Diffusion of Microfinance


October 3, 2012


Matt Jackson


Stanford Economics Department


We examine how participation in a microfinance program diffuses through social networks, using detailed demographic, social network, and participation data from 43 villages in South India. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, the ∈jection points.” Microfinance participation is significantly higher when the injection points have
higher eigenvector centrality. We also 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 nonparticipants.
We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants. However, information passing by non-participants is still substantial and significant, accounting for roughly one-third of informedness and participation. We also find that, once we have properly conditioned on an individual being informed, her decision to participate is not significantly affected by the participation of her acquaintances.


Matt Jackson

Matthew O. Jackson is the Eberle Professor of Economics at Stanford University and an external faculty member of the Santa Fe Institute and a fellow of CIFAR. Jackson’s research interests include game theory, microeconomic theory, and the study of social and economic networks, including diffusion, learning, and network formation. He was at Northwestern and Caltech before joining Stanford, and has a PhD from Stanford and BA from Princeton. Jackson is a Fellow of the Econometric Society and the American Academy of Arts and Sciences, and former Guggenheim Fellow.