The impact paths of social capital and the effects of microfinance: Evidence from rural households in China?
China Agricultural Economic Review
ISSN: 1756-137X
Article publication date: 26 July 2019
Issue publication date: 18 October 2019
Abstract
Purpose
The purpose of this paper is to investigate the impact paths of the social capital and the effects of microfinance in rural China, and address effective methods to enhance the effects of microfinance for rural China.
Design/methodology/approach
Using a structural equation model with survey data from 350 rural households in China, this paper analyzes empirically whether greater level of social sanctions and social relations caused more tangible effects of microfinance, and whether tangible effects of microfinance are associated with social capital formation of households.
Findings
The results indicate that social capital promotes the effects of microfinance and the process of providing microfinance service is also the process of building social capital. Moreover, social sanctions diminish the effects of microfinance while social relations boost them and enhance the effects of microfinance that can encourage social capital formation. Results also show that a reverse causal relationship exists between social sanctions and social relations.
Research limitations/implications
The empirical results imply that actively utilizing and creating social capital is vital to improve the effects of microfinance, and microfinance institutions (MFIs) should concentrate more on harmonious social relations and deliberately build social capital.
Practical implications
These findings imply that actively utilizing and creating social capital is vital to improve the effects of microfinance, and the MFIs should concentrate more on harmonious social relations and deliberately build social capital to enhance the effects of microfinance while prudently use social sanctions.
Social implications
Enhancing the effects of microfinance, while prudently using social sanctions, increases households income.
Originality/value
This paper originates to investigate the links between the social capital and the effects of microfinance in a mutual way, and the results urge more attentions on the harmonious social relations which have been ignored to enhance the effects of microfinance.
Keywords
Acknowledgements
The authors gratefully acknowledge the funding support from the National Social Science Fund of China (Grant No. 14BMZ074) and the Fundamental Research Funds from the Central Universities of South-Central University for Nationalities (Grant No. CST18009).
Citation
Xiong, F. and You, J.L. (2019), "The impact paths of social capital and the effects of microfinance: Evidence from rural households in China?", China Agricultural Economic Review, Vol. 11 No. 4, pp. 704-718. https://doi.org/10.1108/CAER-12-2017-0256
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited