Do institutions and social capital provide a viable means for advancing the goals of poverty reduction programs in low capacity states? This question has particular importance for Nigeria and Africa as a whole because of the poor performance of poverty reduction programs despite domestic and global efforts to reduce poverty in the continent. In this paper, I assess the usefulness of the informational aspects of the new institutional economics and the social network method of social capital paradigm in reducing access, information and monitoring costs faced by the poor and service providers of micro-credit institutions in Nigeria. The general proposition of this paper is that poverty reduction can be promoted on the one hand, by designing programs to reflect some regularities (formal and informal rules and regulations) which best enhance benefits and mitigate costs faced by the poor for obtaining services, and on the other hand a mobilization of cohesive social relationships based on existing networks of semiautonomous units, that substitute for weak enforcement of contracts to reduce the service delivery costs to the poor.
In this article, I analyze why it has been difficult to achieve the proposed common currency, the "ECO" by the Economic Community of West African States (ECOWAS), using a constructivist approach that emphasizes the importance of institutions. I argue that a common currency has not been implemented due to the absence of an intense and institutionalized set of political and economic relationships among member states. The analysis places emphasis on how historical, social, and cultural factors structure the operation of a common currency to ground the behavior of actors in widely shared experiences and institutionalized principles.
Do creative institutional design and social networks of poverty reduction programs in impoverished countries lower access and transaction costs for the poor and service providers? This question, while important for all impoverished countries, draws particular interest in the African context because there is too much emphasis on whether and why these programs work and not how programs should work in societies that are characterized by uncertainty, hostility to the interests of the poor, and unpredictability in constraining the activities of self-interested actors. To test whether creative institutional design features and social networks can lead to successful provision of credit to the poor, this article draws on existing records and original rigorous qualitative data on the organizational policies and behavior of borrowers existing in the Lift Above Poverty Organization (LAPO), a national microfinance institution in southern Nigeria, to examine how innovative rules and procedures reduce the access costs faced by the poor for obtaining credit and other services for improved welfare and enhanced productivity. The overall assessment shows that there is a strong relationship between programs, which emphasizes institutional design mechanisms to overcome typical problems of implementing programs that benefit the poor.
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