Social capital has enjoyed an impressive growth across the social sciences over the last two decades. It has been particularly prominent across development studies. The study investigates social capital and human and economic variations in poor localities and its influence on the capacity of community for development. The relationship between social capital dimensions and human and economic characteristics of the households with community development has been analysed using multivariate analysis based on data collected from 497 households in poor localities of Addis Ababa. Community development is highly associated with increased participation in local associations; trust in the community, confidence in local institutions and pattern of reciprocity among inhabitants in the locality. These findings provide qualified support for the systemic model of local social organization but challenge theory of social disorganization that predicts lower levels of social capital in poor communities.