The Diffusion of Microfinance
Banerjee, Chandrasekhar, Duflo & Jackson (2013). “The diffusion of microfinance.” Science 341 (6144)
This paper studies the diffusion of participation in a program of Bharatha Swamukti Samsthe (BSS), a microfinance institution (MFI) in rural southern Karnataka.BSS usually creates small groups of about 5 women to be jointly liable with the micro loans from the institution. For this study, BSS provided the names and data of 75 villages they planned to bring into their clientele. Only 43 were introduced.
The hypothesis of the study: Microfinance Information finds its way to people via the social networks that are established well before new information arrives.
While there are numerous studies documenting such phenomena of established records of social networks and their beginnings, few studies model the exact mechanics of information transmission and fewer empirically distinguish between the alternative models of transmission within those recorded networks. Model distinction is integral to this paper and this presentation, and it’s what the authors do create here; they use rich social network data they collected and a combination of structural and reduced form approaches to manufacture/map social networks and study the transmission of information.
The first part of the study was contacting “leaders” in the village and privately interviewing them to be Injection points, the first villagers to spread the news.
So, a leader’s connectedness is very important to the success of the distribution of information. BSS does it’s research to try and find the best leaders to contact that will make the widest impact across the community.
The results was a robust social network map. They created a web of connections within the villages that was so rich it allowed for the rest of the study to continue and find interesting results.
