World Development Vol. 38, No. 2, pp. 184–194, 2010� 2009 Elsevier Ltd. All rights reserved

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Social Capital and its “Downside”: The Impact on Sustainability

of Induced Community-Based Organizations in Nepal

KRISHNA PRASAD ADHIKARICentre for Nepal Studies, Reading, UK

and

PATRICIA GOLDEY *

University of Reading, Reading, UK

Summary. — This paper examines the role of social capital in the sustainability of induced community-based organizations (CBOs).Quantitative and qualitative data were collected from 14 villages and 129 CBOs in Southern Nepal. This paper argues that social capitalcan be both positive and negative, affecting collective action and the sustainability of CBOs. Major problems include rule breaking withimpunity and elite capture of resources, especially during the transition phase from external to internal management. While externalagencies play an important role in inducing and sustaining CBOs, they should also address the complex issue of social capital and itsdownside.� 2009 Elsevier Ltd. All rights reserved.

Key words — social capital and its downside, sustainability, community-based organization, Nepal, Asia

* The authors gratefully acknowledge the support given during fieldwork

by the Rural Self-Reliance Development Centre, Kathmandu, and in p-

articular by the Chairperson Dr. Devendra Raj Panday. The research

would not have been possible without the cooperation of the villagers who

answered questions despite an extraordinarily difficult situation due to the

political and armed conflict. The authors would like to thank the field

assistants: Moti Bashyal, Ram P. Neupane, Kum Bahadur K.C. and

Jitendra Yadav for their very helpful collaboration in this study. Finalrevision accepted: December 3, 2008.

1. INTRODUCTION

Inducing the formation of organizations or groups in thecommunity has been a popular strategy in the field of develop-ment since the 1970s at least; often coupled with an emphasison the participatory process. Recently this approach has re-ceived further impetus with recognition of the theory of socialcapital and its prominence in current development debates.Studies with social capital as the main focus have almost takencommunity organizations for granted. However, few empiricalstudies have been carried out to assess the role of social capitalin the sustainability of community groups.

This paper aims to contribute to a better understanding ofthe sustainability of community groups by examining the fac-tors associated with social capital in villages of a southern dis-trict of Nepal. Nepal has witnessed a massive rise in thenumber of externally induced CBOs, particularly after thedemocratic political change in 1990 and subsequent shift ofdevelopment policies and approaches. Theoretically, unitingpeople in a group and carrying out varied activities, includingsavings and credit, involves trust and the norms and behaviorsof cooperation. In addition, CBOs emphasize frequent meet-ings and the implementation of joint activities collectivelyfor personal as well as for collective benefits, thereby promot-ing social capital. The enhancement of social capital in the vil-lages and in the groups is expected to help resolve problems inthe systems of collective governance (Putnam, 1993), includingthe governance of the groups themselves.

Despite these assumptions and burgeoning works on socialcapital, examination of the dynamic interrelation betweenthe existing social capital and induced social capital throughthe inducement of CBOs has been a largely ignored dimension.So far, the application of the concept of social capital in thestudy of institutions has been mainly one-sided as social cap-ital has been taken to be intrinsically positive. RegardingCBOs in Nepal, there has been no study focused on their prev-alence and sustainability, but only limited and fragmented at-

184

tempts to understand the nature and experience of CBOs inNepal, mainly confined to evaluations of a particular projector agency (e.g., see Sah, 2003; Sharma, Bhattachan, & Shres-tha, 2001; Subedi, 1999). These studies usually focus on mea-suring projects’ impacts in the short term. Such studies mostlyuse management and organizational approaches to evaluatethe success or failure of groups or projects.

Based on empirical research carried out in 14 villages of twodistinct communities (Dudhraksha, hereafter referred to asnorthern and Majhgaon, hereafter referred to as southern)of a western–southern Terai district (Rupandehi) in Nepal in2004 (Adhikari, 2007), this paper aims to analyze the role ofsocial capital in the sustainability of CBOs. It assesses the rela-tionship between various aspects of social capital vis-a-visfunctioning of CBOs and identifies which aspect contributesto sustainability. It also attempts to analyze the interrelation-ship between the existing and induced social capital, and socialcapital and its downside so as to apply a holistic framework ofsocial capital to the study of sustainability of CBOs. A criticalreview of the concept of social capital is followed by a presen-tation of the research methodology and operationalization.Research findings are presented followed by discussion andconclusion.

SOCIAL CAPITAL AND ITS “DOWNSIDE” 185

2. CONCEPTUAL FRAMEWORK: CRITICAL REVIEWOF SOCIAL CAPITAL

(a) Concept of social capital

Social capital is presented in an extensive literature, withseveral definitions. The use of the concept in the developmentdebate is recent and can be attributed to three principalauthors: Bourdieu, Coleman, and Putnam (Baron, Field, &Schuller, 2000). However, social capital was earlier used torepresent the significance of social positions in facilitatingacquisition of standard human capital characteristics (Loury,1977).

Bourdieu (1986), p. 251 defines social capital as “the sum ofresources acquired by an individual or a group by virtue ofpossession of a durable network of more or less institutional-ized relationships of mutual acquaintance and recognition.”Bourdieu argues that power and conflict are inherent ele-ments of social relations and the volume of social capital pos-sessed by an agent depends on the size of network ofconnection that can effectively be mobilized (Bourdieu,1986, p. 249). Another influential definition of social capitallinks social capital in the creation of human capital and edu-cational outcomes (Coleman, 1990, p. 96). Coleman definessocial capital by its function; and as several entities consistingof some aspect of social structure, which facilitate certain ac-tions of individuals within that structure. He argues that so-cial capital is productive, making possible the achievement ofcertain ends that would not be attainable in its absence (Cole-man, 1990). Robert Putman redefined the concept and influ-enced recent development studies. According to Putnam(1995), p. 67, “social capital refers to features of social orga-nization, such as networks, norms, and trust that facilitatecoordination and cooperation for mutual benefit.” He seessocial capital as a distinct form of “public good” with an ef-fect on economic and political performance at the collectivelevel (Putnam, 1993). He emphasizes that people’s participa-tion in associational life results in better services and effectivepublic institutions (Putnam, 1993). He argues that social cap-ital keeps sense in “civic virtue” embedded in a network ofreciprocal relations, whereas a society with many virtuousbut isolated individuals is not necessarily rich in social capital(Putnam 2000, p. 19).

Putnam’s original definition of social capital was narrow;but he later (1998) expanded it from horizontal relationshipsbetween likeminded people to connections and interaction be-tween heterogeneous groups. Based on connections at differentlevels, social capital has been presented as bonding, bridging,and linking. According to Woolcock and Sweetser (2002), p.26, bonding social capital refers to connections to “similarpeople like you” (family, relatives, and kinship); bridging so-cial capital refers to connections to people “who are not likeyou;” and linking social capital involves connections to peoplein power, whether they are in politically or financially influen-tial positions. Linking social capital also includes vertical con-nection to formal institutions (Woolcock, 2001).

Social capital theory is now applied in development practiceby many development agencies and national governments. De-spite the highly positive emphasis and diverse applications ofthe concept as a positive sum game in which all can gain (Fine,2001, p. 123), the concept of social capital has invited criti-cisms. The critics argue that the “bright sides” of social capitalhave been exaggerated due to an “optimistic bias” (Gargiulo &Benassi, 1999). Both the proponents and critics of social cap-ital have acknowledged, to different degrees, that social capitalalso has a downside (Baron et al., 2000).

The concept of social capital is weakened by interpreta-tion to serve convenience (NESAC, 1998; Putzel, 1997), thusit lacks uniformity in meaning and use (Portes & Landolt,1996; Quibria, 2003). Despite the proliferation of studieson social capital, a significant number of empirical worksin this area remains mired in serious measurement and esti-mation problems (Quibria, 2003). One often debated issue isthe use of capital metaphor. Another important criticism re-lates to the lopsided rendition of social capital. The litera-ture on social capital focuses largely on its positiveconsequences, neglecting the downside (Portes & Landolt,1996). Similarly, social capital has been over popularizedto undermine the role of state, power, class, and politicsand to mask the failure of the neo-liberal path (Harriss,2002). To discuss many of these criticisms is beyond thescope of this paper. However, the issues of downside of so-cial capital and contextual measurement issues are discussedfurther as they form part of the framework applied in thisstudy.

(b) Downside of social capital

Portes (1998), p. 18 argues that “Sociability cuts both ways.”Social capital has both a positive and a negative side. The neg-ative side has been expressed in various ways, such as anti-so-cial capital perverse social capital; negative social capital;“downside” of social capital; negative implications/effects/as-pects of social capital; public bads, “dark side” of social cap-ital (Field, 2003; Gargiulo & Benassi, 1999; Putnam, 2000;Putzel, 1997).

Field (2003), p. 71 explains the negative consequences of so-cial capital in two respects: (a) it may reinforce inequality; and(b) it may play a part in supporting antisocial behavior. Thefirst consequence is attributed to power asymmetry, whilethe second relates to “perverse social capital” (the intendedor unintended negative externalities to the wider communityof some social networks).

(i) Power and inequality in social capitalField (2003), p. 75 argues that “It is possible to see social

capital as both an asset in its own right that is unequally dis-tributed and as a mechanism that can promote furtherinequality.” High social capital in the given group may rein-force and help sustain inequalities. Portes and Landolt(1996) have presented several stances of power and inequalitiesof social capital. The same strong ties that help members of agroup often enable the group to exclude outsiders; for exam-ple, strong business networks often restrict newcomers fromentering a business. Within the group too, when membershipin a community provides help when needed, it also demandsconformity, thus restricting individual freedoms. Downwardleveling pressures in strong groups deter innovation and theacquisition of human capital as members have to follow inthe footsteps of fellow members. High engagement among dis-advantaged people helps little to improve a situation as thereare few resources to draw from the network. Sometimes in-tra-ethnic high social capital (strong ethnic networks) maybar ethnic integration and, thereby, help to promote racialinequalities (Field, 2003).

Even though social capital provides members of a networkwith benefits from “the collectively-owned capital,” access tosocial capital as resources depends more on the power positionand location of the members (Bourdieu, 1986). According toPortes and Landolt (1996), and Field (2003), due to powerand inequality, social capital may sustain privilege and under-pin disadvantage; people may spend social capital at the

186 WORLD DEVELOPMENT

expense of others; powerful people can undermine the socialcapital of less powerful groups.

According to Lin (2001) the macro-structure of resources ishierarchical: that is, composed of positions, authority, rules,and agents where access and control of resources are con-nected to authority, a form of power. In a hierarchy, the occu-pants of higher positions use the positional chain of commandof power and authority to dictate, impose, and interpret rulesand procedures and to allocate resources to those in a lowerposition. In terms of embeddedness of resources, the hierarchi-cal structure in general is assumed to be a pyramidal shape: thehigher the level in the command chain, the fewer the numberof positions and occupants, and the higher level of the posi-tions and occupants, the more command of absolute and rel-ative amount of resources and information on location ofthem and vice versa (Lin, 2001, pp. 33–38).

(ii) Norms and networks with perverse effectsAs social capital facilitates coordination and cooperation

for the mutual benefit of the members of the network (Put-nam, 1993), some social norms and networks facilitating coop-eration may have harmful consequences to the larger society.Though some forms of networks of cooperation that producenegative consequences are non-intentional, others, for exam-ple, criminal gangs, drug networks, and terrorist networks,intentionally produce antisocial outcomes (Field, 2003). Thenegative impact of social capital embedded in powerful, tightlyknit social groups, not accountable to citizens at large, is evi-denced, for example, in corruption, patronage, and cronyismin political and governmental institutions (Narayan & Cassi-dy, 2001; World Bank, 1997).

(c) Rationale for using the social capital framework

Understanding the context of social organizations is essen-tial to explain the success and failure of development activitiesand institutions. Some communities perform more successfullythan others in sustaining development efforts/achievementsand institutions: as shown by the findings, for example by Bag-adion and Korten (1991) in the management of irrigationassociations in the Philippines; Bunch and Lopez (1995) in sus-taining increased yield after project phase out in Hondurasand Guatemala; Uphoff, Esman, and Krishna (1998) in themanagement of irrigation by water users associations in SriLanka; Krishna and Uphoff (1999) in performing collective ac-tions in India; Reid and Salmen (2000) in the success of exter-nally induced projects of agriculture extension in Mali; Pretty(2003) in sustainable management of natural resource groupsin various countries; and Bebbington, Dharmawan, Fahmi,and Guggenheim (2006) in the level of local capacity and ofrelative success in turning capacity into effective resolutionof problems in Indonesia. These examples from earlier studieshint that communities’ variation in managing and sustainingcommunity institutions is due to differential endowment of so-cial capital in the community. There is implicit consensus thatsocial capital is important because it allows people to work to-gether by resolving the dilemmas of collective action (Portes &Landolt, 1996).

In his analysis of the dilemma of collective action, Putnam(1993) concludes that because of social trust and norms of rec-iprocity, some communities successfully carry out collectiveactions, and others fail due to their lack. Putnam argues thatsocial capital is a precondition for multidimensional develop-ment of community, such as better schools, safer streets, fastereconomic growth, more effective government, and even health-ier and longer lives.

3. OPERATIONALIZATION OF SOCIAL CAPITAL ANDMETHODOLOGY

According to Uphoff (2000), p. 242, Coleman and Putnam,in their conceptualization of social capital, have also used theterms norms, trust, network, and structures descriptively,rather than analytically. Organizing factors constituting socialcapital and categorizing them analytically makes the subjectconcrete, easy to study, more amenable to theoretical progressas well as measurement and evaluation (Uphoff, 2000, p. 220).

Applying a “conceptual subordination approach” (Krishna& Uphoff, 1999, p. 6), Uphoff (2000) presents an analyticaldisaggregated framework. He categorizes social capital ele-ments into two distinct yet sometimes overlapping categories:structural and cognitive (Uphoff, 2000, pp. 240–242). In thiscategorization under structural social capital are roles, rules,procedures, and precedents as well as networks that facilitate“mutually beneficial collective actions.” Under cognitive socialcapital are the norms, values, attitudes, and beliefs which cre-ate and reinforce the positive interdependence of utility func-tions and that support “mutually beneficial collectiveactions” (Uphoff, 2000, p. 241).

Quibria (2003), p. 35 argues that to overcome the problemrelated to the empiric of social capital, it should be acknowl-edged that there is not a single entity called social capital,but many distinct notions. Based on the analytical framework,the social capital measurement tools were devised in the studyby disaggregating the concept into structural and cognitivelines. The information collection methods and tools were de-signed to capture “multi-faceted” (Dasgupta and Serageldin,2000) aspects of social capital.

Social capital has been understood and measured differentlyby researchers in different contexts and for different purposes.The differences are also explained by the uniqueness of localcultural contexts as social capital can only be understood inits local context (Foley and Edwards, 1997). However, whilerecognizing and being sensitive to cultural variations, mea-surement of social capital should provide a common concep-tual framework that helps to unify different dimensions ofsocial capital. Borrowing the “loose-tight” framework of Pe-ters and Waterman (1982), cited in Krishna and Shrader(1999), we have tried to apply flexibility in the local adaptationof measurement of social capital while tightly sticking to theconcept.

The concept of social capital was operationalized in order todevise the measurement in the local context. Taking the con-textual differences of social capital into account, methodolog-ical reviews were carried out in the developing country context(e.g., Bebbington & Carroll, 2000; Grootaert & Narayan,2000; Grootaert, Narayan, Jones, & Woolcock, 2004; Krishna& Uphoff, 1999; Pantoja, 1999; Reid & Salmen, 2000).

Based on the reviews, a social capital operational frameworkwas developed (Figure 1). The framework included cognitivesocial capital: trust, norms of reciprocity (norms of coopera-tion and collective actions), and sanctions; and structural so-cial capital: groups and networks (formal and informal); anddownside of social capital (power and inequalities ingrainedin social relations, and norms and networks having negativeexternalities). These features were measured mainly based onvillage attributes so that village indices could be computedand compared from one village to another. In the beginning,the study was extensively exploratory, which paved way forthe formulation of instruments for in-depth household inter-views. Supplemented with various methods such as group dis-cussions, observation, census, in-depth interviews, and casestudies, the study generated both quantitative and qualitative

14

Social capital

=

Cognitive

+

Structural

Trust SanctionsNorms of reciprocity

Networks Groups

LIN

KIN

G: T

rust in institutions

of various types

BO

ND

ING

and B

RID

GIN

G: T

rust in people from

various groups

Norm

s of cooperation

Norm

s of collective action

Village rules keeping and

enforcement

Dem

ocratic functioning (Q

uality)

Density (Q

uantity)

Sharingprivate m

atters

Support in urgent need of m

oney

General

supports of daily needs

Support in accidents/em

ergencies

Diversity (Inclusion)

Downside:Power; inequality;

norms and networks having negative

externalities

Downside:Power; inequality;

norms and networks having negative

externalities

=

=

Source: The major disaggregated concept drawn from Uphoff (1999) and operationalised by researchers based on review of literature and field exploration

(Source: The major disaggregated concept drawn from Uphoff (2000) and operationalised by researcher based on extensive review of literature and field work)

Figure 1. Operationalization of social capital.

SOCIAL CAPITAL AND ITS “DOWNSIDE” 187

data from multi-units of analysis: household, village, and com-munity-based group.

Field work was carried out under very difficult conditionsdue to the armed conflict: problems of security, avoiding“gatekeepers” for free access to information and finding peo-ple willing to participate. This limited selection of sites to thosewhere we had some personal contacts and familiarity. It wasvery difficult, if not impossible, to go to the field without asupport network. With informed consent, there was a veryencouraging participation in the semi-structured householdinterviews, which were conducted at respondents’ homes. Toprotect respondents, names have been changed or are notidentified. Similarly, for enhanced confidentiality, where possi-ble, the names of the villages are represented by numbers.

Based on the framework, various data collection tools usedin similar studies were tested and adapted where applicable.Through extensive exploratory work a local set of instanceswas identified in order to measure various aspects of socialcapital in the study villages. It was found that using singlemeasures such as “most people trusted” was not valid to reflectthe level of trustworthiness in the study villages as the level oftrust differed from one person or institution to another andfrom one purpose to another. Altogether 20 different groupsof people (based on social divisions) and institutions wereidentified. Trust in people was measured against trustworthi-ness in monetary matters and trust in institutions and repre-sentatives was measured against the trust that they performtheir institutional and personal responsibilities with due hon-esty and fairness. Trustworthiness of individuals in similargroups (social, economic, and political) in villages was indexedunder bonding trust and trustworthiness of individuals in dis-similar social groups was indexed under bridging trust. Simi-larly, trust in institutions and representatives was indexedunder linking trust. Various norms of reciprocity prevailingat the local contexts were explored, measured and indexed intotwo broader categories: norms of cooperation and norms of

collective action. Status of sanctions related to collective ac-tions was identified and indexed by village. The village wise in-dexed score of various aspects of social capital is presented inAppendix 1.

Regarding structural social capital, both formal and infor-mal networks were explored. Groups were analyzed in theirnumber (density), diversity as well as in quality (democraticfunctioning). Based on exploration of local traditions and in-stances, size of networks of supports in the villages was mea-sured separately on four distinct local contexts: on monetaryneeds; on general supports; on sharing private family affairs;and on emergency accidents. Similarly, the issues of powerand inequality embedded in all the above-mentioned socialrelations were identified and various norms and networks pre-vailing at the local contexts and having negative implicationsfor the wider society were explored in the field and in the lit-erature. Finally, the level of various aspects of social capitalin the villages was compared with the level of groups’ func-tioning. The downside aspect of social capital and issues re-lated to collective system of governance in the villages wereidentified qualitatively.

Similarly, the sustainability of the group was defined as per-ceived by the respondents. They indicated that sustainability,which was roughly translated as digo in Nepali and tikau inBhojpuri, meant continuity and regularity of group activities,such as meeting, savings (if any), investment, repayment (ifany), or other sector related activities.

4. RESULTS

Given the limited aim of this paper, in this section onlyresults related to the relationship between social capital andsustainability of groups are presented. Therefore, resultsregarding the prevalence and trends of groups and the natureof social capital in the study villages are not presented here.

188 WORLD DEVELOPMENT

(a) Comparing the aspects of social capital with thefunctioning of groups in the villages

In an attempt to understand the sustainability of groups vis-a-vis social capital, this section compares village-to-villagedata on structural social capital (group) with various aspectsof cognitive social capital. The first part of this section com-pares village wise densities of groups of all conditions withother village features, and the second part deals with the“quality” aspects of groups comparing the index of groupfunctioning scores with other aspects of social capital.

(i) Comparing patterns of static data with village level socialcapital indices

Village level group densities are computed as mean numberof groups per household for three conditions of cumulativenumber of groups: (a) total (all groups participated in sofar), (b) existing (total groups minus left out or dead groups),and (c) functioning (existing groups minus inactive groups).For the purpose of calculating household density of groups,cumulative number of groups has been considered. It shouldbe noted that cumulative number of groups here denotes thesum of the responding households’ membership in variousgroups. Village to village correlation analysis of informationshows two interesting results. First, aspects related to socialcapital in the villages are positively associated with the ratioof functioning groups in the villages. Villages where normsof cooperation, norms of collective action, thus overall normsof reciprocity and cognitive social capital, are high also have ahigh number of functioning groups. The correlation betweenthe index of overall rules keeping and densities of groups inall three conditions in the villages is positive and the strongestof all other aspects. In all analyses, the correlation with thedensity of existing groups is stronger than that with totalgroups and strongest with the density of functioning groups.In sum, it can be concluded that groups may be induced inany village, but more of them survive and function in the vil-lage where rules are kept. Table 1 illustrates the strength ofcorrelation between social capital components and village leveldensities of groups by conditions.

On the other hand, the negative correlation with some neg-ative aspects of village features such as political division, orgeneral division signifies that in villages where such problemsprevail, very few groups continue to function.

(ii) Group functioning: pattern matching of dynamic data withvillage social capital

The analyses in previous sections showed why severalgroups are inactive, left or dead in some villages and are func-tioning in others. Because the level of functioning of groups

Table 1. Correlation of density of groups wi

Aspects of social capital Pearson correlation (r)

Norms of cooperation r

Norms of collective action r

Overall norms of reciprocity r

Cognitive social capital r

Total rule keeping r

Norms breeched r

Division in the villages r

Political division r

* Correlation is significant at the 0.05 level (2-tailed).** Correlation is significant at the 0.01 level (2-tailed).

differs from one group to another, analysis of groups’ numberalone may not reflect the qualitative differences between them.In order to capture the quality, the perceived democratic func-tioning level of groups was measured and this index was com-pared with other social capital variables at village level. Anindex of democratic functioning has been computed throughresponses (five-scale) on the level of meeting attendance andparticipation in the decision making process, and on the levelof effectiveness. The level of functioning of the different orga-nizations may vary from time to time; presumably functioningis relatively better in the initial days when people have moreinterest combined with incentives and direct or indirect sup-port of agencies/projects that started their formation. Thus,the level of functioning of the groups was rated based on thelatest situation. Because many groups under study have notbeen phased out, their age, not the phase of the projects,was taken to identify the functioning level. Therefore, forthe analysis of functioning, two years or older groups, 102(80% of all groups) were considered. The results are presentedin Table 2.

The results mostly converge with the results of static analy-sis, and in most cases the relation between some aspects of vil-lage social capital is even stronger. It is found that villageswhere overall and bonding trusts are high also have relativelybetter functioning groups. Among three strands of trusts, thevillage level bonding trust has a strong correlation with thegroups functioning score in the village. However, the correla-tion with bridging and linking trust is small. Regarding the ele-ments of linking trusts, most of the trust scores are either notcorrelated or slightly negatively correlated, except for the trustin local government, which is very highly positively correlatedwith the functioning score of groups by villages.

The analysis between the village index of norms of reciproc-ity with the functioning of groups at the village level shows po-sitive associations at an over-moderate level. A separateanalysis shows both the norms of cooperation and the normsof collective actions are positively associated with the groupsfunctioning scores at village level. The village composite ofcognitive social capital is highly correlated with the groupfunctioning score.

Various village features related to sanction are found highlyassociated with the functioning of the groups. The villageswhere overall rule keeping is high also have highly functioninggroups. It is found that villages where the rules are breeched fre-quently have low functioning groups. There are several aspectsof village and group relationships, which have negative impactson the collective goods. Of them, village divisions, ethnic ormainly political, are prominent. It is found that village divisioncorrelates negatively with the functioning of the groups in thevillage, and with political division this is even stronger.

th norms and rule keeping (village-wise)

Density of cumulative number of groups by villagesAll groups

Total Existing Functioning

.238 .342 .462�.150 .084 .235.025 .241 .407�.035 .242 .453.370 .604* .783**

.420 .176 �.039

.021 �.099 �.299�.102 �.307 �.477

Table 2. Correlation between 2 year or older groups’ functioning and socialcapital in the villages

Aspects of social capitalin the villages

Pearsoncorrelation

Functioning scoreof all over 2 years group

Positive aspects

Overall trust R .527Bonding trust R .765**

Bridging trust R .304Linking trust R .212Cognitive social capital R .793**

Overall norms of reciprocity R .671**

Norms of collective action R .626*

Norms of cooperation R .460Overall rules keeping R .737**

Negative aspect

Norms breeched R �.655*

Division in the villages R �.703**

Political division R �.699**

* Correlation is significant at the 0.05 level (2-tailed).** Correlation is significant at the 0.01 level (2-tailed).

SOCIAL CAPITAL AND ITS “DOWNSIDE” 189

(c) Reflecting on qualitative information: why sanctionis a problem?

The results of the quantitative analysis of social capital andfunctioning of groups should be seen as a general directionrather than deterministic. Analysis of further qualitative andcase focused information showed that among other aspects,sanctions appeared to be the most important factor both inthe governance of collective action in the villages and manage-ment of groups. The quantitative data showed that villageswhere collective rules are breeched frequently and where sanc-tion is a problem had a low survival rate and poor functioninglevel of groups.

In order to understand why sanction is a problem, respon-dents were asked whether the collective village rules are brea-ched and who does breach rules in the village. The overallresponse shows that two in three persons breaching rules areleaders and/or well-to-do persons whereas poor and disadvan-taged people alone account only for 2%. Thirty percent ofrespondents said it is anybody regardless of who is breechingthe rules. Even though village elites breach the rules most inall study villages, the ratio is higher in Southern VDC thanin the Northern VDC (Table 3).

It is found that every village has rules, at varied levels andforms, mainly regarding regulating labor contribution (janash-ram) and penalties, locally known as khara and dand, for non-compliance. In some villages, where the rules are respectedhighly, breeching of norms is rare; application of monetarypenalties is excused after naming and shaming the noncompli-ant. However, some villages, where the rules are respected to alow extent, failed to realize any kinds of penalties on non-com-pliance. The remarks from respondents from those villages

Table 3. People breaking the vill

Village rule breach AnybodyLeaders/well to do

Poor and disadvantaged

Total

Note: Figure in parentheses is percentage within the VDC.

where groups functioning score is lowest, illustrate this situa-tion. “In the past when there used to be road work, I didnot see those not coming being punished” said a respondentfrom village 8. “Rule is there for penalty—but it has not hap-pened so far” A respondent from village 4. A respondent fromvillage 11 echoes, “Rules are made for violators but are neveradopted into action,”

Regarding the problems of enforcing rules in villages,respondents indicate that when powerless people violate therules, it is easier to enforce the penalties, but when they areviolated by the powerful, it is almost impossible to penalizethem, because villagers, in the first place, can hardly see thatleaders have violated the rule as the latter normally hide them.Even if known, it is too difficult for commoners to deal withthem. It is so intimidating that in the words of a respondentfrom village 12, “. . .Nobody raises questions due to fear. . .”It is because the village informal network of cooperation re-volves around the powerful people who often create difficultyor refuse to cooperate with those who go against them, mak-ing their life difficult afterwards. A respondent from anothervillage (5) mirrors the situation: “If an influential person doesnot regard the rules, the mistake is covered up. Sano (peoplefrom disadvantaged status or powerless people) fear to dareto break the rules while Thulo (elite) do not care.” Due topower differences, upward imposition of penalty is virtuallyimpossible. When the rules are violated by powerless people,this does not pose a threat to the functioning of collective ac-tion or group activities as they are made to pay the price,which however, is problematic when committed by powerfulpeople. Even if they are tried, they get away by using theirpower network. A respondent from village 10 puts it thisway, “Bada Aadmi [elites] do it [violate the rules]. If this isthe Chot Aadmi [disadvantaged], Dadh [a penalty] is taken.The rich people have the ability to pay bribes in Thaana [topolice] and draw the decision in their favor.”

When the leaders violate the rules with impunity, it is verydifficult to require others to follow the rules. As a result, itis difficult to initiate or sustain the collective affairs. A respon-dent recalls the situation in his village “No, since they (leaders)do not fulfill the rules themselves, how can they make othersfulfill them?” In some cases the difficulty to penalize a culpritalso lies in the fact that villagers are aligned to rival politicalparties which makes it hard to initiate collective actions inthe first place, and also difficult to impose the penalties dueto favoritism.

When village collective affairs get into trouble, mainlythrough rules breaking with impunity, this reflects the down-side of social capital at the local level and wider structural le-vel. Even though a high level of dependency on mutualcooperation characterizes villages in the study, each strandof social capital explored and measured was found to be gov-erned by intrinsic power-based relations. For example, inhighly trustworthy and reciprocal relations too, benefits distri-butions are very skewed toward the powerful. Many suchrelations are highly exploitative and of a bonded nature. The

age rules by VDC (N = 69)

Village development committee (VDC) Total (%)

Northern (%) Southern (%)

39.0 17.9 30.458.5 78.6 66.72.4 3.6 2.9

41 (100.0) 28 (100.0) 69 (100.0)

190 WORLD DEVELOPMENT

statement from Balku Harijan [name changed), of southernVDC illustrates this situation.

“I do not have connection with my immediate family as I left homeand moved to a new place. Here I have very good relation of trust witha local moneylender who motivates me to take loan that I would notneed to pay cash as I would be given a work at his farm to pay backthe interest which is 10% a month. The neighbors do not trust me,but the moneylender does as we have been co-operating with eachother for several years now. I benefit from the loan in need and he doeswith the work in time.”

Regarding performing collective actions, evidence showedthat when it comes to giving contributions to the community,the elites do not proactively participate, but when it comes togaining they are there; if there is a good source of funds com-ing from outside for communal purposes, schemes are carriedout without information being given to the common people.Regarding support networks, the evidence shows that eventhough support in emergencies is almost universal, when itcomes to supporting powerful members, everybody helps.However, this is not the case for poor members.

The relatively powerful people were found to be in a posi-tion to influence cooperation and collective action in the vil-lages as well as at the wider level. Relatively more educated,holders of power positions in party organizations or local gov-ernments, wealthy and in some cases high caste people haverelatively wider networks and more bridging and linking socialcapital. In addition, various exploitative norms and networkswere found both in the study villages and at the wider level.Practices related to governance of collective affairs at widerlevels include political patronage and divisions; Afno Manche(favoritism, nepotism, and sycophancy); corruption; rent seek-ing; free riding; elite capturing of public resources; impunity;social hierarchy based on caste and class. Similarly, other localnorms and networks include money lending; illegal logging;cross-border smuggling; gambling; alcoholism; systems of veil-ing on women; (in some cases) religious codes forbiddinginterest-based savings and credits. The power-based inequali-ties and norms and networks together have produced negativeimplications (intentionally or unintentionally) for cooperationand collective actions in the villages.

These examples of the downside of social capital prevail to arelatively higher extent in the Southern VDC than in the

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Figure 2. Perceived social capital inducem

Northern VDC. They limited, to a varied degree, the systemsof collective management, including community groups. Someof them have visible effects while others are invisible; somesimply prevent people from organizing in groups and carryingout collective actions while others damage the group’s cohe-sion.

Contrary to the popular belief that people at a more power-ful position in the locality help bridge and link the local initia-tives horizontally and vertically in order to draw resources forthe local good, in many cases such people were found to beusing their networks to feed their own self-interest and unleashthe downside of social capital on the rest of the group.

(d) Inducement of social capital, sustainability,and role of agency

Several questions were asked relating to the inducement ofsocial capital and its sustainability through group process.The fact that trustworthiness of a fellow member of the groupis the highest indicator of all other people and institutions sig-nifies that social capital is promoted through participation inthe groups. Furthermore, respondents’ agreements on variousstatements related to social capital confirm this status. Overall,the respondents agree that as a result of group participation:(a) there has been help and support in emergencies; (b) mem-bers of the groups are perceived to be closer than before join-ing the group; (c) cooperation between members has increased;(d) mutual trust between different members has increased; (e)distance between various groups of people (sex, caste/ethnic-ity, income, religion, origin, education, party, etc.) has nar-rowed; (f) people have learned from each other; (g) unityhas strengthened; and (h) contacts with external agencies in-creased. Figure 2 shows the perceived level of each of theseindicators in the scale of 100. The score is computed basedon five-scale question, 2 indicating strongly agree and �2 indi-cating strongly disagree.

Coming together in a group and meeting regularly for com-mon goals, members often use this platform to carry out activ-ities relating to individual as well as collective benefits. Thecloseness between individuals has increased through workingin the same groups, as they have the opportunity to closelyunderstand each other’s habits/behaviors, and, as a result,the level of trust has increased. They deposited regular savings

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ent through groups by types of groups.

SOCIAL CAPITAL AND ITS “DOWNSIDE” 191

in the care of an official; were given credit from local savingsor external fund without collateral; and made regular and fullrepayment. As long as group affairs go smoothly, the relation-ship is idealized as members perceive each other as if they werea “member of an extended family.” The groups provided helpin emergency. A respondent from an unsuccessful group of vil-lage 13 said, “. . .when in emergency, there is no money avail-able in the village free of interest, but in the group there was anemergency fund.” As far as narrowing the gap between differ-ent types of people is concerned, certainly the group processhelped to narrow the boundaries of caste/ethnicity, sex, etc.A respondent from a successful group in village 1 recalls thelocal Tharu women’s remarks that, “we had no chances tomeet and interact with Pahadiya.”

Regarding promotion of social capital in the inducedgroups, three types of scenarios are found: (1) groups do notpromote social capital even during the project period and con-sequently fail to function; (2) groups generate social capital aslong as the project/agency is there to facilitate but later fail tosustain it when the project is phased out; and (3) groups pro-mote social capital and sustain it for a long time.

Along with the study of all types of groups, five special caseswithin them related to the second category were studied indepth in order to understand the issue of sustainability of so-cial capital. All groups were deemed to be very successful byboth the respondents and the facilitating agencies. All thesegroups were multi-sectoral with a good level of local savingsand other resources. The credit repayment rate of the agencysupplied revolving fund was near 100% and of the local fundwas over 95%. The membership in four of five groups rangedfrom 22 to 33 and in the fifth it was 62. Groups met on a fixedday of each month with over 80% attendance and a good levelof participation in the decision making process. Leaders wereselected through group discussion and decisions made werethrough a consensus-based process. Each group was trainedin record keeping, accounting, and meeting procedure andmaintained up-to-date records with members’ passbooks fullychecked each month. They had carried out several collectiveactions voluntarily; rules were rarely breached, and, whenbreached, even leaders were made to pay the penalties.

In all these groups every thing changed when external sup-port was terminated. The groups were asked to join a federa-tion, which was later turned to a cooperative. Many problemserupted in all these groups: powerful members/leaders bree-ched the rules; captured the resources; and meetings werenot held. A respondent from an inactive group, from village11illustrates this scenario: “They (office bearers) were fine, butlater (after the agency left on completion of the project), theystarted not to attend the meeting, wanting to participate inthings (any opportunities provided for the groups) themselves,but with lack of communication.”

The following remarks from another group (from village 8)epitomize the problem:

“Soon after the project was phased out and the agency staff left, prob-lems emerged as the chairperson, secretary and treasurer started towork arbitrarily. The chairperson himself took a loan from the groupand did not pay in time. When he failed to abide by the rule how couldhe force others to pay back?”

How powerful people create problems during the transitionperiod of the group is evident from the following statement ofa respondent from another group.

“Local elites got the opportunity to play their dirty games and commitirregularities after the agency workers left. The rumor-mongersalarmed members that the money could be taken away if they joinedthe cooperatives. With the fear of losing money after the agency theDhanimani (powerful elites) people started to ask the loans for Rs.

2000/3000 like that. They knew that there was not that much fundto meet such demand. While the project was active, rules were perfectlyrespected. There were fines for breaching the rules.”

In all groups similar problems were found. Respondentsmentioned that just as the trust increased, so has betrayal inmany of the groups (mainly by the leaders) leading collectiveefforts toward collapse. One respondent from an unsuccessfulgroup said, “there had been increased trust but this lasted onlyfor a short while.”

5. DISCUSSION AND CONCLUSION

The most significant and important findings from the empir-ical study in Nepal can be summarized as follows:� Social capital can be induced but it is difficult to sustain.� Village level cognitive social capital has positive relations

with the survival and functioning of groups.� Downside of social capital plays an equally important

role; rules breaking with impunity and elite capture areproblematic.� Agency facilitation is crucial to mediate the aspects of

social capital and thereby enhance sustainability ofgroups.� Transition phase is the most vulnerable phase of groups

management.As the level of social capital varies from village to village, so

does the functioning of groups. In terms of varying endow-ment of social capital and performance of institutions fromone place to another, this finding is consistent with findingsof many other studies reviewed in previous sections. Of the so-cial capital aspects, cognitive social capital (at bonding level) ishighly associated with the functioning of the groups. However,this is not an absolute rule because two other factors also playroles in the villages: first, some of the less cohesive villages alsomay have some groups surviving and better functioning due tothe facilitation and mediation of agencies; and second, the per-verse norms and networks that prevail at a broader level mayaffect the functioning of groups in the villages even though vil-lage level cognitive social capital is high.

The evidence shows that social capital can be inducedthrough group process. There are three scenarios in terms ofinducement and sustainability. First, some groups could notgenerate trustworthiness and were unsuccessful during theprojects facilitation. Second, some groups generated and con-solidated social capital. Third, some groups generated socialcapital but failed to sustain after the projects terminated. Inthe second scenario, high village social capital backed up thenewly induced social capital. In the third, the newly formed so-cial capital was destroyed by the presence of the downside ofsocial capital in the village or elsewhere. This third scenariodoes not support Pretty (2003) who argues that maturity en-hances social capital which is likely to be irreversible. Thesefindings show that there is a constant interaction betweenthe existing village social capital and newly induced social cap-ital.

The downside of social capital also explains why rules areoften broken by powerful people with impunity. Due to thecaste- and class-based hierarchical social organization andpower-based vertical relations in the society in general, andin the southern VDC in particular, upward enforcement ofrules is impractical, enabling elite capture of resources andimpunity. These findings on sanctions and the powerful sup-port Putnam’s observation that sanctions are less likely to beimposed upwards and to be accepted if imposed (1993), p.174. Similarly, as shown by several studies, elite capture of

192 WORLD DEVELOPMENT

resources at community level collective resource managementis also common (e.g., Esman & Uphoff, 1984; Malla, Neupane,& Branney, 2003; UNDP, 2004; Marcus & Acharya, 2005).

Evidence shows that in most cases, external agencies play arole of mediator and facilitator in heterogeneous communities,and help link group efforts to the outside world. However, it isno longer so when the project is terminated. This finding isconsistent with Buckland (1998) who found in Bangladeshthat the sharing of resources between the local elites and otherpeople was likely to last as long as the agency was presentthere. Putnam (1993) argues that third party enforcement ofcontract is costly and impossible. However, in the case ofinduced community groups, agencies as the third party arealready there.

Evidence shows that the transition period is the most vulner-able phase for the groups’ management. In this period groupsweaken: attendance starts to decline, rule adherence breaksdown; overdue loans increase leading to a chaotic situation.This is when the downside of social capital manifests itself.The findings regarding phases and crisis in groups are consis-tent with FAO (1999) who found groups reached a “manage-ment crisis and retrenchment phase,” and with Greiner (citedin Lewis, 2001, p. 88) who in his life cycle model argues thatthe crisis arises in transition from one stage to another threat-ening the very survival of the groups.

The interplay between social capital and the downside of so-cial capital and effects of agency mediation is summarized inthe schematic diagram (Figure 3). This study has shown thatboth types of norms and networks exist simultaneously. Thecooperation in the village could take three forms; betweenindividuals (private good), at whole village level (public good)and at the group level (public or semi-public good). However,all types of social cooperation involve some degree of powerand inequality, thus, generating some downside of social cap-ital. Similarly, several norms and networks of cooperation inthe study field have negative consequences for the wider soci-

Social capital:Trust, Norms of

reciprocity, sanctionand network

Collective action (Village level)

Cooperation(Between individuals)

Collective action (Organisation level-

ICBO)

Downside:Norms and network

involving trust

Presence of agent/ mediator

(Agency inducement

Latent or minimised

Low or no effect

Power and inequality

Forms of social capital Forms of cooperation

Agency mediation, changes in downsi

Interaction between social

capital and its downside

Figure 3. Interplay between social capital and its downside and e

induced community-ba

ety, thus adding to the downside of social capital. Coexistingat varied level and constantly interacting with each other, so-cial capital and its downside shape the outcome of cooperationand collective action. In terms of sustaining cooperation, oneof the most serious repercussions of this interplay is mani-fested in the tendency that the norms of cooperation, be it vil-lage norms of collective action or operational norms of self-help groups in the village, are violated at odd moments, espe-cially by people in the positions of power. During the projectperiod when external agencies facilitate (unless they generatethe downside themselves), the downside of social capital re-mains in a latent form (in some rare cases it may be trans-formed positively). However, when the external agencies/projects mediating the parties and facilitating the collectiveand cooperative activities in the villages are terminated, thedownside of social capital tends to manifest. Whatever socialcapital was promoted for some significant time gets quicklyand easily dissipated. This effect is very high in the inducedgroups.

In summary, this study has implications for social capitaltheory and practice particularly related to the inducementand sustainability of community-based organisations. We ar-gue that social capital and its downside are inextricably inter-related notions and require equal consideration whileinducing and promoting community-based groups. The sus-tainability of induced social capital depends largely on thesuccess of minimizing the pernicious norms and networksand promoting those that are related to positive sum socialrelations. All parties including community mobilizing agen-cies should be equally aware of the sources and impact ofthe downside of social capital. Special awareness in ruleskeeping and equitable resource utilization, especially duringthe transition period is crucial. Groups and agencies shouldgive attention to formulate good transition managementand self-sustaining future mechanisms. Given that severalstudies have hinted at the problems of elite capture at various

53

Informal (private or semi-public or common goods)

(Semi) formal (common or public goods)

(Semi) formal (semi public or common

goods)

Least effects

Moderate or high effects

High effects

)

Absence of agent/ mediator

(Agency withdrawal)

Manifested or revived

High effect

Nature of cooperation Effects of interaction and mediation on cooperation

de of social capital and effects on cooperation

ffects on various forms of cooperations. Note: ICBOs are the

sed organizations.

SOCIAL CAPITAL AND ITS “DOWNSIDE” 193

sectors and level of governance in Nepal, future study shouldfocus on understanding the nature and process of elite cap-ture and developing mechanisms that discourage it and pro-mote equitable practices. Future studies might also identify

practical ways to minimize the downside and maximize theupside of social capital while mobilizing community-basedorganizations.

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APPENDIX 1

Scores of various aspects of social capital in the scale of 100 by villages

194

Villages Overalltrust

Bondingtrust

Bridgingtrust

Linkingtrust

Norms ofcooperation

Norms ofcollective

action

Norms ofreciprocity

Cognitivesocialcapital

Overallrules

keeping

Generaldivision

Politicaldivision

Groupfunctioning

Groupdensity

total

Groupdensityexisting

Groupdensity

surviving

1. 59.2 71.2 57.1 53.5 50.0 74.0 62.0 60.6 86.0 42.0 0.0 72.6 4.8 4.8 4.62. 60.6 77.1 57.6 52.9 48.0 79.0 63.5 62.0 65.0 19.0 14.0 74.0 3.3 2.9 2.73. 67.2 80.4 69.2 57.2 32.0 58.0 45.0 56.1 77.0 41.0 17.0 78.2 3.0 2.8 2.74. 57.9 63.4 57.1 55.0 49.0 52.0 50.5 54.2 63.0 33.0 17.0 0.0 4.6 3.3 3.05. 54.9 65.0 49.1 53.5 50.0 75.0 62.5 58.7 73.0 33.0 0.0 67.3 2.4 2.4 2.46. 62.1 77.0 61.4 51.4 54.0 82.0 68.0 65.0 63.0 26.0 14.0 72.5 2.3 2.1 2.17. 58.2 69.6 49.1 59.0 51.0 58.0 54.5 56.4 78.0 27.0 0.0 43.3 3.2 2.0 2.08. 59.8 70.5 56.5 56.2 42.0 56.0 49.0 54.4 54.0 36.0 8.0 52.4 2.2 2.2 1.79. 54.9 67.6 52.6 49.0 53.0 51.0 52.0 53.5 61.0 53.0 50.0 81.5 3.6 3.0 2.410. 64.0 68.6 56.4 66.0 45.0 50.0 47.5 55.8 73.0 67.0 44.0 65.3 3.1 2.9 2.611. 48.3 58.3 44.8 45.8 27.0 52.0 39.5 43.9 49.0 92.0 63.0 29.7 3.2 2.2 1.312. 58.0 66.0 54.3 56.5 39.0 63.0 51.0 54.5 47.0 47.0 25.0 28.4 2.0 1.0 0.613. 57.6 60.8 60.0 54.0 35.0 63.0 49.0 53.3 48.0 58.0 38.0 0.0 3.6 2.6 2.014. 61.6 71.2 61.7 54.2 33.0 63.0 48.0 54.8 63.0 60.0 50.0 50.0 2.4 1.8 1.615. 60.5 72.4 58.1 54.9 46.0 65.0 55.5 58.0 67.0 32.0 10.0 61.3 3.1 2.7 2.516. 57.7 65.5 54.8 55.0 40.0 56.0 48.0 52.9 58.0 62.0 46.0 41.4 3.0 2.3 1.817. 59.5 69.9 56.9 55.0 44.0 62.0 53.0 56.2 64.0 43.0 22.0 55.9 3.0 2.5 2.3

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