Misplacing social capital in women’s economic wellbeing – the experience of microcredit from Bangladesh

Abstract

Microcredit depletes women borrowers’ social capital and ability to enforce payments, significantly improving the rate of recovery but not borrowers’ economic condition. Using in-depth interviews and focus group discussions (FGDs), this study finds that the Grameen Bank both uses and fosters borrowers’ pre-existing social ties in the community to ensure payments. Borrowers who intensively use social capital to repay loans deplete their opportunities to sustain business and daily survival. They utilize both horizontal and vertical social ties to repay loans and mobilize resources to run and grow businesses. While most borrowers lack and fail to use social capital, better-off borrowers can use social capital for businesses. Conflicts between borrowers to assist loan defaulters also prevent them from using social capital for businesses. Although social ties help some borrowers derive an income from loans, they provide the bank with a mechanism to enforce payments. This in turn depletes borrowers’ economic wellbeing.