The Diffusion of Microfinance

Abstract

Abstract. We examine how participation in a microfinance program diffuses through social networks, using detailed demographic, social network, and participation data from 43 villages in South India. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, the "injection points." Microfinance participation is significantly higher when the injection points have higher eigenvector centrality. We also estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and nonparticipants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants. However, information passing by non-participants is still substantial and significant, accounting for roughly one-third of informedness and participation. We also find that, once we have properly conditioned on an individual being informed, her decision to participate is not significantly affected by the participation of her acquaintances.JEL Classification Codes: D85, D13, G21, L14, O12, O16, Z13

Evaluating reproductive decisions as discrete choices under social influence

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Social Interaction Effects and Connection to Electricity: Experimental Evidence from Rural Ethiopia

“…The potential importance of these effects for policy design therefore calls for rigorous qualitative insights to be collected (as suggested in Manski, 2000) or empirical studies specifically designed for the purpose. To our knowledge, only Banerjee et al (2011) provide convincing empirical identification of the mechanisms underlying social interaction effects, using detailed social network analysis within a randomized control trial design. Investigating participation rates in a microfinance program in southern India, they find no peer effect over and above that of information transmission, suggesting that expectation interactions dominate in this case.…”

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