An emerging theory of social capital formation and its implications for local governance are discussed in this article. The theory argues that social capital formation through peace and development initiatives in a local government area that has experienced or is experiencing conflict, characterized by extremely low incomes, lack of access to productive resources and services, and low level of education, is facilitated by a mediating organization that builds trust, enhances collective responsibility and action, and helps increase a group's network or linkages. By consciously incorporating what this article considers as "social capital formation strategies" in peace and development initiatives, implementation of theses and new initiatives is facilitated and sustained. The social capital formed has a potential to enable local government units to transform the original vulnerable situation of the LGU so that it achieves desired local governance goals. It is possible that in a conflict area, the resulting outcomes of social capital are more lasting peace, higher incomes, a sense of prosperity and meaningful participation by actors in the local government area.
