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Trust, Social Capital, and Intermediation Roles in Microfinance and Microenterprise Development

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Abstract

This study examines the role of trust and intermediation functions in microfinance and microenterprise development. Fifteen Self-help Groups (SHGs) were selected from three different locations in India for Focus Group Discussions (FGDs) and in-depth personal discussions. The peer trust was found higher than the intermediation trust during the microfinance group formation as well as group operations. The level of intermediation trust was higher than the peer trust during microenterprise development. The entry level trust was cognitive in nature, and transformed to ‘affective peer trust’ and ‘affective intermediation trust’ at the operational level. Trust was found to be the causality of social capital in SHGs. Intermediation trust was higher for early adopters of entrepreneurship than that of the late adopters. In case of microentrepreneur, the cognitive intermediation trust was transformed to affective intermediation trust with the passage of time.

Résumé

Cette étude examine le rôle de la confiance et des fonctions d’intermédiation dans le développement du microfinancement et des microentreprises. Quinze groupes d’entraide ont été sélectionnés dans trois endroits différents d’Inde pour des discussions de groupe ciblées et des discussions personnelles approfondies. Il a été constaté que la confiance entre homologues était supérieure à la confiance d’intermédiation au cours de la formation du groupe de microfinance et les opérations de groupe. Le niveau de la confiance d’intermédiation était supérieur à la confiance entre homologues au cours du développement des microentreprises. La confiance de départ était de nature cognitive et était transformée en « confiance affective entre homologues » et en « confiance d’intermédiation affective » au niveau opérationnel. Il a été constaté que la confiance était la causalité du capital social dans les groupes d’entraide. La confiance d’intermédiation était supérieure pour les adopteurs précoces de l’entrepreneuriat à celle des adopteurs tardifs. Dans le cas du microentrepreneur, la confiance d’intermédiation cognitive était transformée en confiance d’intermédiation affective avec le temps.

Zusammenfassung

Diese Studie untersucht die Rolle von Vertrauens- und Vermittlungsfunktionen bei der Entwicklung der Mikrofinanzierung und von Mikrounternehmen. Es wurden 15 Selbsthilfegruppen aus drei verschiedenen Orten in Indien für Fokusgruppendiskussionen und ausführliche persönliche Gespräche ausgewählt. Man stellte fest, dass das Peer-Vertrauen bei der Gründung der Mikrofinanzgruppe sowie den Gruppentätigkeiten größer war als das Vermittlungsvertrauen. Während der Entwicklung des Mikrounternehmens war das Vermittlungsvertrauen größer als das Peer-Vertrauen. Das Vertrauen auf der Einstiegsstufe war kognitiver Art und wandelte sich auf der betrieblichen Ebene in „affektives Peer-Vertrauen“und „affektives Vermittlungsvertrauen“. In den Selbsthilfegruppen erwies sich das Vertrauen als die Kausalität des sozialen Kapitals. Das Vermittlungsvertrauen war bei frühen Teilnehmern der Unternehmung größer als das Vertrauen bei späteren Teilnehmern. Bei den Mikrounternehmern wandelte sich das kognitive Vermittlungsvertrauen im Laufe der Zeit in affektives Vermittlungsvertrauen.

Resumen

El presente estudio examina el papel de la confianza y de las funciones de intermediación en el desarrollo de las microfinanzas y las microempresas. Se seleccionaron quince Grupos de Autoayuda (Self-help Groups, “SHG”) de tres lugares diferentes en India para Debates de Grupos Focales y debates personales en profundidad. Se encontró que la confianza entre iguales era mayor que la confianza de intermediación durante la formación del grupo de microfinanzas, así como también en las operaciones del grupo. El nivel de confianza de intermediación fue superior que la confianza entre pares durante el desarrollo de microempresas. La confianza en el nivel de entrada era de naturaleza cognitiva, y se transformó en “confianza afectiva entre pares” y “confianza afectiva de intermediación” a nivel operativo. Se encontró que la confianza es la causalidad del capital social en los SHG. La confianza de intermediación fue superior para los primeros en adoptar el espíritu emprendedor que la de los últimos en adoptarlo. En el caso del microempresario, la confianza cognitiva de intermediación se transformó en confianza afectiva de intermediación con el paso del tiempo.

摘要

本研究检验信任与中介功能在微型金融与微型企业发展中所扮演的角色。从印度三个不同地方选取十五个自助团体(Self-help Groups (SHGs) )进行专题小组讨论(Focus Group Discussions)与深度个人讨论。研究发现,在微型金融团体形成以及团体运营过程中,同伴信任要高于中介信任。 入门层次的信任(entry level trust)是属于认知性的,并在运营层次中被转化为“情感同伴信任(affective peer trust)”与“情感中介信任(affective intermediation trust)”。研究发现,在自助团体中,信任是社会资本的起因。对于较早接受企业家精神的人而言,与较迟接受企业家精神的人相比,其中介信任较高。在微型企业的情况中,随着时间的流逝,认知中介信任(cognitive intermediation trust)被转化为情感中介信任。

ملخص

تتناول هذه الدراسة دور مهام الثقة والوساطة في تنمية تمويل المشاريع المتناهية في الصغروالمشاريع الصغيرة. تم اختيار خمسة عشر مجموعات المساعدة الذاتية (SHGs) من ثلاثة مواقع مختلفة في الهند لمناقشات مجموعة تركيز ومناقشات شخصية متعمقة. تم إكتشاف أن ثقة النظير أعلى من ثقة الوساطة خلال تشكيل مجموعة تمويل المشاريع المتناهية في الصغر فضلا” عن تشغيل المجموعة. كان مستوى ثقة الوساطة أعلى من ثقة النظيرخلال تنمية المشروعات المتناهية في الصغر. كانت ثقة المستوى الأولي معرفية في الطبيعة، تحولت إلى “ثقة النظيرذات الصلة بالمشاعر” و “ثقة وساطة النظيرذات الصلة بالمشاعر “ على مستوى التشغيل. تم إيجاد أن الثقة هي العلاقة بين السبب والنتيجة لرأس المال الاجتماعي في مجموعات المساعدة الذاتية.(SHGs) كانت ثقة الوساطة للأوائل الذين يستخدمون تكنولوجيا حديثة للمشاريع أعلى من الذين يستخدمون تكنولوجيا حديثة في وقت متأخر. في حالة الأعمال المتناهية في الصغر، تحولت ثقة الوساطة المعرفية إلى ثقة الوساطة ذات الصلة بالمشاعرمع مرور الوقت.

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Notes

  1. A fundamental question raised by this study. As per the SHG format, the members were self-selected and they were from the homogenous socio-psycho-economic background (Panda 2009). Armendariz and Morduch (2007) observed that the SHG participants self-select themselves for one or many reasons. Coleman (1999) observed that the projects participant have similar individual attributes which makes them different from non-members, and these attributes could be entrepreneurial ability, coping mechanism, risk bearing ability, etc. If so, then an individual self-select to a microfinance programmes if she has entrepreneurial ability, coping mechanism, risk bearing ability, etc. Going by this logic, all members in a SHG should have entrepreneurial ability, coping mechanism, risk bearing ability, etc. Then why all the members are not microentrepreneurs? I believed that the personal discussion will be able to explore the causality of this phenomenon.

  2. The self-selected members organized themselves into groups and then selected a president, secretary and a treasurer for the group with the help of the NGO. Thereafter, the SHG members started micro-scale banking with an active intermediation support from the NGO. Members contributed a regular monthly saving (a predefined saving amount for members in SHGs) to the group’s saving pool, and the group started lending interest bearing credits to members from the group saving pools (with a predefined lending criteria). The interest rates on credit, repayment period, penalty, etc., were predefined. However, in some SHGs the monthly saving amount, credit disbursement criteria, interest rates on credit, repayment period, penalty, etc., were changed with time as per the appeal of most of the members. SHGs have opened a bank account in the name of the SHG at their nearest nationalized commercial bank. They were depositing the collected monthly saving in the bank and withdrawing during credit disbursal or whenever necessary. Every SHGs has conducted fortnight meetings which were called as group meetings. The monthly saving was ranging from Rs. 50 to Rs. 200 per member per month. There were two types of credits, i.e. (i) production credit and (ii) consumption credits. Production credits included credits for the purchase of productive assets, while consumption credits included credits for children’s education, health expenses or social obligations. However, interest rates of both of these credits were same for all the SHGs. With respect to repayment periods, different SHGs have had different repayment plans.

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  1. Institute of Management Technology (IMT-Hyderabad), Survey No. 38, Cherlaguda Village, Shamshabad, Hyderabad, 5000218, India

    Debadutta K. Panda

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Correspondence to Debadutta K. Panda.

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Appendices

Appendix: Important Questions in FGD

Thrift and Credit

  1. i.

    How did the SHG form, develop and perform? What was the members’ role and what was intermediary’s role? What did the intermediary do from the beginning till now and how did they do this?

  2. ii.

    Why did believe in your peer and intermediary during the SHG formation?

  3. iii.

    Is there any change in the belief in peer and intermediary from starting to till now? If yes, why and how?

Enterprise Development

  1. iv.

    How does an enterprise develop in SHGs?

  2. v.

    What is the role of intermediary in SHG?

  3. vi.

    How much you know understand about your intermediary?

  4. vii.

    What is your role and what is the role of intermediary in enterprise development?

  5. viii.

    Why do you need an intermediary for an enterprise development?

Important Questions in Personal Discussion

Members Without Microenterprises

  1. i.

    Why did you not have microenterprise?

  2. ii.

    What is different between you and those who have microenterprises? What is your view of those members who have microenterprises?

  3. iii.

    Do you think that the SHG intermediary helps in enterprise development? Explain your relationship with intermediary organization?

Members Who Individually Own a Microenterprise

  1. iv.

    What made you to have an enterprise to your own?

  2. v.

    How are you different from those who did not have microenterprises?

  3. vi.

    Do you think that the SHG intermediary helps in enterprise development? Explain your relationship with intermediary organization?

Members Who Jointly with Other Members Own a Microenterprise

  1. vii.

    How and what made you jointly own a single enterprise?

  2. viii.

    Why and how are you different from those who did not have microenterprises or who had microenterprise of their own?

  3. ix.

    What is comment on your peer? Do you trust your peer? What is the outcome of your trusting to your peer in your enterprise?

  4. x.

    Do you think that the SHG intermediary helps in enterprise development? Explain your relationship with intermediary organization?

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Panda, D.K. Trust, Social Capital, and Intermediation Roles in Microfinance and Microenterprise Development. Voluntas 27, 1242–1265 (2016). https://doi.org/10.1007/s11266-015-9678-8

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