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Can Self-Help Groups Really Be 'Self-Help'?

Author

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  • Greaney, Brian

    () (Yale University)

  • Kaboski, Joseph P.

    () (University of Notre Dame)

  • Van Leemput, Eva

    () (Board of Governors of the Federal Reserve System (U.S.))

Abstract

We provide an experimental and theoretical evaluation of a cost-reducing innovation in the delivery of "self-help group" microfinance services, in which privatized agents earn payments through membership fees for providing services. Under the status quo, agents are paid by an outside donor and offer members free services. In our multi-country randomized control trial we evaluate the change in this incentive scheme on agent behavior and performance, and on overall village-level outcomes. We find that privatized agents start groups, attract members, mobilize savings, and intermediate loans at similar levels after a year but at much lower costs to the NGO. At the village level, we find higher levels of borrowing, business-related savings, and investment in business. Examining mechanisms, we find that self-help groups serve more business-oriented clientele when facilitated by agents who face strong financial incentives.

Suggested Citation

  • Greaney, Brian & Kaboski, Joseph P. & Van Leemput, Eva, 2016. "Can Self-Help Groups Really Be 'Self-Help'?," International Finance Discussion Papers 1155, Board of Governors of the Federal Reserve System (U.S.), revised 14 Jan 2016.
  • Handle: RePEc:fip:fedgif:1155
    DOI: 10.17016/IFDP.2015.1155r
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    References listed on IDEAS

    as
    1. Jessica Cohen & Pascaline Dupas, 2008. "Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment," NBER Working Papers 14406, National Bureau of Economic Research, Inc.
    2. Paolo Casini & Lore Vandewalle & Zaki Wahhaj, 2017. "Public Good Provision in Indian Rural Areas: The Returns to Collective Action by Microfinance Groups," World Bank Economic Review, World Bank Group, vol. 31(1), pages 97-128.
    3. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 281-292.
    4. Orazio Attanasio & Britta Augsburg & Ralph De Haas & Emla Fitzsimons & Heike Harmgart, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," IFS Working Papers W11/20, Institute for Fiscal Studies.
    5. Jessica Cohen & Pascaline Dupas, 2010. "Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 1-45.
    6. Joseph P. Kaboski & Robert M. Townsend, 2005. "Policies and Impact: An Analysis of Village-Level Microfinance Institutions," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 1-50, March.
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    Citations

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    Cited by:

    1. Ksoll, Christopher & Lilleør, Helene Bie & Lønborg, Jonas Helth & Rasmussen, Ole Dahl, 2016. "Impact of Village Savings and Loan Associations: Evidence from a cluster randomized trial," Journal of Development Economics, Elsevier, vol. 120(C), pages 70-85.
    2. Diego A. Vera-Cossio, 2017. "Targeting credit through community members," Development Research Working Paper Series 07/2017, Institute for Advanced Development Studies.
    3. repec:eee:deveco:v:134:y:2018:i:c:p:1-15 is not listed on IDEAS
    4. Aggarwal, Shilpa & Francis, Eilin & Robinson, Jonathan, 2018. "Grain today, gain tomorrow: Evidence from a storage experiment with savings clubs in Kenya," Journal of Development Economics, Elsevier, vol. 134(C), pages 1-15.
    5. repec:eee:deveco:v:128:y:2017:i:c:p:24-48 is not listed on IDEAS
    6. Emily Breza & Cynthia Kinnan, 2018. "Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis," Working Papers id:12587, eSocialSciences.
    7. repec:bla:devpol:v:37:y:2019:i:1:p:129-151 is not listed on IDEAS
    8. Beaman, Lori & Karlan, Dean S. & Thuysbaert, Bram, 2014. "Saving for a (not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali," Center Discussion Papers 187189, Yale University, Economic Growth Center.
    9. Vandewalle, Lore, 2017. "The Role of Accountants in Indian Self-Help Groups: A Trade-off between Financial and Non-Financial Benefits," World Development, Elsevier, vol. 93(C), pages 177-192.
    10. Cassidy, Rachel & Fafchamps, Marcel, 2018. "Banker My Neighbour: Matching and Financial Intermediation in Savings Groups," CEPR Discussion Papers 12715, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Microfinance; Self-Help Groups; Privatized Delivery;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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