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Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India

Pushkar Maitra, Sandip Mitra, Dilip Mookherjee, Alberto Motta (motta@unsw.edu.au) and Sujata Visaria

No 20709, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent evaluations of traditional microfinance loans have found no significant impacts on borrower incomes or productive activities. We examine whether this can be remedied by (a) modifying loan features to facilitate financing of working capital needs of farmers, and (b) delegating selection of borrowers for individual liability loans to local trader-lender agents incentivized by repayment-based commissions. We conduct a field experiment in West Bengal where this design (called TRAIL) was offered in randomly selected villages. In remaining villages a more traditional design (called GBL) was offered, wherein five-member groups applied for joint liability loans with terms otherwise similar to TRAIL loans. TRAIL loans increased cultivation of potatoes (the major cash crop in the region) and farm incomes by 17–21%, whereas GBL loans had insignificant and highly dispersed effects. We argue this was because TRAIL agents selected borrowers that were low-risk and highly productive, whereas the GBL scheme attracted farmers that were riskier on average and highly heterogeneous in terms of productivity. TRAIL loans also achieved higher repayment and take-up rates, and lower administrative costs.

JEL-codes: O16 O17 Q14 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-dev, nep-exp and nep-mfd
Note: DEV
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Published as Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
Published as Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Alberto Motta & Sujata Visaria, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, vol 127, pages 306-337.

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Related works:
Journal Article: Financing smallholder agriculture: An experiment with agent-intermediated microloans in India (2017) Downloads
Working Paper: Financing Smallholder Agriculture: An Experiment wth Agent-Intermediated Microloans in India (2016) Downloads
Working Paper: Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India (2015) Downloads
Working Paper: Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India (2014) Downloads
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