Social Networks and Micronance

Abhijit Banerjee Arun G. Chandrasekhar Matthew Jackson Esther Duo

November 2009

What I was going to present: experimental evidence on technology diusion in Kenya

A sample of farmers, randomly selected from parents in many schools, received hands on demonstration of fertilizer in their own farm. Beforehand, we asked them (and the control group) who the three people they talk to about fertilizer are. We then follow their adoption over several season, as well as that of their friends, and the friends of the control group Adoption if treatment group farmers almost doubles. But no dierence in adoption between their friends and the the friends of the control group after 1, 2, 3, 4 seasons. It is not because information is useless to neighbor: in one season, one randomly selected friend of the treatment group was invited to the demonstration. The adoption of the invited friend is a large as that of the treatment farmer.

What I hope to present if I am ever invited again

This is a surprising result, in light of results in Ghana (Conley,Udry) and India (Foster, Rosenzweig) Assuming we can take these result as face value, suggests that diusion of agricultural technology is quite context dependent. A dierence is that fertilizer is old and boring. Pineapple and green revolution were new and fun. Epidemiological model of technology diusion, with multiple equilibria: people talk only if it is worth it. If nobody talks, innovation dies, and therefore there is nothing to learn from your neighbor, and therefore no one talks, This suggest that exogenous changes in the environment can have large eect on whether or not technology diuses in the network

Experiments we are piloting now

At the village level, randomly

Reduce the cost of communication (farmers cooperative) Make fertilizer exciting: well-timed discounts

At the individual level, inject a new technology (use of the right quantity of fertilizer, gizmo to help that) randomly to some farmers. Make gizmo available at low cost in the shop. See whether it diuse among friends of the injection points Prediction: no diusion in the usual networks. More diusion in village with farmers coop and discount program.

Networks and micronance diusion

How do network structures impact the diusion of membership in a micronance organization?

Information about micro-credit access as well as invitations to join an MFI are (to a substantial extent) supposed to be spread by current members. Network literature suggests that link structure and topological properties inuence diusion of information through the network

Context and Outline

We have detailed network data on a set of villages, before a particular MFI starts working in this villages This data is then matched to micro-nance take up, at the individual level. We can use it to answer various questions: what inuences average participation in the network, what inuences individual participation, what inuences who forms a group with who, etc. All these questions are fraught with identication issues. Today we will focus on the one question on which we may have a better (partial) handle: average village-level take up.
Look at correlation between network properties and take up Study specically the role of injection points: does it matter who is rst exposed to micronance? To answer this specic question, we exploit the MFI strategy of always accessing the same type of people when starting work in a village. These people have dierent network characteristics in dierent villages.

Environment

75 villages, rural Karnataka Within 2-3 hours outside of Bangalore Little pre-existing presence of micronance institutions Limited access to formal credit technologies Industries include agriculture (nger millet, rice, coconut), sericulture (silk worm rearing) BSS (Bharatha Swamukti Samsthe) is a young micronance institution (MFI) seeking to penetrate these villages Presents a unique opportunity to study diusion of micronance across the network

Data
Full census of the village:
Village questionnaire:
village leadership, presence of ngos, SHGs, geographical features (rivers, mountains, roads)

Household census:
demographic information, GPS coordinates, amenities (roof type, latrine), caste, occupation, etc.

Follow up survey:
Detailed individual questionnaire:
Stratied the households by religion (Hindu, Muslim, Christian) Stratied by geographic sub-locations Randomly sample subject to stratication half of the eligible households Basic household information Social network data on thirteen dimensions including visitors to the home, religious network, advisors, nancial network (who they borrow or lend small amounts of money or kerosene/rice from), etc.

Data

Very rich multigraph with many dimensions of connections between individuals

Can (eventually) test theories about how dierent types of relationships may matter

Many networks 75 villages in sample, 38 villages with MFI penetration.

Uniquely enables to study how network topology aects diusion processes Most analyses have only a handful of networks (usually one) and can only focus on local information

Detailed information on physical covariates

But no nancial data (so as to not prime the villagers)

Sample Village

Sample Village

Sample Village With MF

Data

Partially observed networks :

Pseudo-random sample of network data induces biases in the analysis Can take a rules of thumb approach or a more structural approach Rules of thumb involve analytically correcting statistics under random sampling with some justication (which is what we are doing for now).

Household versus individual network as unit of analysis What network to use? Usual identication issues (omitted variable bias etc.)

Descriptive Statistics

Table 1 : Descriptive statistics % general merit or obc % with savings % in self-help groups Average degree Average clustering Average path length Average eigenvector centrality (leaders) Average eigenvector centrality (population) Mean 0.676 0.414 0.357 15.691 0.530 1.976 0.072 0.050 Std. Dev. 0.167 0.136 0.165 2.615 0.046 0.132 0.015 0.008 Min 0.034 0.143 0.025 11.797 0.417 1.747 0.042 0.031 Max 0.991 0.643 0.635 22.462 0.657 2.249 0.123 0.067

Network properties and Micronance Take up

Are the basic properties of the network correlated with take up?
Size Clustering Average Degree Variance of Degree distribution Degree of schism: p (1 p ) where p is fraction of network people who have negative 2d EV value.

Result

Table 2: Correlation between network characteristics and MF take up Take Up (Village level) Average degree -0.0041 -0.0043 [0.0057] [0.0058] Var. of degree distribution -0.0005 -0.0004 [0.0008] [0.0008] Average path length Average clustering Second eigenvalue of stochastized First eigenvalue of adjacency Schism Size Adj. R squared F stat p-value No. obs -0.0006 [0.0002] 0.2741 0.0030 38 -0.0005 [0.0002] 0.2552 0.0077 38 0.0922 [0.2467]

0.0048 [0.0220] -0.0005 [0.0009] 0.2027 [0.4720] 0.0822 [0.2509]

-0.0002 [0.0204] -0.0003 [0.0013]

-0.0009 [0.0008] 0.2364 0.0165 38

0.0236 [0.3144] 0.0386 [0.1749] -0.0036 [0.0245] 0.0009 [0.0012] -0.0005 [0.0002] 0.1968 0.0535 38

Does the injection point matter?

Do the characteristics of people to be made aware of micronance (injection point) matter for take up? Identication problem: villages with dierent injection point may also be dierent,: e.g. people who sent their main leader forward talking to BSS may be the ones that are interested in taking up micronance in the rst place. Source of identication: BSS relies on a single denition of a leader to enter a village: village elders, self-help group leaders, gram panchayat leader, temple pujari (priest), doctor, headmaster, anganwadi teacher, shop owner All these people are invited to the initial training meeting The average degree is 15 (2.6) for the average person, and 19 (3.7) for the leaders. Range for leader: 12.7-29

Questions of interest

Question 1: Does the fact that these leaders are leaders in the network sense matter for take up: We use eigenvector centrality of leaders as a measure of network leadership : a measure of importance which reects the importance of the people you know. Question 2: Does it make a dierence whether or not these people take up themselves (i.e., is is the centrality of the stained leaders that matters, or centrality in general?

Results

Table 4: Main regression Centrality Stain Stained Dummy*Centrality Size Village network control Village other controls (SHG, saving) Village centrality Adj. R squared F stat p-value No. obs -0.0007 [0.0003] N N Y 0.3862 0.0004 38 -0.0007 [0.0008] Y N Y 0.3611 0.0091 38 -0.0007 [0.0003] N Y Y 0.4435 0.0003 38 -0.0004 [0.0008] Y Y Y 0.4137 0.0053 38 1 1.1661 [0.76708] 0.3522 [0.1732] 2 1.4330 [0.8496] 0.2909 [0.1900] 3 1.8227 [0.79711] 0.2396 [0.1744] 4 1.8671 [0.8935] 0.2043 [0.1941] 5 2.2123 [0.9114] 0.5454 [0.3092] -0.6436 [0.4592] -0.0006 [0.0008] Y Y Y 0.4346 0.0050 38

Interpretation

Centrality of leaders matters a lot Whether or not leaders are stained also matters: but it is not really identied Centrality of leaders matter just as much, even if none of them take up: an information story rather than other peer eects stories.

Caveats

Leader centrality may still tell us something about the nature of the village which is correlated with subsequent take up of micronance
We regress village level variables on centrality Table level of savings signicant... We control for village level network and background characteristics in the regressions.

Table 3 : Is the centrality of the leader correlated with village characteristics? Eigenvector centrality of leader set Age -0.0029 -0.0031 [0.0021] [0.0020] Education 0.0013 0.0000 [0.0032] [0.0032] % GM or OBC -0.0158 -0.0216 [0.0152] [0.0153] No. beds -0.0224 [0.0300] Electricity -0.0077 [0.0247] Latrine 0.0086 [0.0112] Savings -0.0030 [0.0306] SHG -0.0265 [0.0253] Adj. R squared 0.0327 0.0705 -0.0432 F stat p-value 0.2546 0.1991 0.6924 No. obs 38 38 38

-0.0016 [0.0450] 0.0018 [0.0284] -0.0237 [0.0128] -0.0391 [0.0027] 0.0056 [0.0042] -0.0002 [0.0169] -0.0333 [0.0461] -0.0059 [0.0349] 0.0067 0.4359 38

Conclusions

Injection sites matter

Eigenvector centrality of leader set matters Take up also correlated with whether leaders are stained, but dicult to interpret what this means. Eigenvector centrality of leaders set matters even in villages where they do not take up themselves.

Basic network properties such as degree, clustering, average path length, second eigenvalue all seem to be largely irrelevant

Next Steps

Does injection point within a network matter for adoption in this part of the network, particularly when the network has strong schism? Test node-level data hypotheses Test time series level hypotheses Study group formation patterns