An Empirical Analysis of Social Capital and Enterprise Performance in Tanzania: The Case of Women Owned Businesses

Abstract

This paper explores the impact of social capital on the performance of women owned microcredit supported enterprises. The paper uses data from a random sample of 429 women business owners who had accessed microloans in Morogoro and Iringa municipalities. An ordered probit was used to determine the impact of social capital on enterprise performance. Results have shown that certainly, social capital plays a significant role in the performance of women owned businesses. Specifically, results have demonstrated that business owners who received business support and advice from informal networks were more likely to experience profits increase in their enterprises than otherwise. Results have also shown that overall, the impact of bridging social capital on enterprise performance was more important than the bonding social capital. Our results suggest that for women business owners to enhance performance of their enterprises they need not only financial capital and human capital (business training and management skills) but also they need to develop, promote and use appropriate forms of social capital. In particular, women business owners could be facilitated to establish social capital beyond their immediate neighbourhoods, such as joining heterogeneous networks both formal and informal. Efforts could also include strengthening women’s associations with a view to widening their sources of resources and information for them to unleash their business growth potentials.