennium, the Eighth Biennial Conference of the International Association for the Study of Common Property
Location: Bloomington, Indiana, USA
Conf. Date: May 31-June 4
Date: 2000
URI: https://hdl.handle.net/10535/2079
Sector: Social Organization
Subject(s): IASC
common pool resources
social capital
economic development--policy
Abstract: "Despite a rapid growth in microfinance organizations (MFOs) over the past 10 years, much remains unknown about their effects on sustainable development, and in particular on environmental resources and common pool resources (CPRs) (Anderson and Nugent, 1999). We propose that MFOs affect CPRs both directly, though changes in discount rates and the levels and composition of economic activity, and indirectly through changes in a community's social and human capital. These indirect routes are the focus of our paper. "Microfinance organizations both draw upon, and change the social and human capital of the communities in which they operate (Basteler, 1999; Grootaert, 1998). In turn, a community's social capital is an important determinant of how common pool resources are managed (Mearns, 1996; Hacket, Schlager and Walker, 1994; Ostrom, 1993). We suggest that there are at least three ways in which MFOs contribute to a community's capital base, and in turn, affect CPR management: lowering the costs of collective action; mobilizing women; and educating members about natural resource management. "First, most lending programs require that borrowers attend weekly meetings. These meetings provide a valuable venue for communicating and sharing information, and if successful, can build understanding and trust, strengthening associations among neighbors and families. In turn, this lowers the cost of collective action and hence the monitoring and enforcement costs of CPR management. In the Western Forest Complex in Thailand, for example, group meetings are used to report on forest burning activity and coordinate village responses to support measures to reduce deforestation. "Second, MFOs mobilize women. Microfinance meetings provide women, some of whom would otherwise be isolated in or near their homes, with an opportunity to share information on families, work, acceptable norms and customs, and to offer support for one another. This association is particularly valuable for women, who, in many developing countries, have an important and unique relationship to environmental resources and CPRs. Women are usually responsible for gathering fuelwood, non-timber forest products, and collecting water for their households. They often suffer the most from the effects of deforestation and desertification, and consequently have a particular incentive to maintain or improve their local environment. "Third, many MFOs combine credit with education, including technical training on resource management. In some cases this training includes techniques on successful collective action and group efforts to manage the commons. "The impact of microfinance organizations on social capital is not unambiguously positive, nor does social capital have a uniform influence on CPR management. In part, we expect it to depend on existing social and natural capital. But it is also necessary to distinguish among different MFO structures, forms of social associations, and types of CPRs. Our goal in this paper is to develop a framework for analysing the effects of microfinance characteristics on specific types of social capital and CPRs, and to support our analysis with evidence gathered from microfinance programs worldwide."

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