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Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries

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  • 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
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    References listed on IDEAS

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    1. Dar, Manzoor H. & de Janvry, Alain & Emerick, Kyle & Sadoulet, Elisabeth & Wiseman, Eleanor, 2021. "Private Input Suppliers as Information Agents for Technology Adoption in Agriculture," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt23k9t4q6, Department of Agricultural & Resource Economics, UC Berkeley.

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    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

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