Financing smallholder agriculture: An experiment with agent-intermediated microloans in India

Pushkar Maitra, Sandip Mitra, Dilip Mookherjee, Alberto Motta and Sujata Visaria
Authors registered in the RePEc Author Service: Sujata Visaria and Sujata Visaria

Journal of Development Economics, 2017, vol. 127, issue C, 306-337

Abstract: We explore the hypothesis that traditional joint-liability microfinance programs fail to increase borrower incomes in part because they cannot screen out unproductive borrowers. In randomly selected villages in West Bengal, India, we implemented trader-agent-intermediated lending (TRAIL), in which local trader-lender agents were incentivized through repayment-based commissions to select borrowers for individual liability loans. In other randomly selected villages, we organized a group-based lending (GBL) program in which individuals formed 5-member groups and received joint liability loans. TRAIL loans increased the production of the leading cash crop by 27% and farm incomes by 22%. GBL loans had insignificant effects. We develop and test a theoretical model of borrower selection and incentives. Farmers selected by the TRAIL agents were more able than those who self-selected into the GBL scheme; this pattern of selection explains at least 30–40% of the observed difference in income impacts.

Keywords: Agricultural finance; Agent-based lending; Group lending; Selection; Repayment (search for similar items in EconPapers)
JEL-codes: D82 O16 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Financing Smallholder Agriculture: An Experiment wth Agent-Intermediated Microloans in India (2016)
Working Paper: Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India (2015)
Working Paper: Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India (2014)
Working Paper: Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:127:y:2017:i:c:p:306-337

DOI: 10.1016/j.jdeveco.2017.03.001

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