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The Role of Accountants in Indian Microfinance Groups: a Trade-Off Between Financial and Non-Financial Benefits

Lore Vandewalle ()

No 1118, Working Papers from University of Namur, Department of Economics

Abstract: Self-Help Groups (SHGs) create a platform that allows women to meet on a weekly basis to save and to take loans if needed. Strict records of all saving and lending is important, both to avoid con flicts in the group and to obtain access to bank loans. Accounting is done either internally by a group member or externally by another villager. Economic theory suggests that repeated interaction between individuals can help to build social capital. However, in the context of these SHGs, the presence of an, often male, external accountant might hamper this process. Using rst hand data on SHGs in Northern India, I nd that repeated interaction is more likely to create non-financial benefits in the form of mutual assistance and collective action when there is no external involvement. However, these bene ts come at a cost, as SHGs with internal accountants distribute financial benefits more unequally and the accountants themselves receive larger shares than the other members of the groups. I provide evidence that the larger shares cannot be explained as a compensation for better financial performance, but that some form of elite capture occurs. Although this implies that an internal accountant is more expensive than an external accountant, there is no evidence that groups with internal accountants are less stable. Members are not more likely to leave groups, possibly because the loss in nancial bene ts is outweighed by the gain in non-financial benefits.

Pages: 44 pages
Date: 2011-12
New Economics Papers: this item is included in nep-mfd
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