The Diffusion of Microfinance

Abhijit Banerjee, Matthew Jackson, Esther Duflo and Arun Chandrasekhar

No 8770, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. 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 higher when the injection points have higher eigenvector centrality. We 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 non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances.

Keywords: Microfinance; Diffusion; Social Networks; Peer effects (search for similar items in EconPapers)
JEL-codes: D13 D85 G21 L14 O12 O16 Z13 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-dev, nep-mfd, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

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Working Paper: The Diffusion of Microfinance (2012)
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