IDEAS home Printed from https://ideas.repec.org/p/hit/hiasdp/hias-e-94.html
   My bibliography  Save this paper

Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries

Author

Listed:
  • Maitra, Pushkar
  • Mitra, Sandip
  • Mookherjee, Dilip
  • Visaria, Sujata

Abstract

We compare two different methods of appointing a local commission agent as an intermediary for a credit program. In the Trader-Agent Intermediated Lending Scheme (TRAIL), the agent was a randomly selected established private trader, while in the Gram Panchayat-Agent Intermediated-Lending Scheme (GRAIL), he was randomly chosen from nominations by the elected village council. More TRAIL loans were taken up, but repayment rates were similar, and TRAIL loans had larger average impacts on borrowers’ farm incomes. The majority of this difference in impacts is due to differences in treatment effects conditional on farmer productivity, rather than differences in borrower selection patterns. The findings can be explained by a model where TRAIL agents increased their middleman profits by helping more able treated borrowers reduce their unit costs and increase output. In contrast, for political reasons GRAIL agents monitored the less able treated borrowers and reduced their default risk.

Suggested Citation

  • Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Visaria, Sujata, 2020. "Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries," Discussion paper series HIAS-E-94, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:hias-e-94
    as

    Download full text from publisher

    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/30932/070_hiasDP-E-94.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mansuri, Ghazala, 2007. "Credit layering in informal financial markets," Journal of Development Economics, Elsevier, vol. 84(2), pages 715-730, November.
    2. Anderson, Michael L, 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt15n8j26f, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Shantayanan Devarajan & Stuti Khemani, 2018. "If Politics is the Problem, How Can External Actors be Part of the Solution?," International Economic Association Series, in: Kaushik Basu & Tito Cordella (ed.), Institutions, Governance and the Control of Corruption, chapter 8, pages 209-251, Palgrave Macmillan.
    4. Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2018. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 1-13, March.
    5. Lori Beaman & Ariel BenYishay & Jeremy Magruder & Ahmed Mushfiq Mobarak, 2021. "Can Network Theory-Based Targeting Increase Technology Adoption?," American Economic Review, American Economic Association, vol. 111(6), pages 1918-1943, June.
    6. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
    7. Ghazala Mansuri & Vijayendra Rao, 2013. "Localizing Development : Does Participation Work?," World Bank Publications - Books, The World Bank Group, number 11859, December.
    8. Oriana Bandiera & Imran Rasul, 2006. "Social Networks and Technology Adoption in Northern Mozambique," Economic Journal, Royal Economic Society, vol. 116(514), pages 869-902, October.
    9. Lori Beaman & Jeremy Magruder, 2012. "Who Gets the Job Referral? Evidence from a Social Networks Experiment," American Economic Review, American Economic Association, vol. 102(7), pages 3574-3593, December.
    10. Rema Hanna & Vivi Alatas & Abhijit Banerjee & Benjamin A. Olken & Ririn Purnamasari & Matthew Wai-Poi & Christian Daude, 2012. "Ordeal Mechanisms in Targeting: Theory and Evidence from a Field Experiment in Indonesia," CID Working Papers 254, Center for International Development at Harvard University.
    11. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    12. Deserranno, Erika & Bandiera, Oriana & Rasul, Imran, 2020. "Development Policy through the Lens of Social Structure," CEPR Discussion Papers 14876, C.E.P.R. Discussion Papers.
    13. Diego Vera-Cossio, 2022. "Targeting Credit through Community Members," Journal of the European Economic Association, European Economic Association, vol. 20(2), pages 778-821.
    14. Clare Balboni & Oriana Bandiera & Robin Burgess & Maitreesh Ghatak & Anton Heil, 2023. "Why Do People Stay Poor?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(2), pages 785-844.
    15. Erika Deserranno & Miri Stryjan & Munshi Sulaiman, 2019. "Leader Selection and Service Delivery in Community Groups: Experimental Evidence from Uganda," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 240-267, October.
    16. Dey, Subhasish & Sen, Kunal, 2016. "Is Partisan Alignment Electorally Rewarding? Evidence from Village Council Elections in India," IZA Discussion Papers 9994, Institute of Labor Economics (IZA).
    17. Stokes, Susan C., 2005. "Perverse Accountability: A Formal Model of Machine Politics with Evidence from Argentina," American Political Science Review, Cambridge University Press, vol. 99(3), pages 315-325, August.
    18. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    19. Dilip Mookherjee, 2015. "Political Decentralization," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 231-249, August.
    20. Benjamin Moll, 2014. "Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?," American Economic Review, American Economic Association, vol. 104(10), pages 3186-3221, October.
    21. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    22. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 423-423.
    23. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    24. Vivi Alatas & Abhijit Banerjee & Rema Hanna & Benjamin A. Olken & Julia Tobias, 2012. "Targeting the Poor: Evidence from a Field Experiment in Indonesia," American Economic Review, American Economic Association, vol. 102(4), pages 1206-1240, June.
    25. Joseph P. Kaboski & Robert M. Townsend, 2012. "The Impact of Credit on Village Economies," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 98-133, April.
    26. Abhijit Banerjee & Arun G Chandrasekhar & Esther Duflo & Matthew O Jackson, 2019. "Using Gossips to Spread Information: Theory and Evidence from Two Randomized Controlled Trials," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(6), pages 2453-2490.
    27. Casey, Katherine, 2018. "Radical Decentralization: Does Community Driven Development Work?," Research Papers 3629, Stanford University, Graduate School of Business.
    28. Susan Athey & Guido W. Imbens, 2006. "Identification and Inference in Nonlinear Difference-in-Differences Models," Econometrica, Econometric Society, vol. 74(2), pages 431-497, March.
    29. Gabriel Fuentes, 1996. "The use of village agents in rural credit delivery," Journal of Development Studies, Taylor & Francis Journals, vol. 33(2), pages 188-209.
    30. James A. Robinson & Thierry Verdier, 2013. "The Political Economy of Clientelism," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(2), pages 260-291, April.
    31. Maria Sagrario Floro & Debraj Ray, 1997. "Vertical Links Between Formal and Informal Financial Institutions," Review of Development Economics, Wiley Blackwell, vol. 1(1), pages 34-56, February.
    32. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    33. Sisir Debnath & Tarun Jain, 2020. "Social connections and tertiary health‐care utilization," Health Economics, John Wiley & Sons, Ltd., vol. 29(4), pages 464-474, April.
    34. Jeffrey R Kling & Jeffrey B Liebman & Lawrence F Katz, 2007. "Experimental Analysis of Neighborhood Effects," Econometrica, Econometric Society, vol. 75(1), pages 83-119, January.
    35. Abhijit Banerjee & Emily Breza & Esther Duflo & Cynthia Kinnan, 2019. "Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?," NBER Working Papers 26346, National Bureau of Economic Research, Inc.
    36. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    37. Rachel Heath, 2018. "Why Do Firms Hire Using Referrals? Evidence from Bangladeshi Garment Factories," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1691-1746.
    38. Adel Varghese, 2005. "Bank-moneylender linkage as an alternative to bank competition in rural credit markets," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 315-335, April.
    39. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
    40. Vivi Alatas & Abhijit Banerjee & Rema Hanna & Benjamin A. Olken & Ririn Purnamasari & Matthew Wai-Poi, 2016. "Self-Targeting: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 371-427.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deserranno, Erika & Bandiera, Oriana & Rasul, Imran, 2020. "Development Policy through the Lens of Social Structure," CEPR Discussion Papers 14876, C.E.P.R. Discussion Papers.
    2. Emerick, Kyle & De Janvry, Alain & Sadoulet, Elisabeth & Dar, Manzoor & Wiseman, Eleanor, 2020. "Private Input Suppliers as Information Agents for Technology Adoption in Agriculture," CEPR Discussion Papers 15584, C.E.P.R. Discussion Papers.
    3. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Munshi Sulaiman & Imran Rasul, 2023. "Social Incentives, Delivery Agents, and the Effectiveness of Development Interventions," Journal of Political Economy Microeconomics, University of Chicago Press, vol. 1(1), pages 162-224.
    4. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2021. "Evaluating the Distributive Effects of a Development Intervention," HKUST CEP Working Papers Series 202106, HKUST Center for Economic Policy.
    5. M. Ali Choudhary & Anil K. Jain, 2022. "Credit access and relational contracts: An experiment testing informational and contractual frictions for Pakistani farmers," International Finance Discussion Papers 2022, Board of Governors of the Federal Reserve System (U.S.).
    6. Matthew Olckers & Toby Walsh, 2022. "Manipulation and Peer Mechanisms: A Survey," Papers 2210.01984, arXiv.org, revised Nov 2023.
    7. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Visaria, Sujata, 2022. "Evaluating the distributive effects of a micro-credit intervention," Journal of Development Economics, Elsevier, vol. 158(C).
    8. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Imran Rasul & Munshi Sulaiman & Jack Thiemel, 2022. "Microfinance and Diversification," Economica, London School of Economics and Political Science, vol. 89(S1), pages 239-275, June.
    9. Anindya Bhattacharya & Anirban Kar & Alita Nandi, 2023. "Asymmetric networks, clientelism and their impacts: households' access to workfare employment in rural India," Papers 2304.04236, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Diego Vera-Cossio, 2022. "Targeting Credit through Community Members," Journal of the European Economic Association, European Economic Association, vol. 20(2), pages 778-821.
    2. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
    3. Marshall Burke & Lauren Falcao Bergquist & Edward Miguel, 2019. "Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 785-842.
    4. Oriana Bandiera & Robin Burgess & Erika Deserranno & Ricardo Morel & Imran Rasul & Munshi Sulaiman & Jack Thiemel, 2022. "Microfinance and Diversification," Economica, London School of Economics and Political Science, vol. 89(S1), pages 239-275, June.
    5. Mookherjee, Dilip & Nath, Anusha, 2023. "Clientelistic politics and pro-poor targeting: Rules versus discretionary budgets," World Development, Elsevier, vol. 166(C).
    6. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    7. Deserranno, Erika & Bandiera, Oriana & Rasul, Imran, 2020. "Development Policy through the Lens of Social Structure," CEPR Discussion Papers 14876, C.E.P.R. Discussion Papers.
    8. Anindya Bhattacharya & Anirban Kar & Alita Nandi, 2023. "Asymmetric networks, clientelism and their impacts: households' access to workfare employment in rural India," Papers 2304.04236, arXiv.org.
    9. Olivia Bertelli & Fatou Fall, 2023. "Reaching out to socially distant trainees. Experimental evidence from variations on the standard farmer trainer system," Working Papers DT/2023/03, DIAL (Développement, Institutions et Mondialisation).
    10. Björkegren, Daniel & Karaca, Burak Ceyhun, 2022. "Network adoption subsidies: A digital evaluation of a rural mobile phone program in Rwanda," Journal of Development Economics, Elsevier, vol. 154(C).
    11. Fafchamps, Marcel & Islam, Asad & Malek, Mohammad Abdul & Pakrashi, Debayan, 2020. "Can referral improve targeting? Evidence from an agricultural training experiment," Journal of Development Economics, Elsevier, vol. 144(C).
    12. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
    13. Andrés Rodríguez‐Pose & Roberto Ganau & Kristina Maslauskaite & Monica Brezzi, 2021. "Credit constraints, labor productivity, and the role of regional institutions: Evidence from manufacturing firms in Europe," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 299-328, March.
    14. Fernando, A. Nilesh, 2021. "Seeking the treated: The impact of mobile extension on farmer information exchange in India," Journal of Development Economics, Elsevier, vol. 153(C).
    15. Bonan, Jacopo & Battiston, Pietro & Bleck, Jaimie & LeMay-Boucher, Philippe & Pareglio, Stefano & Sarr, Bassirou & Tavoni, Massimo, 2021. "Social interaction and technology adoption: Experimental evidence from improved cookstoves in Mali," World Development, Elsevier, vol. 144(C).
    16. Stefano Caria & Grant Gordon & Maximilian Kasy & Simon Quinn & Soha Shami & Alexander Teytelboym, 2020. "An Adaptive Targeted Field Experiment: Job Search Assistance for Refugees in Jordan," CESifo Working Paper Series 8535, CESifo.
    17. Lubega, Patrick & Nakakawa, Frances & Narciso, Gaia & Newman, Carol & Kaaya, Archileo N. & Kityo, Cissy & Tumuhimbise, Gaston A., 2021. "Body and mind: Experimental evidence from women living with HIV," Journal of Development Economics, Elsevier, vol. 150(C).
    18. Gharad Bryan & Dean Karlan & Jonathan Zinman, 2015. "Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 174-204, August.
    19. Anindya Bhattacharya & Anirban Kar & Alita Nandi, 2016. "Local Institutional Structure and Clientelistic Access to Employment: The Case of MGNREGS in Three States of India," Working Papers id:11549, eSocialSciences.

    More about this item

    Keywords

    Targeting; Intermediation; Decentralization; Community Driven Development; Agricultural Credit; Networks;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:hiasdp:hias-e-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Resources Section, Hitotsubashi University Library (email available below). General contact details of provider: https://edirc.repec.org/data/ashitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.