What is Social Capital?

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In this post we discuss the concept of Social Capital.

The term social capital is a combination of the two terms “social and “capital”. Further, the term social derives its inference from the term ‘society”.

Therefore to understand the concept of social capital, we must first comprehend the meaning of the two terms “society” and “capital”.

Society can be defined as a group of individuals sharing common resources, faith or ideologies. This sharing of resources or ideologies creates a cohesion among its members who often work, as a group, towards the upliftment of other members of the society or simply towards spreading the ideologies that unite them.

Capital, on the other hand, can be defined as money or assets held, which provide its owners benefits in terms of future income or other monetary advantages. Note that assets could be both tangible or intangible. Examples of tangible assets could be investment in real-estate or metals like gold.

Similarly, the right to mine an area rich in coal deposits is an example of intangible asset.

Social Capital: 

Broadly speaking, the term social capital can be defined to mean assets, both tangible or intangible, held by the society at large, capable of providing benefits to the members of the society in the present as well as the future.

A group of farmers pooling resources together to dig a canal from the nearest waterbody to irrigate their fields is an example of social capital.

The canal helps the farmers produce more by ensuring a continuous supply of water to their fields. Here the canal is not the individual property of any single farmer but is a reward of their collective efforts.

Note that benefits from these social assets, need not always be measurable in monetary terms.

For example members of a society pooling together funds to construct a school for their children is also an example of social capital.

The benefits that the members of the society aim to achieve from the school i.e good education for their children, cannot be directly measured in monetary terms. The benefits from this initiative, would flow to the founding members once their children finish school and are able to establish themselves in a career of their choice.

Social capital can be a boon for entrepreneurs and the spirit of entrepreneurship as well.

Where a group of traders set up a fund to provide financial assistance to each other in times of need or to finance working capital requirements at below market rates of interest, it indeed is an example of social capital.

 

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