Trust, Networks and Norms: The Creation of Social Capital in Agricultural Economies in Ghana FERGUS LYON* University of Durham, Durham, UK Summary. Ð This paper contributes to the continuing debate over the multifaceted concept of trust, and its ability to provide a richer explanation of processes of economic activity. Using case studies of agricultural production, marketing and ®nancing systems in Brong Ahafo Region of Ghana, the analysis documents the means by which trust is created among farmers, traders and agricultural input suppliers. The mechanisms include formal and informal networks of working relations, customer friendships, pre-existing networks and intermediaries. The study shows that trust is necessary for the development of a vibrant private sector based on microenterprises, in conditions where actors cannot rely on formal legal institutions at present. Ó 2000 Elsevier Science Ltd. All rights reserved. Key words Ð social capital, credit, markets, rural development, Africa, Ghana 1. INTRODUCTION Trust and social capital have become fash- ionable terms in development discourse in the late 1990s, being taken up by a range of disci- plines and generating interest in many of the development agencies. Exchange requires in- teraction and a level of security which can be based on legal measures, trust or coercion. Small-scale rural producers and traders in less developed countries have limited access to legal measures and so have to rely on other measures notably trust. Applied research needs to con- sider ways of understanding the mechanisms whereby social capital and trust are created. There is very little empirical work on the social relations of markets and how actors build up trust that enables more complex exchange than spot transactions to take place. These concepts are important for understanding how people cope with poverty and increase their incomes in situations of high risk and no for- mal insurance. This paper attempts to explore these issues based on a survey of production, ®nancing and marketing of tomatoes in Brong Ahafo, Ghana. 1 The survey results are related to the literature of institutional economics, anthropology and history. Through taking a broad de®nition of social capital that concentrates on trust and norms as well as networks, this paper adds to the grow- ing literature that is exploring the role of social relations in economic activity (Humphrey & Schmitz, 1996; Fafchamps, 1996; Berry, 1993, 1997; Woolcock, 1998). This diers from pre- vious paradigms that assume models of devel- opment can be replicated easily. It also goes beyond forms of New Institutional Economics that assume that institutions evolve to minimize transaction costs, but which fail to explore the nature of social relations and norms on which these institutions are based. The concept of social capital broadly de®ned opens up spaces for reinterpretation and discussion across the social science disciplines. The popularity and the widely spread aca- demic roots of the concept of social capital has World Development Vol. 28, No. 4, pp. 663±681, 2000 Ó 2000 Elsevier Science Ltd. All rights reserved Printed in Great Britain 0305-750X/00/$ - see front matter PII: S0305-750X(99)00146-1 www.elsevier.com/locate/worlddev * Many thanks to Seth A®korah-Danquah and Frank Owusu Acheampong who assisted with the survey, and to Gina Porter, Jonathan Rigg and Liz Oughton, Andrew Dorward, Colin Poulton, Ramatu Al-Hassan, Abigail Barr and referees for their useful comments. I would also like to thank the participants of seminars at the Department of Agricultural Economics at University of Ghana, Department of Geography at University of Durham, and Social Capital Thematic Group at the World Bank, Washington. The research on which this paper is based was ®nanced by Department for Inter- national Development (DFID) of the United Kingdom. However, the ®ndings, interpretations and conclusions expressed in this paper are entirely those of the author Final revision accepted: 24 September 1999. 663