Strength of Weak Ties in Microfinance

1. Strength of Weak Ties in Microfinance PhD Research Sponsored by the Leverhulme Trust Cornell Jackson

2. Background • Part of Leverhulme Research Project looking at microfinance & social networks • PhD Research focused on the networks of microfinance clients • Research hosted by Bullock Cart Workers Development Association (BWDA) located in Tamil Nadu, India

3. Social Network Analysis Definition • Social networks are defined and measured as connections among people, organisations, political entities (states and nations) and/or other units. • Social networks are so important is because human beings are ultra-social animals that create social networks (Haidt, 2006) • Social network analysis is a theoretical perspective and a set of techniques used to understand these relationships (Valente 2010).

4. Social Network Analysis Definition • Social Network Analysis Definition (Freeman, 2004) • Social network analysis is motivated by a structural intuition based on ties linking social actors, • It is grounded in systematic empirical data, • It draws heavily on graphic imagery, and • It relies on the use of mathematical and/or computational models

5. Social Network Analysis Concepts • Small World Networks • Scale Free Networks • Network Dynamics (individual, network) • Social Capital • Homophily • Diffusion/Contagion • Centrality • Efficient Network Forms • Interventions

6. Reach of Connection and Influence • Christakis and Fowler (2010) propose the following: • Connection – Six degrees of separation (Travers & Milgram (1969), Dodds, Muhamad and Watts(2003)) • Influence – Three degrees of separation • Intrinsic Decay Explanation • Network Instability Explanation • Evolutionary Purpose Explanation

7. Visualisations – Who Does the Most Work?

8. Visualisation – Who Does the Most Work?

9. Theoretical Background • Strength of Weak Ties (Granovetter, 1973) • Reliance of the poor on strong ties (Granovetter, 1983) • Structural Holes (Burt, 1992) • Brokerage & Closure (Burt, 2005) • Spillover (Burt, 2010) • Social Intermediation (Edgcomb & Barton, 1998) • Inclusive Value Chains (Harper, 2010) • Power Distance Index (Hofstede, 1984)

10. Research Questions • How does a MFI help its clients bridge structural holes? • How can MFIs socially intermediate to help clients establish weak bridging ties?

11. Methodology • Population – 111 Sari Sellers MFI Clients in Tamil Nadu • Links to: • Suppliers • Financial Sources • Customers • Market Information • Reverse Small World Method – Who would you talk to first? • More customers • Make your business better • To find info on upcoming weddings and festivals • Kanchipuram Silk Question

12. Methodology – Cont’d • Social Intermediation – Non-Financial Aid • Jati • Financials • Progress Out of Poverty Index (PPI)

13. Results • Large reliance on strong ties • The internal network of BWDA, like most Indian organisations, has most links to and from the centre • Very few ties that cross the links to and from the centre • While only 5% of the population, animators (SHG leaders) are 55% of the sari sellers interviewed.

14. Results – Cont’d • Definition of Strong Ties (Trust): • Finance – Non-collateral loans • Supplier – Credit provided • Relationships – Family, Friends, Neighbours or Long-term • Customers – Relationship > 1 year

15. Methodology – Cont’d • Kanchipuram Silk Sari Question

16. Visualisation – Target Method

17. Preliminary Interpretations • Poor depend mainly on strong ties. Mainly due to insecurity (Granovetter, 1983) • Indian hierarchical cultural ecosystems encourages “command and control” network structures • Sari sellers’ networks are fragile and easy to fragment • Context is important. These sari sellers do not recognise and take advantage of brokerage opportunities • South Railway Colony • Kanchipuram Silk Sari Question • Animators get the most training from BWDA.

18. Network Fragmentation I

19. Network Fragmentation II

20. Network Fragmentation III

21. Network Fragmentation IV

22. Intervention • Pilot Test • Attempt to get sari sellers to build weak bridging ties with other sari sellers and see how these impact business, networks and PPI • Use information and skills sari sellers want to entice bridge building • Villupuram treatment group and Pondicherry the control group • Assumption: BWDA internal network is a safe place to build weak, bridging ties

23. Intervention • Sari sellers have agreed to form an association as a result of this research. • BWDA is seriously consider buying saris in bulk for sari sellers. Will not be part of PhD research. But shows how spillover could work.

24. Contribution • If research questions can be answered successfully, microfinance institutions in India can help their clients develop the weak, bridging ties that could help increase their businesses and their poverty reduction.