Improving the functioning of the rural financial markets of Armenia

Theoretical literature suggests that social capital, respectively the underlying social networks, facilitate access to otherwise lacking production factors such as financial resources. In addition, the manifestation of different dimensions of social capital is suggested to facilitate collective action and better outcomes in communities. This work analyses by means of Social Network Analysis the role of social capital (bonding and bridging dimensions) in accessing productive resources, in particular access to information and micro-credit. In addition, it determines empirically the significance of social capital (structural and cognitive dimensions) for the credit repayment performance of joint liability borrowing group members. The significance of both cognitive and structural social capital shows that it is essential to consider different dimensions of social capital in such an analysis. Otherwise, analysis may result to biased results. The results suggest that transition brought not only socio-economic changes but also changes of social structures and social support networks to rural Armenia. Though village culture appears to be preserved, social support networks prioritise and benefit the kin members first.