NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

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

NBER Working Paper No. 20709
Issued in November 2014
NBER Program(s):Development Economics

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.

download in pdf format
   (516 K)

email paper

A non-technical summary of this paper is available in the March 2015 NBER digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20709

Published:

Users who downloaded this paper also downloaded* these:
Greenstone, Mas, and Nguyen w20704 Do Credit Market Shocks affect the Real Economy? Quasi-Experimental Evidence from the Great Recession and ‘Normal’ Economic Times
Ravallion w19210 The Idea of Antipoverty Policy
Keys, Piskorski, Seru, and Yao w20561 Mortgage Rates, Household Balance Sheets, and the Real Economy
Hombert, Schoar, Sraer, and Thesmar w20717 Can Unemployment Insurance Spur Entrepreneurial Activity?
Alfaro, Chari, and Kanczuk w20726 The Real Effects of Capital Controls: Firm-Level Evidence from a Policy Experiment
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us