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

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.