Analyzing Rural Livelihoods in Kenya: a Social Capital Approach

Abstract

The capacity of people's self-organization, social ties and solidarity is at the core of social capital. Social capital provides the means for accessing resources and support at vulnerable life cycles. Rich endowment of social capital allows people to produce and provide for one another outside the mechanism of the market. This thesis investigates the role of social capital in improving rural livelihoods in Kenya. Formulation of development policy in Kenya has often not taken into account key forms of national resources, particularly social capital. Yet research elsewhere has shown that social capital facilitates achievement of a broad range of development objectives. For many years, rural development in Kenya relied on the strategy that focused mainly on achieving economic growth through accumulation of physical capital, ignoring the diverse dimensions of social capital and how these dimensions affect rural livelihoods. This thesis examines the hypothesis that social capital has a crucial role to play in improving rural livelihoods. The thesis uses primary data collected from a sample of 340 households from Nyeri district to demonstrate the linkage between social capital and rural livelihoods. The outcome of rural livelihoods is proxied by total household expenditure and by household poverty status. Descriptive and econometric methods are used to explore the nexus between social capital and livelihood outcomes. Results from econometric analysis show that social capital significantly affects total household expenditure and poverty status. There is evidence in the study area that social capital enables households to generate livelihoods sources that support non-monetary forms of exchange. This non-monetary exchange seems to reduce transactions demand for cash and to facilitate household savings. Contrary to previous studies, it is found that total household expenditure is negatively associated with aggregate social capital. This finding suggests that social capital reduces household welfare. However, contrary to this simple interpretation, the finding instead suggests that households with large social capital endowments are able to meet their basic needs through non-cash transactions. Social capital can enable households to increase consumption without cash expenditure, and without relying on self-purchased goods. The thesis further shows that the welfareeffects of various forms of social capital differ, indicating that effects of social capital are not sufficiently measured using aggregate value of social capital. The findings of the thesis are used to suggest policies for promoting formation of social capital as a mechanism for improving living conditions of rural households.