PROF. NGANGA TABITHA WAGITHI KIRITI

This article investigates the influence of social capital on consumption expenditure in rural Kenya. It uses primary data collected from a sample of 340 households in Nyeri district to demonstrate the linkage between social capital and rural livelihoods. Econometric methods (OLS) are used to explore the nexus between social capital and consumption expenditures. Results from econometric analysis show that social capital significantly affects total household expenditure. There is evidence in the study area that social capital enables households generate consumption expenditure sources that support non-monetary forms of exchange. This non-monetary exchange is presumed to reduce transactions demand for cash and facilitate household savings. Contrary to expectations, it is found that total household expenditure is negatively associated with aggregate social capital. This finding seems to indicate that social capital reduces household welfare. Contrary to this simple interpretation, the finding suggests that households with large social capital endowments are able to meet their basic needs through non-cash transactions. Social capital can enable households to increase consumption without cash expenditure and relying on self-purchased goods. The article further shows that the welfare effects of various forms of social capital differ, indicating that effects of social capital are not sufficientle measured using aggregate quantity of this variable. The findings of the study are used to suggest policies for promoting formation of social capital as a mechanism for improving living conditions of rural households.