Comparing collective action in rural and urban group based microcredit

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Self-Help Groups (SHGs) have emerged as a key mechanism for poverty alleviation in rural India, and a recent initiative aims to adapt these concepts for urban areas in the Greater Hyderabad Area. This study investigates how variations in social capital attributes between rural and urban communities influence collective action in group-based microcredit. Utilizing a framework based on social capital and collective action theories, the research distinguishes between structural and cognitive dimensions. A mixed-methods approach is employed, combining general survey data with findings from field experiments. The results suggest that field experiments provide a more accurate measure of cognitive indicators than surveys. Trust and solidarity, crucial elements of social capital, were found to be more significant in rural SHGs than in urban counterparts. While both rural and urban SHGs demonstrate stability and similar operational functions, the differing attributes of social capital may have varying implications for their future effectiveness. The adaptability of SHGs within microcredit frameworks is evident in both settings, yet the differences raise questions about the threshold levels necessary for their successful operation. Policymakers and practitioners should consider these factors when developing the next generation of SHGs in an increasingly urbanized India.