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

Author

Listed:
  • Pushkar Maitra
  • Sandip Mitra
  • Dilip Mookherjee
  • Alberto Motta
  • Sujata Visaria

Abstract

We experimentally evaluate two micro-lending schemes to finance high-value smallholder agriculture. Loans featured durations that matched crop cycles, low interest rates, dynamic repayment incentives and index insurance. In the TRAIL design, the lender incentivized a local trader to recommend borrowers for individual-liability loans. In GBL, it offered joint-liability loans to self-formed groups, who attended high-frequency meetings and met savings targets. TRAIL loans increased potato cultivation and farm incomes by 17{21%, but GBL loans had insignificant effects, because TRAIL borrowers were more productive and lower-risk. TRAIL loans had higher repayment and take-up rates, and lower administrative costs than GBL loans.

Suggested Citation

  • Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Alberto Motta & Sujata Visaria, 2014. "Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India," Monash Economics Working Papers 35-14, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2014-35
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    References listed on IDEAS

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    Cited by:

    1. Singh, Nirvikar, 2018. "Financial Inclusion: Concepts, Issues and Policies for India," Santa Cruz Department of Economics, Working Paper Series qt98p5m37s, Department of Economics, UC Santa Cruz.
    2. Casaburi, Lorenzo & Reed, Tristan, 2017. "Competition in Agricultural Markets: An Experimental Approach," CEPR Discussion Papers 11985, Centre for Economic Policy Research.
    3. Mookherjee, D. & Motta, A., 2016. "A theory of interactions between MFIs and informal lenders," Journal of Development Economics, Elsevier, vol. 121(C), pages 191-200.

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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