Microfinance And Social Capital Theory

In accordance with the previous only physical capital theory and capital operation logic, the poor will inevitably be excluded from the traditional financial services. Social practice of microfinance originates in social care to this part of the population suffering from financial exclusion. On the basis of the reflections to the only physical capital operation logic, it successfully absorbs the logic of the social capital, achieves effective control to the rural credit risk, reduces transaction costs, and meets the poor’s financial demands to improve their living and developing conditions. Its inherent logic is the use of the particular information delivery mechanism in rural social communities networks, makes the powerful advantage of inside information in the rural areas passed to the microfinance institutions outside from the rural social group by group lending mechanism, solves the problems of adverse selection and moral hazard. As an effective tool for poverty reduction, the social practice of microfinance is significant and an irreplaceable role for solving the problems of the rural financial market inefficiency.With the development of microfinance practice, the development of microfinance institutions emerges the trend of excessive commercialization, embodies in focusing so much attention on the financial performance, while ignoring the original intention of providing services for the poor and maximizing social performance, and triggering a series of ethical issues, such as the controversy of high interest rate, improper competition leading to customers’excessive debt, difficult to balance the interests of all stakeholders during operating process, etc. The solution of these problems is really about the future and destiny of the social practice of microfinance.After all, microfinance is a kind of complex social practice which includes multilayer stakeholders to participate in, thus it is influenced by multiple variables. Its commercialization tendency is also the result of a dynamic game of all sorts of variables, and the inevitable process under the action of physical capital operation logic and social capital running logic. Therefore, for microfinance commercialized trend, it is necessary for us to return to the logical starting point of microfinance social practice, namely the origin of the social capital acting on that.How to implement the collaborative development of microfinance financial performance and social performance has always been the hotspot in theory research. This article attempts to provide a possible way of coordinated development from the dimension of social capital theory, through the analysis of the internal connection between the microfinance institutions’ internal-external social capital accumulation and organization performance, to achieve the double performance goals of sustainable services for the poor.The strong explanatory power of social capital theory for microfinance commercialization problem, operation mechanism and social performance management, stems from the inherent logic of the evolution of capital. The theorists have widely recognized the function that social capital for credit risk aversion in rural finance market, and to analysis the internal connection between microfinance and social capital, but the research is still not systematic and perfect. This is because, on the one hand, these studies do not systematically study on the social capital theory, unilaterally apply a perspective of social capital theory for the analysis of microfinance, even directly understand the social relations as the social capital, do not figure out clearly the inherent relationship of social practice and social relations and social capital, thus unable to comprehensively analysis the internal connection between the microfinance social practice and social capital. Previous research, on the other hand, doesn’t distinguish the layers of dimension of social capital, prefer from microscopic dimensions namely borrowers dimension to analyze the mechanism of action of social capital, doesn’t achieve the organic combination of the micro and meso and macro levels, lack of comprehensive consideration, and then difficult to use different dimensions of social capital theory to analyze the microfinance coordinated development of social performance and financial performance.There are five sections in this article. The first part is introduction. The second part leads the structure context of full text, on the basis of the introduction of microfinance commercialized connotation and the controversy of over-commercialized trend, analyzes that only back to the starting point where microfinance social practice and social capital occurs reaction can we solve the problems and controversy in the process, of commercialization. The third part includes chapter2and chapter3. Chapter2starting from the starting point where microfinance social practice and the social capital occurs reaction, analyzes the inner mechanism in which the group lending mechanism and the social capital occurs connections, studies microcredit how to use the effect of social capital to reduce transaction costs and avoid the credit risk, and then draw a conclusion that the group lending model is not universal in practice so that the loan mechanism and risk evading mechanism needs to be innovated constantly. The third chapter introduces an innovation on microfinance case in our country, the "Moral Bank" of Yuyao city, analyzes its explorations of all aspects systematically. The fourth part includes the fourth and fifth chapter. Chapter4Aiming at the current commercialized trend of microfinance, from the dimension of social capital theory to analyze the organization performance of microfinance institutions, so as to explore a kind of perspective and possibility that makes the coordinated development of social performance and financial performance realized. Chapter5emphasizes the probe into the internal connection of social relations and social practice and social capital, and from the perspective of business ethics, combined with the stakeholder theory, discusses the operation logic of social performance management based on multidimensional practice subject. The last part is the summary of the article.