The purpose of thi s study is to assess the relation ship between social capital andrngroup based micro finan ce. Ea rli er studies have predominantly focused on thernimpact of microfinance schemes on the livelihoods of the participants. Muchrnatt ention was not paid to the social processes underl ying the group basedrnmicrofi nance. Therefore, this research has been initiated to fi ll the knowledge gaprnthat exists in this particularly important area of development. The research wasrnconducted by taking the activities of Dedebit Credit and Saving Institution atrnMekelle zone of the Tigray regional state. This microfinance institution is one ofrnthe pioneers on the practice of group based microfinance in Ethiopia.rnThe objective of the study was to examine different dimensions of social capital asrnthey pertain to the group-based mi crofin ance. Specifically, it was aimed at stud yingrnthe social rel ationships th at may exist between the borrowers themselves (before,rnduring and after their involvement in the microfinance institutions) on the one hand;rnand the lender-borrowers relationship on the other hand.rnIn order to undertake this research, daia collection has invol ved methodologicalrntriangulation or a combination of d ifferent methods. However, the major researchrnmethod employed for thi s study was inte rviewer-admini stered survey research. Tornaugment this method, individua l intervielVs, personal observations and focus grouprndiscussions were includ ed . Relevant literature and essential documents were alsornextensive ly consulted as sources of secondary in fo rmation .rnThc finding of the study shows th at peop le be long to a number of local ICIT Irnassoc iations and know each othcr a great deal. These are the major sources forrnpeople to IÂ·orm microfinancc groups. It al so indi cntes that the microiiuanccrninstitution does not pay much