Financing smallholder agriculture

An experiment with agent-intermediated microloans in India

Pushkar Maitra, Sandip Mitra, Dilip Mookherjee, Alberto Motta, Sujata Visaria

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)306-337
Number of pages32
JournalJournal of Development Economics
Volume127
DOIs
Publication statusPublished - 1 Jul 2017

Keywords

  • Agent-based lending
  • Agricultural finance
  • Group lending
  • Repayment
  • Selection

Cite this

Maitra, Pushkar ; Mitra, Sandip ; Mookherjee, Dilip ; Motta, Alberto ; Visaria, Sujata. / Financing smallholder agriculture : An experiment with agent-intermediated microloans in India. In: Journal of Development Economics. 2017 ; Vol. 127. pp. 306-337.
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Financing smallholder agriculture : An experiment with agent-intermediated microloans in India. / Maitra, Pushkar; Mitra, Sandip; Mookherjee, Dilip; Motta, Alberto; Visaria, Sujata.

In: Journal of Development Economics, Vol. 127, 01.07.2017, p. 306-337.

Research output: Contribution to journalArticleResearchpeer-review

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