Membership has its privileges: the effect of social capital and neighbourhood characteristics on the earnings of microfinance borrowers

This paper examines the determinants of self-employment success for microcredit borrowers.Theories of social capital and neighbourhood effects are integrated in an attempt to account for earnings differentials amongst a unique sample of microfinance borrowers.The paper posits that social capital -social relations that facilitate individual action -is essential for microentrepreneurial success.Based on a survey and data collected by the authors, this study demonstrates that social capital is a positive determinant of self-employment earnings.It also highlights the role that neighbourhoods play in fostering social capital and improving microentrepreneurial performance.