Cooperative Micro-Bank and the Splintering of Social Capital in West Kalimantan, Indonesia

Abstract

Much has been written about the roles of microfinance institutions in the development of local economies in industrializing nations. Scholars have developed different perspectives and provided useful analyses, but they seem to have paid less attention to the socio cultural factors affecting the performance of microfinance institutions. By employing the concept of social capital, this paper aims to investigate the processes of development of Star Cooperative Micro-Bank in West Kalimantan.  Extended case method has been used to collect data from various actors who have direct and indirect knowledge of the Star Cooperative Micro-Bank. This study reveals that the sound financial performance of the Star Cooperative Micro-Bank has been concomitant with a splintering of social capital indicated by its ethnic preference in outreaching clients. This phenomenon has made thicker the already thick boundaries of inter-ethnic relations. It suggests that state institution needs to act as a linking agency in order to bring other ethnic groups into the Star Cooperative Micro-Bank.

Keywords: microfinance institution, ethnicity, social capital, Embeddedness, Indonesia