THE IMPACTS OF SOCIAL CAPITAL ON POVERTY REDUCTION IN VIETNAM

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MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
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MASTER THESIS
THE IMPACTS OF SOCIAL CAPITAL ON POVERTY
REDUCTION IN VIETNAM
MAJOR: INTERNATIONAL ECONOMICS
NGUYEN MAI PHUONG
Ha Noi – 2023

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
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MASTER THESIS
THE IMPACTS OF SOCIAL CAPITAL ON POVERTY
REDUCTION IN VIETNAM
MAJOR: INTERNATIONAL ECONOMICS
Code: 8310106
Full name: NGUYEN MAI PHUONG
Supervisor: Luong Thi Ngoc Oanh (Ph.D)
Ha Noi – 2023

ACKNOWLEDGEMENT
I would like to express my sincere gratitude to my advisor, Dr. Luong Thi
Ngoc Oanh, for their invaluable guidance and support throughout my master’s
program. Their expertise and encouragement helped me to complete this research
and write this thesis.
I would also like to thank my friends and family for their love and support
during this process. Without them, this journey would not have been possible.
Finally, I would like to thank all of the participants in my study for their time
and willingness to share their experiences. This work would not have been possible
without their contribution.

DECLARATION
I hereby declare that the thesis "The impacts of social capital on poverty
reduction in Vietnam" is my own work and based on the research learned theory,
practice survey and guidance from Dr. Luong Thi Ngoc Oanh.
The research results stated in the thesis are honest and have never been
published in any research work. All documents and references from previous studies
are fully cited in accordance with regulations.
I take full responsibility for the truthfulness of the thesis.

TABLES OF CONTENTS
LIST OF ABBREVIATIONS ................................................................................... i
LIST OF FIGURES .................................................................................................. ii
LIST OF TABLES ................................................................................................... iii
CHAPTER 1: INTRODUCTION.............................................................................1
1.1. Research rationales ......................................................................................1
1.2. Literature review..........................................................................................4
1.3. Research objectives ......................................................................................8
1.4. Research questions .......................................................................................8
1.5. Research scope..............................................................................................8
1.6. Research subjects..........................................................................................8
1.7. Research methodology .................................................................................9
1.7.1. Research process.............................................................................................9
1.7.2. Research Methods.........................................................................................12
1.7.3. Survey design and data collection................................................................12
CHAPTER 2: THEORICAL FRAMEWORK OF THE IMPACTS OF
SOCIAL CAPITAL ON POVERTY REDUCTION ............................................16
2.1. Social capital ...............................................................................................16
2.1.1. Definition ......................................................................................................16
2.1.2. Classification of social capital......................................................................18
2.1.3. Theories of social capital..............................................................................22
2.2. Poverty.........................................................................................................27
2.2.1. Definition ......................................................................................................27
2.2.2. Measures of poverty......................................................................................32
2.3. The impacts of social capital on poverty reduction.................................34

CHAPTER 3: AN ANALYSIS OF THE IMPACTS OF SOCIAL CAPITAL
ON POVERTY REDUCTION IN VIETNAM......................................................38
3.1. Factual situation in Vietnam ........................................................................38
3.1.1. Current status of poverty in Vietnam..............................................................38
3.1.2. Current status of social capital in Vietnam ....................................................42
3.2. Research model and hypothesis ...................................................................44
3.2.1. Research model................................................................................................44
3.2.2. Hypothesis........................................................................................................45
3.3. Developing questionnaires and selecting research scales ..........................52
3.4. Research results.............................................................................................55
3.4.1. Descriptive statistics.........................................................................................55
3.4.2. Result of testing reliability coefficient Cronbach’s Alpha.............................57
3.4.3. Result of Exploratory Factor Analysis (EFA)................................................62
3.4.4. Result of Logistic Regression Analysis...........................................................65
3.5. Discussion.......................................................................................................70
CHAPTER 4: SOLUTIONS TO REDUCE POVERTY IN VIETNAM ............75
4.1. Objectives for poverty reduction in Vietnam .............................................75
4.2. Solutions for state agencies to reduce poverty in Vietnam........................76
CONCLUSION.........................................................................................................85
REFERENCE...........................................................................................................88

i
LIST OF ABBREVIATIONS
GDP Gross Domestic Product
USD United States Dollar
ABS Australian Bureau of Statistics
VARHS Vietnam Access to Resources Household Survey
UNDP United Nations Development Programme
MPI Multidimensional Poverty Index
EFA Exploratory Factor Analysis
UNCTAD United Nations Conference on Trade and Development
UN United Nations
OPHI Oxford Poverty and Human Development Initiative
HDI Human Development Index
MOLISA Ministry of Labour, War Invalids and Social Affairs
MDP Multidimensional Poverty
NTP-SPR National Target Program for Sustainable Poverty Reduction

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LIST OF FIGURES
Figure 1. 1. Research process.......................................................................................9
Figure 2. 1. The weak tie theory ................................................................................22
Figure 2. 2. The structural holes theory.....................................................................25
Figure 3. 1. Research model.......................................................................................45

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LIST OF TABLES
Table 3. 1. Poverty rate in VietNam (2015 – 2021 period) .......................................40
Table 3. 2. Poverty rate by residence and by region..................................................42
Table 3. 3. Factors of Social capital...........................................................................52
Table 3. 4. Statistics on Gender .................................................................................55
Table 3. 5. Statistics on Head of Household's Gender...............................................56
Table 3. 6. Statistics on Age ......................................................................................56
Table 3. 7. Statistics on Income .................................................................................57
Table 3. 8. Reliability coefficient of the Neighborhood cohesion scale....................59
Table 3. 9. Reliability coefficient of the Social trust scale ........................................59
Table 3. 10. Reliability coefficient of the Social network scale................................60
Table 3. 11. Reliability coefficient of the Civic participation scale ..........................61
Table 3. 12. Reliability coefficient of the Social supoort scale .................................61
Table 3. 13. KMO coefficient and Barlett's test.........................................................63
Table 3. 14. Rotated Component Matrix ...................................................................64
Table 3. 15. Omnibus Tests of Model Coefficients...................................................66
Table 3. 16. Model Summary.....................................................................................68
Table 3. 17. Classification Table ...............................................................................68
Table 3. 18. Result of Logistic Regression Analysis.................................................69

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CHAPTER 1: INTRODUCTION
1.1. Research rationales
Along with other traditional capital sources like natural capital, social capital
has long been seen as a crucial resource for the creation of products and services and
economic progress. (Coleman, 1988; Putnam, 1993; Granovetter, 1995; Narayan and
Pritchett, 1997; Munshi and Kaivan, 2003; Xue, 2008; Lancee, 2010). The majority
of nations have developed their own sets of standards for measuring social capital.
Since the early 2000s, researchers from a variety of sectors have seen social capital
as a crucial resource in Vietnam. To be valuable, this kind of capital must be
observable and quantifiable, though (Uphoff and Wijayaratna, 2000). Since social
capital is a multifaceted and multi-formal term, there is still debate regarding its
exact definition. Additionally, not all forms of social capital have the same impact
(Granovetter, 1995). In the quest for the prosperity and well-being of any nation,
there is now a rising understanding of the significance of social and environmental
concerns in addition to economic ones. A variety of social indicators that are
provided by social capital are crucial for comprehending the consequences of the
economic, social, and environmental domains. National governments and
international institutions like the World Bank now frequently focus on social capital
as a means of attaining other policy objectives (ABS-2004).
Meanwhile, a variety of factors, including a household's sociodemographic
makeup, its access to natural resources, and its socioeconomic development capital,
affect how well it may rise beyond poverty. Despite significant progress, poverty
remains a major concern of the community. There are about 13.6 million people
who are no longer poor, but economically unstable and not in the middle class. Even
if there is currently little chance of falling into absolute poverty, establishing a
higher level of economic stability remains a matter of survival. In 2018, about 40%
of the middle class of 2016 fell into the lower economic class. Vietnam is still a poor
country, with a low per capita income (GDP per capita in 2000 is about 400 USD),
the poverty rate is still high. Vietnam has succeeded in drastically reducing poverty

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thanks to its strong economic growth and extensive provision for the poor. Even
while some economic sectors have seen significant improvements, the reduction in
poverty brought about by economic growth has not been adequate because progress
disproportionately favors individuals. There is a need to re-examine the internal
dynamics of pursuing the current growth model to identify where more interventions
can be implemented to ensure the well-being of the population.
Vietnam's Comprehensive Strategy for Growth and Poverty Reduction shows
the harmony between economic growth and solving social problems. The tasks and
objectives in the Comprehensive Strategy for Growth and Poverty Reduction not
only require targeted support measures for each specific target group in terms of
poverty reduction, but also link policies from macroeconomic policies, structural
reform, sector development policies and solutions to social security policies of all
sectors and levels to ensure sustainable growth and poverty reduction. Social capital,
another significant form of capital, has not been fully taken into account for
reducing poverty (Abdul-Hakim et al., 2010). Growing research points to the fact
that social capital often plays a significant role in economic results since its impacts
are often bigger than those of human capital (Hassan and Birungi, 2011). When
social actors participate in the production of socially provided products, social
capital is formed (Antoci et al., 2008). Indeed, the poor are either completely absent
or they participate very little in the activities of political and civic groups. Not
participating in political activities is also considered political poverty (Øyen, 2002).
The link between social capital and poverty in Vietnam is not thoroughly
investigated. When the government is designing a strategy to combat poverty, it is
crucial to comprehend the function that social capital plays in this process. However,
the significant impact of social capital on poverty reduction in Vietanm has not been
taken into account and is difficult to grasp. Few studies have been conducted on
poverty reduction methods that emphasize social capital; instead, most efforts are
aimed at addressing economic growth in general (Do and Minamoto, 2021). This
study looked at how social capital and poverty are related to address that unresolved
problem.

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1.2. Literature review
Two studies by Marcel Fafchamps (2015) and Nguyen Van Phuc (2014) both
refer to social capital and economic growth. While the study by Marcel Fafchamps
(2015) emphasizes the part that individual relations play in social exchange,
regardless of if it occurs through the market or the provision of public commodities.
Where formal institutions are inappropriate, social capital can improve the
effectiveness of social trade by increasing search and trust. However, social capital's
advantages are probably not shared equitably. Meanwhile, Nguyen Van Phuc (2014)
show that the function of social capital in the economic growth model may be
described through three primary channels, according to the examination of the many
features and expressions of the notion of social capital. i) Clustered social capital
influences growth by increasing human capital ii) The positive effects of trust and a
code of conduct on the expansion of financial markets demonstrate how social
capital goes beyond its effects on growth. iii) Vertically connected social capital
connects corporate networks and partnerships, assisting in the development and
dissemination of technology breakthroughs and projects. Although these two studies
take rather different paths, in general, theory and practice demonstrate that social
capital supports economic growth by enhancing and extending economic activity.
In combination, Md. Shahidul Islam, Khurshed Alam, and YANLONG
ZHANG et al. (2017) performed research on social capital and poverty in
Bangladesh and China—two nations with potentially significant regimes and
diametrically opposed economies—on the same topic. According to a research
report by Md. Shahidul Islam and Khurshed Alam (2018), cumulative social capital
has numerous favorable socioeconomic effects, particularly when it comes to
reducing poverty in emerging nations. This essay's goal is to investigate how social
capital are related to poverty reduction are related, particularly with regard to
Bangladesh. Research supports the relationship between social networks, reciprocity
norms, social trust, and civic participation and poverty. As social capital has the
ability to simultaneously improve the conditions of the poor, this study has
significant policy implications for the decrease of inherent poverty in Bangladesh. In

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the meanwhile, earlier research, according to the study of Yanlong Zhang et al.
(2017), indicates that social capital at the individual and community levels may
greatly contribute to the reduction of poverty. In this study, we empirically explore
the connection between a household's likelihood of living below the poverty line and
its social capital. To examine the effect of households' social capital on four distinct
poverty metrics, we conducted a large-scale cross-sectional survey in the provinces
of western China. Our findings show that in addition to the structural and relational
characteristics of home social networks, these networks' categories of resources,
such as commercial relationships, political connections, and social groups Poverty
reduction can be significantly aided by the correct association. We are also able to
gain additional insight into how variations in macro-level institutions impact the
efficacy of various social resources in poverty reduction since our study is situated
in the context of China's rising economy. We find that the impact of appropriate
political relationships and social organizations tends to diminish in communities,
and that the quality of local institutions is measured by local people's trust in
institutions that can regulate the efficacy of political relationships and appropriate
social institutions. Business interactions proved successful in reducing poverty in
both low-income and low-income communities, with higher levels of institutional
trust than in communities with lower levels of institutional trust. There are two
levels of confidence: high and low.
Sharing the same method of using data from Vietnam Access to Resources
Household Survey (VARHS), research are implemented different aspects and
implied various results. According to Nguyen Hong and Nguyen's (2019) research, a
number of factors that contribute to poverty of poor households include a lack of
capital for production, a lack of means of production, poor health and a lack of
labor, large families, and a lack of job opportunities. The paper aims to investigate
empirical causes of poverty of the Khmer ethnic people and suggest policy
implications to help the Khmer ethnic people escape poverty in Tra Vinh province
and the Mekong Delta. The authors provide some recommendations based on the
existing circumstance and regression results: 1) Pay special attention to lending

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preferences for those in need 2) Offer occupational training programs to help
households of the Khmer ethnic group's earnings 3) Establish specialized
infrastructure in places home to Khmer people. 4) Promote cultural and religious
institutions in regions where the Khmer ethnic group is present. 5) Enhance and
expand the services and infrastructure of medical clinics. This study experimentally
compares ethnic minority and majority households in rural Vietnam across 6
characteristics of poverty—financial, educational, health, housing, basic services,
and durable assets—over time. Results from the five-wave panel data of the
Vietnam Access to Resources Household Survey (VARHS) from 2008 to 2016 show
improvements in most non-financial aspects of poverty for both ethnic groups,
whereas the monetary aspect exhibits the highest levels of deprivation and the
lowest rate of decline over the study period. The only area where ethnic minority
families did better than majority households during the study period and reported
improvement was health. In numerous aspects of poverty, this study explores the
impact of social capital in households and communities of both racial minorities and
non-minorities. It finds that social capital has significant effects at the community
level on reducing poverty in the areas of money, education, housing, and basic
services for ethnic minorities, while social capital also has significant effects at the
household level on money, durable assets, and basic services. The Vietnam Access
to Resources Household Survey (VARHS), which included a group of families
present between 2008 and 2016, is used to investigate the situation in the papers by
Thang (2018), Do, and Minamoto (2021), which analyzed how social capital affects
the vulnerability of households. The findings imply that being a member of formal
and informal social networks as well as government connections is important for
raising household income and lowering household vulnerability. The findings
suggest that social capital, particularly in the form of group engagement, should be
taken into account by initiatives aimed at reducing poverty in rural Vietnam.
Since 2010, the UNDP has been releasing Multidimensional Poverty Index
(MPI), studies that examine three aspects of poverty: education, health, and living
conditions. These evaluations are based on a competency-based methodology.

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Aguilar and Sumner (2020) claim that access to clean water, sanitary facilities,
power, and good housing are only a few of the fundamental amenities that rural
populations frequently lack. The majority of the poor in rural regions, according to
studies by the World Bank, will be women by 2020, have big families and lots of
children, very little formal education, or neither. Using data from developing
nations, Khan (2000, 2001) discovered that the rural poor were highly connected
with the political climate, ethnicity, high dependence rates, and social policy biases.
The relationship between social capital and poverty is attracting the attention
of both theoretical and empirical researchers. Social capital, according to the
literature on the topic, can lessen poverty through at least three different
mechanisms, including improving group decision-making, disseminating knowledge
that benefits the poor among group members, and curbing opportunistic behavior
(Zhang et al., 2017, Osei & Zhuang, 2020; Grootaert & Narayan, 2001; Grootaert
and Van Bastelar, 2002). Building social capital takes time, according to Collier
(2002), and can frequently take the place of financial and material capital. Because
they have a smaller store of private capital and a lower opportunity cost of time, the
poor may rely more on social capital than the wealthy do. According to Putnam
(1994), the poor benefit more from social capital, which is measured by shared
norms and trust among members of a community or population as a whole. For
instance, wealthy families can reassure lenders with collateral, but poor households
may look for social assistance loans to boost income or lessen their reliance on
income. An experiment in Tanzania, Abdul-Hakim et al.'s study in Malaysia, and
Guagnano et al.'s study in Europe all shown the considerable and beneficial effects
of social capital on poverty as indicated by per capita household income or spending
and household wellbeing. In Vietnam, not many research have looked at the
relationship between social capital and household welfare. Van Ha et al. (2004)
examined the effect of social capital on household wellbeing in Duong O village,
Vietnam, using 105 observations of typical households using recycled paper. Group
membership, social ties, trust, and reciprocity are used to describe social capital.
Contrary to earlier studies done in other nations, the empirical findings show that the

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other three social capital variables have a stronger impact on family satisfaction than
the number of group members. There is considerably more to household income
than labor and human capital.
1.3. Research objectives
The study was conducted with the aim of analyzing the influence of social
capital on poverty in Vietnam so that it can propose solutions based on social capital
to improve poverty in Vietnam (poverty eradication). With the above objectives, the
author gives specific tasks as follows:
(1) Systematize the theoretical basis of social capital, poverty towards poverty
alleviation, and the general effect of social capital on poverty
(2) Building a model of groups of factors affecting the impacts of social capital on
hunger eradication and poverty reduction towards improving the poverty escape rate
of households
(3) Analysis of random household survey data in Vietnam using descriptive
statistical analysis and quantitative analysis.
(4) Proposing solutions for state agencies to create policies and improve to develop
and use social capital as much as possible in improving the poverty rate in Vietnam.
1.4. Research questions
- What factors of social capital affect the poverty reduction of households in
Vietnam?
- How do the factors of social capital affect the poverty reduction of households
in Vietnam??
1.5. Research scope
- Subject: This study aims to focus on determinants of social capital and poverty
- Time: April to June, 2023
- Geographical scope: This study aims to focus on respondents who are chosen
in randomly through Google forms survey.
1.6. Research subjects

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The subject of the study is social capital and the impacts of social capital on
poverty reduction, with households selected according to judgment, based on
convenience or accessibility of the survey object.
1.7. Research methodology
1.7.1. Research process
Source: Author
Step 1. Define the research problem: First, the study needs to identify the
problem that needs to be researched, specifically here about social capital affecting
Define research problem
Refer to previous research
Develop research
hypothesis
Design research
Collect data
Thu thập dữ liệu
Analyze and evaluate data
Build a research model
Complete research
Figure 1.1. Research process
Figure 1. 1. Research process

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the poverty reduction of households. From there, as a basis for developing a plan
and taking the next steps.
Step 2. Refer to previous research: Explore previous studies on the concepts,
characteristics, classifications, and measures of social capital and poverty, the
situation of Vietnam's poverty rate as well as the use of social capital in Vietnam,
along with reference to the influence of social capital on poverty reduction of
households in Vietnam.
Step 3. Develop research hypothesis & build model research: After referring to
previous studies, the author proceeds to develop research hypotheses and build
research models. Research hypotheses and research models need to be associated
with practice, need to be clear to ensure significant research results.
Step 4. Design research: After developing the research hypothesis and building
the research model, the author builds a questionnaire with appropriate and concise
questions, determines the type of scale and minimum sample suitable for the data
analysis techniques to be used. In the process of developing and completing the
questionnaire, the author will conduct a trial survey of some consumers to overcome
the limitations of the questionnaire and make timely adjustments before releasing
the final official questionnaire.
Step 5. Collect data: The author collects data by surveying forms suitable to
the characteristics of the research object and the accessibility and survey. The survey
subjects of the study are households living in Vietnam.
Step 6. Analyze and evaluate data: All collected data will be aggregated,
cleaned, coded for data analysis techniques used in the background. Specifically, in
this study, the data analysis techniques used include: descriptive statistics, testing
the reliability and suitability of the scale, exploratory factor analysis (EFA) and
logistic regression analysis by SPSS software.
Step 7. Finalize the research: After evaluating and discussing the research
results, the author will draw conclusions to answer the research questions and make
recommendations to the state agencies. Along with that, identify limitations of the
research paper and future research directions for the topic and research area.

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1.7.2. Research Methods
The study uses quantitative research methods with primary data collected
through survey. The research sample was taken from households living in Vietnam,
randomly selected without selection. The survey was sent in the form of online
filling through Google Form within 1 month, via social networks, collected 266
valid votes. The questions in the survey are designed based on the research and
analysis method behind, with questions about the demographic characteristics, the
status of social relationships of the households, and at the same time. households'
assessment of the use of surrounding social capital.
With the quantitative research method, the study uses the Linkert scale, a scale
that usually has from 5 to 7 levels describing people's attitudes towards a certain
issue. This scale is named after its creator - the American social scientist, Rensis
Linkert. This scale is becoming increasingly popular and trusted for opinion surveys
because it is one of the most reliable scales for measuring opinions, perceptions, and
behaviors. In this study, the 5-point Linkert scale is used to measure households'
opinions and assessment status on surrounding social capital sources. The 5-point
Linkert scale includes 5 options, with ratings ranging from "Strongly agree" to
"Strongly disagree", including one neutral choice.
1.7.3. Survey design and data collection
Survey design
From the content of the above preliminary scale, the survey has been
developed with a clear set of questions with easy to understand and accessible
content to the respondents, helping the respondents to easily understand the content
of the questions in the survey, understand the purpose of the survey as well as the
purpose of the research paper. The author has rearranged the content of the
preliminary scale above into affirmative sentences with simple words, helping
respondents to choose the most correct answer.
The questionnaire consists of questions, divided into 2 parts with the following
contents:

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Part A: Questions related to personal information of the respondents (Gender, age,
occupation, average monthly income)
Part B: Household's assessment of the surrounding social capital use. Each question
is a statement with 5 levels of agreement from the respondents, equivalent to the 5-
point Linkert scale.
The surveyed people will check the blank boxes that match the reality, feelings
and thoughts of each person to complete the survey.
Data collection
Data collection includes: Secondary data and primary data
Secondary data: The information on the theoretical basis is learned, distilled and
quoted from the studies of the previous authors, the actual situation data is
summarized from the official reports of the General Department Statistics, World
Bank, UNTAD, reputable statistical websites.
Primary data: The results of the survey questionnaires include the responses of the
respondents with information on: demographic characteristics, the household's
assessment of the use of capital resources surrounding society.
Data collection process: The process of collecting primary data through the survey
took place over a week with 2 main phases.
(1) Phase 1: Research to collect and test
The survey was completed and sent to the first 10 people, the author based on
the answers of the survey questionnaires and feedback on the content of the
questionnaire, from which the author relied on the comments to refine the survey,
edit the content and scale to make the most reasonable.
(1) Phase 2: Formal Collection Research
The survey, after being completed, was randomly distributed, and 282 online
responses were collected. After aggregating, cleaning and sorting, only 266 valid

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questionnaires were available for data entry and subsequent steps of survey data
analysis.
Determine sample size:
In the study, the author performs reliability testing of Cronbach's Alpha scale,
EFA observational factor analysis technique and multivariate regression analysis.
The sample size determination in this article is based on the minimum sample size
when analyzing EFA observational factors and multivariate regression analysis.
When performing an EFA observational factor analysis, the minimum sample
size is 50 and preferably 100 (Hair et al., 2006). The ratio of the number of
observations to the measurement variable is 5:1, which means that for 1
measurement variable, 5 observations are required. The measurement variable here
is the number of questions asked in the survey, the number of observations is
calculated by the number of valid questionnaires collected. The sampling formula is:
N = 5x (N is the number of observations/surveys, x is the number of measured
variables/question). Thus, the study presents 18 questions, applying the ratio 5:1, the
minimum sample size to perform EFA exploratory factor analysis is 18x5=90
samples. The study collected 266 valid samples, meeting the minimum sample size
condition of EFA.
When analyzing multivariable regression, the minimum sample size is
calculated according to the formula: N=8x+50 (N is sample size/number of
questionnaires, x is the number of independent variables included in the regression
model) (Tabachnick & Fidell, 2017). Thus, the study gives 5 independent variables,
according to the above formula, the minimum sample size is 8x5+50=90 samples.
The study collected 266 valid samples, satisfying the minimum sample size
condition of multivariate regression analysis.
1.8. Thesis structure
In addition to the table of contents, the list of acronyms, the list of tables, the
list of figures, the list of references and the appendices, the thesis report includes the
following chapters:

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Chapter 1: Theoretical framework of the impacts of social capital on poverty
reduction
Chapter 2: An analysis of the impacts of social capital on poverty reduction in
Vietnam
Chapter 3: Solutions to reduce poverty in Vietnam

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CHAPTER 2: THEORICAL FRAMEWORK OF THE IMPACTS OF
SOCIAL CAPITAL ON POVERTY REDUCTION
2.1. Social capital
2.1.1. Definition
The fundamental idea of social capital has formed, and academics like
Tocqueville, JS Mill, Toennies, and others are linked to it. This demonstrates that
social capital is not a novel idea, but traditional economists frequently neglect it
since it does not fall under the purview of economics. Recently, economists have
started to pay attention to this idea.
Social capital is a formal notion with several aspects. As a result, it is
debatable if social capital has a single definition (Tran Huu Quang, 2006). While
some academics focus on social capital's impacts, others discuss it in terms of
causality. The social network, for instance, is the foundation of social capital, but
social capital cannot be created just by the existence of networks of interactions.
The network must be durable if it is to benefit from its resources, or social
capital. As a result, the network's quality, particularly trust, social norms, and
reciprocity, are crucial in the formation of social capital.
Coleman (1990) connected social capital to moral principles and ethical
standards. He thinks that having social capital is a must for every person. Due to
the fact that contracts stipulating one another's obligations aren't always in place,
everyone in the network is prepared to support and assist one another. According
to game theory, social capital would not exist if opportunistic circumstances of
mutual exploitation took place. Cooperative equilibrium can only be attained
when each player has faith in their partner's cooperation.
In general, traits like trust, a moral code, and reciprocity are crucial
components of social capital. The causal link between social capital's many
components, notably the quantity and caliber of networks (such as trust, behavior
codes, and reciprocity), hasn't yet been studied. fully agreed upon by the
scientific community. Coleman (1990) asserts that networks are formed on the
basis of quality, whereas Dasgupta (2005) contends that individuals are motivated

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to establish trust and a code of behavior in order to advance their own interests
by the large number of networks they have access to.
Putnam, Leonardi, and Nanetti's (1993) study is one of the most widely
recognized studies that introduces the concept of social capital and establishes
the framework for subsequent research on the topic. Social capital is defined by
Putnam et al. (1993) as the traits of social associations that encourage
collaboration for same benefit. These traits of social associations may include
social networks, norms, or social trust. Later, Narayan and Pritchett (1999)
proposed three aspects of social capital, including participation in voluntary
groups, social norms' presence and social function, and the level of trust, which
reflects people's views toward one another. Since then, empirical research has
defined social capital in accordance with the study's environment and the facts
that are available. For instance, Dasgupta (2005) defines social capital succinctly
as "interpersonal networks" in order to avoid making assumptions about the
asset's quality. Other studies, on the other hand, view social capital as important
resources that may be employed to one's advantage. In contrast to Fukuyama
(2001), who proposes social capital as a societal pattern that fosters interpersonal
collaboration, Newman, Tarp, and Van Den Broeck (2014) explain social capital
as the act of exchanging information through involvement in the Women's Union
in the example of Viet Nam. Along with its additional benefits, social capital is
also expected to alter how individuals interact with one another and promote
"productive relationships" in the workplace and other informal kinds of
associations. (Bowen 2009).
In contrast to Putnam et al. (1993), Bourdieu (1986) defined social capital
as "the aggregate of the actual or potential resources which are linked to the
possession of a durable network of more or less institutionalized relationships of
mutual acquaintance or recognition or, in other words, to membership in a group"
despite the fact that the term "social capital" has been in use for over a century.
With his approach, Bourdieu focuses on social capital from the perspective of an
individual and analyzes it as a private good—a resource that people get directly

18
through their social connections. According to Bourdieu (1986), social capital is
resources that are embedded in networks but not networks themselves.
2.1.2. Classification of social capital
Different categories can be used to categorize social capital. According to
scope (at the micro, meso, and macro levels), forms (structural and cognitive), or
distinct views (communitarian, networks, institutional, and synergistic view),
social capital, for instance, may be divided into many categories (Grootaert &
Van Bastelaer, 2002).
Numerous scholars tackle social capital in its polymorphism in addition to
their interest in social capital's various facets. Indeed, the idea of social capital is
expanded with a distinction between horizontal social capital and vertical social
capital due to the direction, intensity, and arrangement of linkages in structural
social capital (Coleman, 1990). Horizontal connections like friends, neighbors,
volunteer organizations, etc. are created when similar conditions and equal power
exist. Vertical social capital, on the other hand, denotes the hierarchical ties and
interdependence of the network's members, such as those in religious institutions
or labor unions.
It's also important to distinguish between the formal and informal networks'
organizational structures. While ties with friends, neighbors, and other informal
networks have formal connections, organized networks like volunteer groups and
religious organizations do not. The strength of the connection between each link,
in particular how easily members of the network may use the resources accessible
to them, is an issue of concern. Informal relationships frequently have stronger
bonds than formal ones do. According to Putnam (2000), the creation of a formal
network of connections serves as the basis for the growth of civil society and
gives people access to formal forms of social capital including state aid and
social help. Contrarily, informal connections facilitate access to one's own
internal resources, such as monetary and spiritual assistance.

19
Sometimes, the terms "weakly bound social capital" and "strongly bound
social capital" are used interchangeably. These ideas are not precisely the same,
though. Social capital may be thought of as bonding, bridging, and linking
social capitals at the micro level. Horizontal relationships and interaction within
a homogeneous group are examples of bonding social capital. It comprises tight
relationships between people who have close sentiments or similarity in
demographics, attitudes, resources, and knowledge, such as friends and family. It
is the strong bond between intimate friends or members of the immediate family
who have same interests or social traits, such as neighbors, socioeconomic class,
coworkers, or religious affiliations, as well as voluntary activities. This sort of
social capital is directly tied to high levels of trust, reciprocity standards, and
mutual assistance offered within those links. This sort of social capital serves as a
"informal safety net" since it continues to be a source of assistance when people
are in need (Das, 2004). By offering quick support, this capital helps individuals
protect themselves from poverty (Cleaver, 2005; Woolcock & Narayan, 2000).
This tying social capital built on family and kinship network gives
assistance during harsher situations when the state is unable to supply basic
requirements. Vertical relationships and connections between the many diverse
groupings are established through social capital. This is the weak connection
connecting many official and informal social participants, including casual
friends, coworkers, and volunteers with diverse backgrounds. As a result, it can
aid individuals in developing new relationships and increasing their access to
social support. In other words, social capital extends outward to aid individuals in
moving forward while social capital clusters give resources for people to live.
According to Narayan and Pritchett (1999), there is a beneficial relationship
between association density and income, with a growth in association of life
increasing revenues by 20%.
In the meantime, the term "bridging social capital" refers to the social
connections made possible through membership in a variety of social groups,
which can range from political organizations and parent associations to clubs for

20
people who share common interests like sports or entertainment. Bridging capital,
acquired through interactions between people from various racial, geographic,
and professional backgrounds, is crucial for advancement; in other words, it gives
actors the chance to advance their interests with influential figures in institutions
like banks and government organizations (Woolcock & Narayan, 2000). They
contend that individuals who are willing or able to foster social relationships
inside their local communities and between local communities and organisations
with external and more extensive linkages to civil society can achieve beneficial
outcomes (Grootaert, 1998). These social connections frequently display a wide
range of demographics and resource availability, as well as fresh knowledge that
may be used to further one's social standing.
Last but not least, social connections that help link common people with
influential members of society are known as linking social capital. As a result,
social standards of respect and networks of reliable connections may be thought
of as social capital that transcends social power. This kind of social relationship
can occasionally be transient and erratic. The establishment of relationships
between individuals and various groups, as well as the social connection and
resources found in these relationships, are known as linking social capital
(Derose and Varda, 2009). Examples of such relationships include those between
members of a community and institutions, or between members of a community
and people who have access to resources outside of the community. This kind of
social capital are able for individuals to access resources and knowledge from
social networks other than their own.
Furthermore, this kind of social capital may be employed dishonestly for
bias and corruption (Ferlander, 2007). There are also two major differences
between structural social and cognitive capital. The difference between structural
and cognitive social capital is often "what people do" vs "what people feel." As
stated by Uphoff in 2000, "structural social capital facilitates information
sharing, collective action, and decision-making through established roles, social
networks, and other social structure supplemented by rules, procedures, and

21
precedents." Along with civic engagement and organizational ties that enable
mutually beneficial group actions, it is also tied to the structure of social
interaction and networks. Common standards, values, attitudes, and beliefs that
encourage individuals to work together for everyone's benefit are referred to as
cognitive social capital (Anirudh and Norman, 2002). The quality of a social
relationship is referred to by this internal, subjective term, which mostly depends
on reciprocity and trust within the relationship.
Due to its strong correlation with economic growth, social capital has
become used as a key word in development literature. The economists at the
World Bank described it as a united kind of trust and bonding that has had a
significant and beneficial influence on reducing poverty (Grootaert, 1999).
In conclusion, social capital can be viewed in many different ways. It is
maintained and reproduced through social interaction, and it can be mobilized
either within-group or between-groups for a specific purpose. It can also facilitate
group action for mutual benefit. Although there are many disagreements,
researchers generally concur that social capital governs all human-to-human
interactions and thereby contributes to economic development, which includes
institutions, relationships, and values such as trust, codes of conduct,
etc. (Fukuyama, 1995; Coleman, 1988, 1990; Grootaert and van Bastelaer,
2002; Dasgupta, 2005).

22
2.1.3. Theories of social capital
The weak tie theory
Figure 2. 1. The weak tie theory
According to this view, time spent in a relationship, emotional intensity,
tenderness, and reciprocal acts (reciprocal services) all show how strong or weak
a relationship is. The Weak Ties Theory, founded by sociologist Mark
Granovetter, emphasizes the value of weak ties in social networks and how they
let people access a variety of resources and information. This theory stresses the
distinct advantages that weak ties offer in terms of social capital, challenging the
conventional emphasis on strong ties. Knowing how weak ties operate can help
you better understand how knowledge spreads, how to get work, and how to use
new resources. The weak ties theory states that social networks have both strong
and weak ties. Strong connections are relationships with close relatives, friends,
and coworkers that are characterized by regular communication, emotional
support, and trust. Weak ties, on the other hand, are further ties, such as
acquaintances, casual friends, or people from various social or professional

23
circles. According to Granovetter, weak ties are essential for forming connections
between various social groups and promoting the exchange of knowledge and
resources. Information is frequently outdated in strong networks since they are
frequently isolated within a clique. The person can find fresh and helpful
information from their network of weak contacts.
The strength of a connection is described by Granovetter (1973) as "a
(probably linear) combination of the amount of time, the emotional intensity, the
intimacy (mutual confiding), and the reciprocal services which characterize the
tie" (p. 1361). He distinguishes between "weak ties" (relationships with
acquaintances, coworkers, and former classmates) and "strong ties" (close
relationships with family, partners, and close friends). Strong ties are linked to
the formation of social capital, particularly since they are more likely to result in
social support (Laireiter & Baumann, 1992) and can result in a wider variety of
kinds of support (Cohen & Wills, 1985; Wellman & Wortley, 1990). However,
Granovetter (1973) makes a distinction between strong and weak ties, contending
that weak ties may be more effective than strong relationships in terms of the
dissemination of innovative, nonredundant information. Weak ties are more
useful as information providers since they have knowledge that the person's inner
circle might not have (due to homophily and other variables). Granovetter's
(1973) and Granovetter's (1974) own empirical findings, as well as more recent
investigations, all supported these hypotheses (Yakubovich, 2005).
The benefit of weak ties is that they can provide people access to new
knowledge that is not always available in a person's tight-knit social network.
Strong relationships often share knowledge and information, but weak ties
expose one to a variety of ideas, alternate points of view, and various social or
professional networks. People may learn about new possibilities, get employment
leads, access special resources, and keep up with trends or advances thanks to
this diversity of information.

24
The significance of weak ties in gaining access to work possibilities was
demonstrated in Granovetter's fundamental study on job searches. He discovered
that a significant percentage of people discovered jobs through weak ties than to
their strong ties. Weak ties increased people's access to new social networks,
businesses, or sectors as well as job openings that were not known to their close
friends or family (Granovetter, 1973). This study emphasized the importance of
weak ties in supplying special knowledge and serving as doors to new chances.
Since social capital is related to both the amount and quality of
relationships, tie strength has historically been strongly related to the issue of
social capital. For instance, Putnam (2000) makes a distinction between bridging
and bonding social capital. Weak ties that are more likely to represent various
network clusters and hence operate as "bridges" between other groups or as
brokers, bridging structural gaps, are the hallmarks of bridging social capital
(Burt, 1995). However, Putnam's framework holds that these weak ties
relationships are lacking depth, thus the bridging social capital they represent—in
contrast to the bonding social capital offered by strong ties—is not connected
with emotional support.
Weak ties have advantages across many fields, not just job searches. For
instance, weak ties can let ideas, habits, and information develop through society.
According to research, weak ties have connections to a variety of social clusters,
making it more possible for information or trends to spread quickly than strong
affiliations (Centola, 2010). Weak ties also play a significant role in
entrepreneurship by introducing people to possible partners, mentors, or investors
outside of their immediate networks, giving them access to tools and information
that would be unavailable through their strong tie connections (Uzzi, 1997).
The importance of weak ties in social capital is highlighted by weak ties
theory, in conclusion. Weak ties offer access to a variety of knowledge,
opportunities, and resources that are not easily accessible inside a person's close-
knit social group. They serve as connectors between various social enclaves,

25
promoting the exchange of ideas, employment leads, and information. The
dynamics of weak ties help us better comprehend social networks, the spread of
knowledge, and resource mobilization.
The structural holes theory
Figure 2. 2. The structural holes theory
A concept in social capital called structural hole theory looks at how
network structure affects the creation and use of valuable resources. The idea,
which was developed by sociologist Ronald S. Burt, emphasizes the value of
structural positions and network ties in boosting a person's social capital. This
theory sheds light on the advantages of filling structural gaps, including the
benefits they give in terms of information flow, access to other viewpoints, and
resource management.
Social networks are not homogenous, according to the structural hole
theory; rather, they are made up of nodes (individuals or organizations) and

26
links (relationships) connecting them. Gaps or missing connections between
nodes within a network are referred to as structural holes. Individuals who are
situated between disjointed groups or clusters might take advantage of these
gaps to serve as intermediates and regulate the information flow between these
groupings. People in such positions thus have access to distinctive and varied
knowledge that is not easily available to others, giving them a competitive
advantage.
According to Burt, those who fill structural gaps have higher amounts of
social capital because they may utilize their position to gain and exercise
control over resources. By bridging structural gaps, people can get benefits
including better access to innovative knowledge, exposure to other points of
view, and the capacity to facilitate connections between previously dispersed
people or groups. This accessibility to other viewpoints and information may
encourage creativity, promote effective decision-making, and boost a person's
authority and influence within the network.
The advantages of structural flaws go beyond personal gains to
organizational or societal levels as well. Businesses that bridge structural gaps
by connecting with outside partners or using other networks frequently have an
advantage over rivals. By fusing various expertise and viewpoints, they may
make use of new resources, spot developing trends or possibilities, and create
creative solutions.
The ideas of structural hole theory have been validated and expanded upon
in a number of research. For instance, Burt's study of brokerage jobs in a legal
company revealed that brokers who fill in structural gaps are more likely to be
promoted and have access to useful information than those in positions with
more dense connections (Burt, 1992). Obstfeld (2005) studied the effect of
structural flaws on innovation in different research and discovered that
managers in favourable structural positions were more likely to launch creative
goods.

27
Various fields, including entrepreneurship, knowledge management, and
social network analysis, have also used structural hole theory. Its ideas have
aided scholars in their understanding of the dynamics of communication,
resource distribution, and social impact across a range of situations.
In conclusion, structural hole theory provides insight on how network
structure affects the creation and use of social capital. Individuals may get a
variety of information, manage resource flows, and gain competitive advantages
by filling structural gaps. Communities and organizations that cross structural
divides can take use of their advantageous positions to promote innovation,
improve decision-making, and achieve a competitive advantage. Our knowledge
of social networks, resource distribution, and information flow dynamics is still
being shaped by this theory.
2.2. Poverty
2.2.1. Definition
Poverty
Poverty is a complex socio-economic phenomenon characterized by the
lack of essential resources and opportunities necessary for individuals and
communities to meet their basic needs and achieve a decent standard of living.
It encompasses various dimensions, including income, education, healthcare,
housing, and social support systems. This paper aims to provide a
comprehensive definition of poverty by examining the perspectives and
definitions proposed by reputable sources. The World Bank defines poverty as
"pronounced deprivation in well-being" (World Bank, 2021, p. 1). The
institution employs an international poverty line, set at $1.90 per day, as a
monetary indicator of extreme poverty (World Bank, 2021). This threshold is
based on purchasing power parity and serves as a benchmark for identifying
individuals living in extreme poverty.
Meanwhile, according to United Nations (UN) Perspective, The United
Nations conceptualizes poverty as a state of deprivation characterized by the

28
lack of fundamental human needs. It includes access to adequate food, shelter,
clean water, sanitation, healthcare, education, and information (United Nations,
2020). The UN emphasizes the multidimensionality of poverty, encompassing
economic, social, and political dimensions. Poverty is seen as a complex issue
influenced by structural inequalities, discriminatory practices, and limited
opportunities for socio-economic advancement. Moreover, The Oxford Poverty
and Human Development Initiative (OPHI) spread the definition of poverty
when focusing on multidimensional poverty, considering various dimensions
such as education, health, and standard of living. OPHI defines poverty as "a
person's inability to reach a minimally acceptable standard of living" (Alkire &
Santos, 2010, p. 3). Their approach acknowledges that poverty extends beyond
income levels and incorporates a broader range of deprivations that individuals
may face.
The definitions presented above illustrate that poverty is a multifaceted
concept that extends beyond mere monetary measures. It encompasses a range
of deprivations and lacks across different aspects of life. These definitions
highlight the need to consider both income poverty and the broader dimensions
of poverty, such as education, healthcare, and social inclusion, to
comprehensively understand and address this issue. Moreover, these definitions
emphasize that poverty is not solely an individual problem but also a societal
issue influenced by structural factors, policies, and societal norms. Poverty
often results from systemic inequalities, limited access to opportunities, and
social exclusion. Addressing poverty requires comprehensive strategies that
encompass income redistribution, social policies, educational opportunities,
healthcare access, and efforts to reduce discrimination and marginalization.
To sum up, poverty is a complex phenomenon encompassing deprivation
and lack of resources and opportunities necessary for a decent standard of
living. The World Bank defines poverty as pronounced deprivation in well-
being, utilizing an international poverty line to identify extreme poverty. The
United Nations emphasizes the multidimensionality of poverty, considering the

29
lack of fundamental human needs and broader socio-economic dimensions.
Sharing the same viewpoint with The United Nations, The Oxford Poverty and
Human Development Initiative adopts a multidimensional approach, focusing
on a person's inability to achieve a minimally acceptable standard of living.
These definitions provide insights into the different dimensions of poverty and
highlight the importance of addressing not only income poverty but also broader
socio-economic deprivations. Understanding poverty from these diverse
perspectives is crucial for formulating effective policies and interventions to
combat poverty and promote inclusive and sustainable development.
Poverty reduction
For many socioeconomic groupings, poverty may signify various concepts.
Who is deemed poor and the evolution of initiatives to reduce poverty are both
influenced by the methods used to measure and define poverty (Caizhen, 2010;
Haveman and Wolff, 2005; Laderchi et al., 2003; Scheidel, 2013).
Poverty reduction is a complex and multifaceted process that involves a
range of interventions aimed at improving the economic, social, and political
conditions of individuals and communities living in poverty (World Bank,
2021). At its core, poverty reduction is about empowering people to improve
their own lives by providing them with the tools, resources, and opportunities
they need to break the cycle of poverty (United Nations Development
Programme, 2020). For example, from the traditional view of poverty reflected
in World Development Report 1990, the notion of poverty consists of material
deprivation and low attainment in education and health (World Bank 1990).
This can involve a wide range of strategies, including improving access to
education and healthcare, promoting economic growth and job creation,
strengthening social safety nets, and addressing systemic inequalities that
perpetuate poverty (International Labour Organization, 2019; World Health
Organization, 2022).

30
A collection of narratives, expectations, and goals that define the situation
at hand (i.e., the issue definition) are used to analyze complicated challenges,
such as the alleviation of poverty in rural homes and communities. In other
words, non-equivalent representations of the system under investigation result
from the pre-analytical acceptance of various narratives about poverty.
Preanalytical choices are those made before to data collection and analysis on
the pertinent features that will be utilized to characterize and represent a
system. The scope and techniques of observation, as well as the analysis's
findings, are determined by these choices (Kovacic and Giampietro, 2015b).
The same rural household may be considered poor from one perspective
but not poor from another depending on the attributes and indicators used to
describe and represent it (e.g., income per capita, literacy levels, access to
healthcare, or availability of productive land). Therefore, selecting a different
story of poverty results in a different evaluation of how well rural households
and communities succeed in reducing poverty. In terms of the degree of poverty
in homes and communities, as well as the kinds of poverty alleviation strategies
that are created and put into practice, it also has various results (Laderchi et al.,
2003).
Additionally, the contrast between weak and strong sustainability becomes
important if we see poverty reduction as a matter of long-term livelihood
sustainability. The paradigm of weak sustainability, according to Daly (1990),
is based on presumptions about the substitutability of various forms of capital,
which indicate that preserving the overall stock of capital, regardless of how it
is constructed, is sufficient for sustainability. Strong sustainability is predicated
on the idea that various forms of capital are complementary rather than
interchangeable. They need to be maintained separately as a result.
In keeping with this, it is also conceivable to distinguish between poverty
reduction that is weak and that is strong (Scheidel, 2013). Weak poverty
reduction makes the assumption that gains in one aspect of wellbeing can make

31
up for losses in other others. For instance, increased income (a flow) from non-
farm occupations that enable people to purchase food might help offset the loss
of land (a fund, or asset), which is used to grow food, in order to achieve food
security. However, there are times when gains in one aspect of poverty cannot
counteract declines in other others. For example, an increase in (short-term)
flows (such as money or food) to improve deprivation cannot always make up
for or replace the loss of underlying finances (such as fertile land or favorable
working conditions) that enable the creation of such flows over the long run.
Strong poverty alleviation must therefore pay attention to these circumstances
where tradeoffs are undesirable and concentrate on expanding access to and
control over the productive funds that enable producing flows and leading long-
term lives of dignity (Scheidel, 2013).

32
2.2.2. Measures of poverty
An essential component in evaluating and improving the socioeconomic
circumstances of a nation is the measurement of poverty. Various techniques
and indicators are used by governments, international organizations, and
scholars to measure poverty and comprehend its multifaceted nature.
There are several ways to assess poverty. It contributes significantly to
quantifying poverty in terms of income-based measures by offering a
quantitative evaluation of the financial health of individuals or households.
Setting a poverty line, which establishes the income minimum below which
people or households are regarded as living in poverty, is one popular approach.
The cost of living, basic requirements, and societal conventions are just a few
of the elements that go into determining the poverty line. Poverty thresholds
that are particular to a nation or region are frequently established by national
statistics agencies and organizations. The worldwide poverty line established by
the World Bank is $1.90 per day (at purchasing power parity in 2011), and it is
widely used to calculate global poverty rates (World Bank, 2018). However,
many nations also have their own poverty thresholds that are adapted to their
own economic circumstances. For instance, the Federal Poverty Guidelines are
used in the United States to determine eligibility for specific government
programs. These guidelines take into account elements including family size
and composition. Income-based poverty lines have limits since they frequently
only consider money or consumption and fail to account for other aspects of
poverty, such as access to healthcare, sufficient housing, or education.
The poverty gap index and its use in measuring poverty are covered by
Ravallion (1992). The poverty gap index measures the level of poverty that
people or households living below the poverty line feel, giving us a more
nuanced view of poverty. The average income or consumption gap for those
who are poor is calculated. The difference between an individual's earnings or
consumption level and the poverty line is taken into consideration by the

33
poverty gap index. Policymakers may evaluate the intensity of poverty and
create policies accordingly by utilizing this information. For instance, a bigger
poverty gap index suggests a greater need for social safety nets or redistributive
measures. To determine certain regions or populations where poverty is most
severe, the poverty gap index may be estimated at many levels, including the
individual, household, and regional levels. Using this knowledge, focused
efforts may be made to reduce poverty.
Other income-based indicators, such as income or consumption quintiles,
the Gini coefficient, and the Lorenz curve, can be used to assess poverty in
addition to the poverty line and the poverty gap index.
Regarding multidimensional measures, it provides a thorough method of
evaluating poverty that goes beyond income or consumption alone. The Human
Development Index (HDI), created by the United Nations Development
Programme (UNDP), is a well-known multidimensional indicator. In order to
give a more comprehensive assessment of human growth and well-being, it
integrates indices of income, education, and life expectancy. The logarithm of
gross national income per capita, adjusted for purchasing power parity, is used
to calculate the HDI's income component. The education component takes into
account elements like the average years of education for adults and the
anticipated years of education for children. According to the UNDP (2020), the
life expectancy component measures the typical number of years that a person
is projected to live. The HDI enables comparisons of human development
across nations and throughout time, revealing both the successes and
shortcomings of efforts to reduce poverty. The Multidimensional Poverty Index
(MPI), created by the Oxford Poverty and Human Development Initiative
(OPHI), is another important multidimensional measure. It expands the
measurement of poverty beyond income or consumption by identifying people
who are simultaneously deprived in multiple dimensions. To understand the
intricacies of poverty, the MPI takes into account a number of indicators from
the fields of education, health, and living conditions. For instance, education

34
indicators can include years of education and rates of attendance at schools,
while health indicators would include nutrition and child mortality. According
to Alkire and Santos (2014), indices of living conditions may include access to
sanitary facilities, power, and decent housing. Individuals are classified as
multidimensionally poor or non-poor based on the existence or absence of
deprivations in various categories. In order to reflect the proportion of
deprivations experienced by the population, the MPI gives both a headcount
ratio of the poor and a measure of the degree of poverty (Alkire & Foster,
2011). This indicator helps decision-makers to pinpoint actions for certain
deprivations.
The use of subjective measurements of poverty in poverty analysis is
covered by Ravallion and Lokshin (2002). Through surveys, subjective
measurements aim to document people's perceptions and experiences of
poverty. People are asked to self-report their level of poverty or to share
qualitative observations about their well-being in these surveys. Objective
measurements can be complemented with subjective measures since they offer
insightful information about people's actual experiences. The similar point of
view is shared by Deaton and Grosh (2000) and Krishnakumar and Ballon
(2008).
2.3. The impacts of social capital on poverty reduction
Social capital plays an essential role in providing access to necessary
goods and services that help alleviate poverty. Strong social networks and
relationships act as conduits for beneficial chances and information. According
to Lin (2001), people who are part of active social networks, for instance, are
more likely to be aware of job vacancies, training opportunities and educational
options. They can use their social capital to access mentoring or skill-building
programs, receive job vacancies and receive references. People may strengthen
their human capital, raise their earning potential, and break the cycle of poverty

35
thanks to this improved access to employment and education (Woolcock &
Narayan, 2000).
Social capital may assist people have better access to healthcare services.
People frequently share information about accessible healthcare providers, cost-
effective treatment alternatives, and preventative measures in tight-knit
communities (Berkman et al., 2000). Strong social relationships make it easier
to share medical information and guide people through challenging healthcare
systems. Additionally, social networks can offer emotional support in times of
health problems, easing the financial load of healthcare costs and fostering
wellbeing (Petersen, 2018). By utilizing social capital, people and communities
can get access to healthcare resources and services that might not otherwise be
available, ultimately lowering poverty and health-related vulnerabilities.
Social capital can give access to other support networks that reduce
poverty in addition to job, education, and healthcare. Community-based
organizations, informal savings and credit clubs, and reciprocal eldercare and
childcare arrangements are a few examples of these support structures (Narayan
& Pritchett, 1997). By using these social networks, people may get help with
their finances, get advice on how to manage their resources, and take part in
group initiatives to solve common problems. In order to help people and
communities deal with changes, overcome economic challenges, and lessen
their risk of getting into poverty, social capital increases the safety nets that are
accessible to them (Aldrich & Meyer, 2015).
Social capital has a significant role in the reduction of poverty through
major channels including economic opportunity and entrepreneurship. Strong
social capital means that well-connected people and groups are more likely to
have access to the financial resources, markets, and commercial networks
needed to engage in activities and activities that generate revenue (Woolcock &
Narayan, 2000). By utilizing their social networks, people can obtain loans,

36
investments, or grants from reliable sources that may not be accessible through
other social networks. institutional institution for finance.
Additionally, social capital encourages information exchange,
collaboration, and trust among economic players, fostering an atmosphere that
is beneficial to economic development. In economic interactions, trust becomes
essential since it lowers transaction costs and promotes collaboration (Putnam,
2000). People with strong connections to society are more likely to form
reciprocal partnerships, keep their word, and conduct advantageous trades. This
trust enables company owners to collaborate, get business guidance, and pool
resources, ultimately resulting in more economic activity and better quality of
life.
Social capital also increases the efficiency and scope of networks for
sharing knowledge. Through their social connections, those who are a part of
powerful social networks may obtain market knowledge, industry trends, and
useful contacts (Lin, 2001). They have access to knowledge about new
prospects, client demands, and prospective collaborations thanks to this
informational advantage. Utilizing this interconnected information, people may
find market niches that support economic growth and the eradication of hunger
as well as establish competitive tactics.
In general, social capital brings about chances for both individuals and
communities in the economy by giving them access to markets, money-related
means, and networks for businesses. This leads to more economic happenings,
business ventures, and improved ways of living. This is because social capital
pushes for trust, teamwork, and the sharing of information among those
involved in economic activities. To make things even better, people who make
policies and those who put ideas into practice can lend a hand in poverty-
reduction efforts. They can do this by encouraging the growth of social capital
through making networks that welcome everyone, building trust, and creating

37
systems that support these efforts. This way, more people can access chances to
better their lives through economic opportunities and resources.
To wrap things up, the scenario at hand presents us with a puzzling
theoretical challenge. This is because social capital leads to distinct results, and
in some countries, it's tied to poverty in a way that's opposite to what you might
expect. What makes it even more interesting is that the advantages of social
capital change a lot depending on which country you're examining. This is
closely connected to how the country's economy operates and how goods are
produced. Now, to really dig deep and get a clearer understanding of what's
happening in Vietnam, we need to give this issue another round of
investigation. This is a crucial step as it will provide us with a better hold on the
situation and allow us to uncover the specifics of what's occurring in Vietnam.

38
CHAPTER 3: AN ANALYSIS OF THE IMPACTS OF SOCIAL CAPITAL
ON POVERTY REDUCTION IN VIETNAM
3.1. Factual situation in Vietnam
3.1.1. Current status of poverty in Vietnam
Between 1993 and 2014, Vietnam's amazing rise from a low-income to
middle-income position pushed 40 million people out of poverty. The poverty rate
decreased at that time, from about 60% to 14%. China's rate of per capita growth
since 1990, which as of 2017 averaged 5.6 percent annually, has been the second-
highest. Vietnamese people now have higher levels of education and may anticipate
living longer than those in most other nations with comparable incomes.
Prior to 2015, Viet Nam used the income poverty unidimensional poverty
metric. The per capita monthly income of the household, which provided for an
estimated daily caloric intake of 2,100–2,300 Kcal and some extra necessary non-
food expenditure, is the income poverty line established by the government. Based
on this poverty line, the MOLISA identified and classified low-income families at
the commune level, measured the poverty rate using data from the National Census
on Poverty it conducted before to each National Poverty Reduction Program, and
updated the lists annually while the programs were being implemented.
A major step in Vietnam's shift from an income-based to an MDP approach
was made in November 2015 when the Vietnamese government adopted national
multidimensional poverty (MDP) metrics for use from 2016 to 2020. Notably, Viet
Nam was one of the first nations in the Asia-Pacific to adopt the MDP strategy to
end poverty in all of its forms. The country's five-year Socio-Economic
Development Plan (2016-2020) established a national average MDP reduction
objective of 1.5 percent yearly and 2-4 percent in mountainous ethnic minority
areas. The National Target Program for Sustainable Poverty Reduction (NTP-SPR,
2016–2020) was designed using the MDP measurements, which take into account
income and non-financial factors like housing, access to water and sanitation,
education, and health services, as well as social and health insurance. This allowed

39
for the identification of low-income households that qualified for program support,
poverty reduction, and social assistance policies.
According to a World Bank (WB) research published on April 28, poverty in
Vietnam significantly decreased between 2010 and 2020. According to the World
Bank's "From the Last Mile to the Next Mile" Poverty and Equity study, over the
previous 10 years, the poverty rate for lower-middle income nations at the bank's
3.20 USD per day threshold fell from 16.8% to 5 percent, which means ten million
people were lifted out of poverty.
It evaluates Vietnam's achievement in eradicating poverty throughout the ten
years leading up to 2020 and looks at what is required to maintain the upward
economic mobility and financial security of the millions who have escaped poverty.
Vietnam's economy has flourished and grown into one that is in high demand abroad
in the less than 50 years since the war's conclusion and the 35 years since the Doi
Moi reforms. The analysis estimates that GDP per person (2015 US dollars) would
increase from 481 USD in 1986 to 2,655 USD in 2020. Living conditions in
Vietnam have improved as a result of the country's rapid economic expansion.
Poverty rates decreased from 16.8% in 2010 to 5.0 percent in 2020, according to the
World Bank's Lower-Middle Income Class (3.20 USD/day 2011PPP) poverty
threshold. 5.7% of Vietnamese people are thought to be multidimensionally poor,
according to early projections for 2019.
The Last Mile problem is persistently higher rates of poverty among particular
populations, yet some encouraging patterns have arisen. Between 2010 and 2020,
the rates of poverty among several persistently disadvantaged groups—including
households in the Midlands and Northern Mountains and members of
ethnic minorities—were cut in half at least. Workers from ethnic minorities are
leaving agriculture more swiftly. About 23% of ethnic minorities worked in
manufacturing in 2020, which is about the same percentage as the Kinh majority at
the beginning of the decade.

40
Vietnam's growth over the past ten years has been mostly inclusive as
household welfare has increased across the board. As many families shifted out of
poverty within a single generation, there were several pathways out of poverty for
most populations. In a changing global economic and climatic environment,
Vietnam is a lower-middle-income nation facing a difficult and uncharted route to
upper-middle and high-income country levels.
Table 3. 1. Poverty rate in VietNam (2015 – 2021 period)
Poverty rate in VietNam (2015 – 2021 period)
2015 2018 2019 2020 Prel. 2021
Poverty rate 7.0 6.8 5.7 4.8 4.4
Source: General Statistics Office (2021)
Although there has been significant progress, poverty is still a major public
concern. In a study of the populace, poverty and hunger were identified as the most
important problem that the government must address from 2015 to 2020. Many
individuals expressed anxiety over slipping back into poverty when asked why it
was the key issue, but even more believed that poverty was a general drag on the
economy and diminished national image. Beyond the poor, a wider range of people
in society are economically vulnerable. There are approximately 13.6 million people
who are no longer in poverty but are neither economically stable nor in the middle
class. Even while there is currently little chance of slipping into absolute poverty,
establishing greater levels of economic stability is still a vital issue. By 2018, about
40% of the middle class of 2016 had fallen to a lower socioeconomic class.
Viet Nam had 609,049 poor residences at the end of 2021, while there were
850,202 near-poor households, or 3.11 percent, of all households. There were no
impoverished houses in Ha Noi, Hai Phong, Da Nang, Ho Chi Minh City, Binh
Duong, or Tay Ninh, according to six localities. The greatest rate of poverty,
however, was found in Dien Bien, where it was 27.33 percent, followed by Ha
Giang (18.54 percent), Cao Bang (18.36 percent), and Bac Kan (17.22 percent). The

41
near poor and poor household rate in Vietnam will increase from 5.2 percent in 2020
to 9.35 percent in 2022 as a result of the new multi-dimensional poverty line
(approved in 2021), which means an additional 10 million people will benefit from
the government's social protection & poverty reduction policies and programs in the
years 2021–2025. The Multi-Dimensional Poverty (MDP) Report 2021 presented
this in Ha Noi this morning. The Committee for Ethnic Affairs (CEMA), General
Statistics Office, Ministry of Planning and Investment (MPI), and the Ministry of
Labour - Invalids and Social Affairs (MOLISA) collaborated to produce the report.
The Australian Government Department of Foreign Affairs and Trade (DFAT)
provided financial support, and the Centre for Analysis and Forecasting under the
Viet Nam Academy for Social Science (CAF/VASS) provided technical assistance.
Viet Nam became a pioneer in the Asia-Pacific Region by incorporating
multidimensional poverty into national poverty analysis and targeting after adopting
the national multidimensional poverty line in 2015. The COVID-19 epidemic was a
significant setback in the fight to eradicate obstinate poverty, but the continuation of
poverty among ethnic minority groups and in coastal, island communities remain a
concern for Viet Nam in terms of achieving the Sustainable Development Goals
(SDGs).

42
Table 3. 2. Poverty rate by residence and by region
Poverty rate by residence and by region
2016 2018 2019 2020
Prel.
2021
WHOLE
COUNTRY
9.2 6.8 5.7 4.8 4.4
By residence
Urban 3.5 1.5 1.2 1.1 1.0
Rural 11.8 9.6 8.0 7.1 6.5
By region
Red River Delta 3.1 1.9 1.6 1.3 1.2
Nothern Midlands
and mountain areas
23.0 18.4 16.4 14.4 13.4
North Central and
Central coastal
areas
11.6 8.7 7.4 6.5 5.7
Central Highlands 18.5 13.9 12.4 11.0 10.1
South East 1.0 0.6 0.5 0.3 0.2
Mekong River
Delta
8.6 5.8 4.8 4.2 3.8
Source: General Statistic Office (2021)
3.1.2. Current status of social capital in Vietnam
One's social capital in Vietnam is made up of their connections to their family,
close friends, and official social organizations (such as the Communist Party of Viet

43
Nam, the government, and labor unions), as well as other social networks like those
in politics or organizations (Chien 2013). The family is viewed as playing a crucial
part in the social life of the vast majority of Vietnamese people among them.
According to R. Dalton, Hac, Nghi, and Ong's findings, just 17% of Vietnamese
people get out with friends on a weekly basis whereas 32% of Vietnamese spend
time socializing with coworkers. The activities of family and other social networks
differ more in Vietnam than in other Asian nations, notably China, Japan, and the
Philippines, even if these nations also consider their own families to be the most
significant social network. Particularly, Japanese, Filipinos, and notably Chinese
strongly value networks related to work; 62% of Chinese people meet together with
coworkers on a weekly basis, compared to 34% and 21% for the Philippines and
Japan, respectively. According to R. Dalton's study, Vietnamese are more likely than
Chinese and Filipinos to take friendships for granted since they only see their friends
half as often.
Viet Nam's economy is expanding significantly, but society has also undergone
significant transformation and modernization. As a result, for many people in
Vietnam, work-related networks are increasingly more significant. Additionally,
established social networks including community groups, sport or culture
organizations, political or professional organizations, and volunteer health
organizations are receiving increased attention from the Vietnamese population (R.
J. Dalton and Ong 2004, R. Dalton et al. 2002). In particular, participation in such
organisations was exposed to at least 20% of the public. Additionally, the average
Vietnamese person belongs to 2.33 groups, which is more than the average for
Chinese (0.91), Japanese (1.41), and Filipinos (1.93).
Empirical study confirms Norlund (2005) that modernization appears to reduce
or replace traditional networks with new networks. This viewpoint is also supported
by R. Dalton et al.'s study, which theorizes that social modernization is altering
social networks and resulting in a wider range of social ties. The government's
official networks may be among these new networks. In other words, connecting
social capital is likely to take the role of connections that serve as bridges and

44
binders (Norlund, 2005). The Vietnamese Women's Association, the Ho Chi Minh
Youth Union, the Viet Nam Farmers Association, and the Vietnamese Confederation
of Labor are some of the biggest national organizations in Vietnam with significant
involvement. Furthermore, R. Dalton et al. (2002) contend that youth union
members appear to be encouraged to pursue advanced occupations, and that such
organizations for the younger generations may expand in the future.
According to Statistical Yearbook of Vietnam 2021, social security work,
supporting people, employees and employers affected by the epidemic in 2019 have
been actively and effectively implemented. Organize the effective implementation of
policies on social insurance, unemployment insurance and salary; build harmonious
and progressive labor relations. The development of subjects participating in social
insurance and unemployment insurance is interested, the proportion of workers in
the age group participating in social insurance is about 36.8%, the proportion of the
labor force in the working age group is about 36%, participation in unemployment
insurance reached about 30%. The protection and care of people's health continues
to be concerned; promoting inter-connection of the online medical examination and
treatment consulting support platform to 1591 medical facilities at district and
provincial levels; ensure people have early access to health care, from a distance,
from the grassroots. To encourage research, technology transfer and domestic
production of vaccines, drugs and biological products. Policies on ethnicity, religion,
belief, the elderly, children, family, gender equality and for the advancement of
women continue to be concerned; High-performance sports achieve some
impressive results.
3.2. Research model and hypothesis
3.2.1. Research model
Inheriting and developing previous studies, the author has come up with a
research model with the following research hypotheses:

45
Source: Author
3.2.2. Hypothesis
Neighborhood cohesion and Poverty reduction
The contribution of social capital to preventing social exclusion and reducing
poverty was investigated by Flores and Rello in 2003. They discovered that social
capital was a crucial tool for raising living standards and combating social isolation
among the various groups. A positive political and economic climate may be
maintained and new difficulties may be solved with the aid of social capital. The
alleviation of many issues, such as poverty and food insecurity, depends on having
strong relationships with neighbors. Broson demonstrated a relationship between
neighborhood social cohesiveness changes over time and food insecurity.
H1: Factor Neighborhood cohesion of social capital has a significant effect on
Poverty reduction.
Neighborhood
cohesion
Social trust
Social network
Civic participation
Social support
H
1
H
2
H
3
H
5
H
4
Poverty
reduction
Social capital
Figure 3. 1. Research model

46

THE IMPACTS OF SOCIAL CAPITAL ON POVERTY REDUCTION IN VIETNAM

THE IMPACTS OF SOCIAL CAPITAL ON POVERTY REDUCTION IN VIETNAM

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