Word of mouth: how microfinance programs go viral

MIT economists examined the spread of anti-poverty programs in rural India. They found that it all depends on who hears about it first.
Written by Janet Fang, Contributor

How do you get people to participate? A new study shows just how much more popular anti-poverty programs can be when socially well-connected citizens are the first to know about them. MIT News reports.

A team led by MIT economist Abhijit Banerjee developed a new measure of social influence they call “diffusion centrality” -- the location of that first person to learn about the services within their social network. When someone with high diffusion centrality receives information, it’ll spread faster.

Specifically, they studied how knowledge spreads through word of mouth, focusing on the operations of Bharatha Swamukti Samsthe (BSS) Microfinance, a small-scale lending institution based in Bangalore, India.

In 2006, they conducted extensive surveys -- demographic, household and social-network data -- six months before BSS started offering microfinance programs. By 2011, the researchers finished conducting follow-up surveys in the 43 villages where BSS ended up running programs.

  • Participants are seven times more likely to pass along information to other households, compared to people who are informed but not participating.
  • However, facts about the programs passed along by nonparticipants proved to be the main source of information for about one-third of the households that eventually did join.
  • Participation increases by about 11 percentage points when well-connected local residents are the first to gain access to them.
  • That gain occurs when the first people to learn about programs are in the 90th percentile of diffusion centrality, as opposed to the 10th percentile.

When introducing a program to a village, BSS representatives hold meetings with local leaders -- often teachers, business owners or heads of local savings groups. But the study shows that their social centrality can vary. The results could help guide anti-poverty researchers and policymakers on selecting “more influential leaders to contact first,” Banerjee explains.

In addition to poverty alleviation, the work might lead to research using social networks to promote agricultural technology adoption, vaccinations for children, and malaria prevention.

The work was published in Science last month.

[Science via MIT News Office]

Images: BSS

This post was originally published on Smartplanet.com

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