Financial Inclusion & Social Capital A Case Study of SGSY Beneficiaries in Kashmir Valley

Abstract

The interaction between economic dimensions and socio-political dimensions of poverty are believed to be interlocked with a continuous interaction among each other. These interactions are believed to manifest in an intertwined relationship; and thus remain at the centre of policy making throughout the developed world. Access to economic resources (Financial Inclusion) is believed to encourage micro entrepreneur to take on profitable activities which in turn provide an enabling environment for him/her to gather access to social networks which may be beneficial to him in terms of access to raw material, marketing support and business ties. Whereas financial inclusion is believed to have a positive impact on social capital, the reverse is also true; the amount and quality of social capital provides a micro-entrepreneur with easy access to diverse sources of finance. Microfinance Institutions around the world heavily rely on group financing mechanism by leveraging on social collateral as a replacement to financial collateral in financing micro-entrepreneurs. The present study is an attempt in this direction to understand the relationship between financial inclusion and social capital. The study attempts to evaluate the impact of access to finance on socio-political empowerment of the beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now known as National Rural Livelihood Mission (NRLM). Results indicate that access to finance has a positive impact on almost all the socio-political indicators of empowerment, the impact being relatively lesser for financial literacy and economic awareness.