TY - JOUR
T1 - Financing smallholder agriculture
T2 - An experiment with agent-intermediated microloans in India
AU - Maitra, Pushkar
AU - Mitra, Sandip
AU - Mookherjee, Dilip
AU - Motta, Alberto
AU - Visaria, Sujata
PY - 2017/7/1
Y1 - 2017/7/1
N2 - 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.
AB - 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.
KW - Agent-based lending
KW - Agricultural finance
KW - Group lending
KW - Repayment
KW - Selection
UR - http://www.scopus.com/inward/record.url?scp=85018898803&partnerID=8YFLogxK
U2 - 10.1016/j.jdeveco.2017.03.001
DO - 10.1016/j.jdeveco.2017.03.001
M3 - Article
AN - SCOPUS:85018898803
SN - 0304-3878
VL - 127
SP - 306
EP - 337
JO - Journal of Development Economics
JF - Journal of Development Economics
ER -
