Trust, Social Capital, and Intermediation Roles in Microfinance and Microenterprise Development

This study examines the role of trust and intermediation functions in microfinance and microenterprise development. Fifteen Self-help Groups (SHGs) were selected from three different locations in India for Focus Group Discussions (FGDs) and in-depth personal discussions. The peer trust was found higher than the intermediation trust during the microfinance group formation as well as group operations. The level of intermediation trust was higher than the peer trust during microenterprise development. The entry level trust was cognitive in nature, and transformed to 'affective peer trust' and 'affective intermediation trust' at the operational level. Trust was found to be the causality of social capital in SHGs. Intermediation trust was higher for early adopters of entrepreneurship than that of the late adopters. In case of microentrepreneur, the cognitive intermediation trust was transformed to affective intermediation trust with the passage of time.