| By: |
Pushkar Maitra (Department of Economics, Monash University);
Sandip Mitra (Sampling and Ocial Statistics Unit, Indian Statistical Institute);
Dilip Mookherjee (Department of Economics, Boston University);
Alberto Motta (School of Economics, University of New South Wales);
Sujata Visaria (Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology) |
| Abstract: |
Recent evaluations of traditional microloans have not found significant
impacts on borrower production or incomes. We examine whether this can be
remedied by delegating selection of borrowers for individual liability loans
to local trader-lender agents incentivized by repayment-based commissions. In
a field experiment in West Bengal this design (called TRAIL) was offered in
randomly selected villages. In remaining villages five-member groups
self-formed and applied for joint liability loans (called GBL) with otherwise
similar terms. TRAIL loans increased production of potato (a leading cash
crop) and farm incomes by 27-37%, whereas GBL loans had insignificant and
highly dispersed effects. Both schemes achieved equally high repayment rates,
while TRAIL loans had higher take-up rates and lower administrative costs. We
argue the results can be partly explained by differences in selection patterns
with respect to borrower risk and productivity characteristics. |
| Keywords: |
agricultural finance, agent based lending, group lending, selection, repayment |
| JEL: |
D82 O16 |
| Date: |
2015–04 |
| URL: |
http://d.repec.org/n?u=RePEc:hku:wpaper:201523&r=mfd |