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Exploring the Social Capital of the Urban Poor for Successful Microenterprise Development Programs in Ethiopia

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Abstract

Microenterprise development forms the major component in the promotion of broad-based economic growth and improvement of the well-being of the urban poor in Ethiopia. To this end, creating employment opportunities and formalising informal enterprises become priority areas. However, the performance of microenterprise development in embracing the informality has fallen short of expectations owing mainly to limitations on joint-liability groups. This study argues that given group lending remains the main approach in financing the poor, microenterprise development programs that involve informality need a better understanding of the social capital of informal entrepreneurs. Thus, applying the network approach to social capital, the study examined the configuration of personal networks of informal entrepreneurs in Addis Ababa. Multi-stage sampling procedures involving purposive and systematic random-walk techniques were employed to draw samples. Ego-network data were collected through Name Generator and Name Interpreter surveys. Data were analysed using Social Network Analysis procedures. The results of the study revealed that religion, ethnicity, sex and marital status are the main attributes underlying homophily among informal entrepreneurs. However, informal entrepreneurs exhibit heterophilous networks on education, occupation, income and age. Using socio-demographic attributes of homophily and heterogeneity (following stages of business development) is, thus, imperative in microenterprise development.

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Notes

  1. The working definition of microenterprise in the Ethiopian context is that they are the smallest, usually informally organised businesses engaged in diverse activities including trade, services, handicrafts etc. They are typically operated by the owner and immediate family (usually unpaid labour) and the income from the microenterprises is in most cases the sole source of income for the family (Desta 2010).

  2. Homophilic ties are ties with people of similar socio-demographic attributes whereas heterophilic ties are ties with people of diverse socio-demographic characteristics.

  3. Iddir is an informal institution established voluntarily by members of a neighbourhood community and is involved in self-help activities. The primary objective of Iddir is providing mutual aid in burial issues. These days, Iddir is also involved in local level community development programs (Pankhurst and Mariam 2000).

  4. Mahber is voluntary and mutual aid community (religious) associations peculiar to Orthodox religion followers. The members gather together at church or in one of the member’s house so as to pray together to get blessing from God and saint and discuss their problems and further share information (Dercon et al. 2005).

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  1. Centre for African and Oriental Studies, College of Social Sciences, Addis Ababa University, P.O. Box 1176, Addis Ababa, Ethiopia

    Getahun Fenta Kebede

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Kebede, G.F. Exploring the Social Capital of the Urban Poor for Successful Microenterprise Development Programs in Ethiopia. Urban Forum 28, 271–292 (2017). https://doi.org/10.1007/s12132-017-9305-4

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