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

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  • 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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    Cited by:

    1. 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.
    2. 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.
    3. Singh, Nirvikar, 2018. "Financial Inclusion: Concepts, Issues and Policies for India," MPRA Paper 91047, University Library of Munich, Germany.
    4. Berg Claudia & Emran Shahe & Shilpi Forhad, 2020. "Microfinance and Moneylenders: Long-run Effects of MFIs on Informal Credit Market in Bangladesh," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-35, July.
    5. 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.
    6. Lixia Liu & Xueli Zhan, 2019. "Analysis of Financing Efficiency of Chinese Agricultural Listed Companies Based on Machine Learning," Complexity, Hindawi, vol. 2019, pages 1-11, July.
    7. Xiaohua Wang & Meilan Chen & Xi He & Fangfang Zhang, 2018. "Credit Constraint, Credit Adjustment, and Sustainable Growth of Farmers’ Income," Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-15, November.
    8. Casaburi, Lorenzo & Reed, Tristan, 2017. "Competition in Agricultural Markets: An Experimental Approach," CEPR Discussion Papers 11985, C.E.P.R. Discussion Papers.
    9. 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.
    10. Ahlin, Christian & Gulesci, Selim & Madestam, Andreas & Stryjan, Miri, 2020. "Loan contract structure and adverse selection: Survey evidence from Uganda," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 180-195.
    11. Casaburi, Lorenzo & Macchiavello, Rocco, 2015. "Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry," CEPR Discussion Papers 10952, C.E.P.R. Discussion Papers.
    12. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2017. "The Equity Impacts of Targeted Smallholder Agricultural Credit," HKUST IEMS Working Paper Series 2017-41, HKUST Institute for Emerging Market Studies, revised Mar 2017.
    13. Berg Claudia & Emran Shahe & Shilpi Forhad, 2020. "Microfinance and Moneylenders: Long-run Effects of MFIs on Informal Credit Market in Bangladesh," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-35, July.
    14. 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.
    15. Evans Olaniyi, 2017. "Back to the Land: The Impact of Financial Inclusion on Agriculture in Nigeria," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 885-903, Autumn.
    16. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Alberto Motta & Sujata Visaria, 2014. "Helping Microfinance Fulfill its Promise: Raising Borrower Incomes through Agent-Intermediated Lending," HKUST IEMS Thought Leadership Brief Series 2015-03, HKUST Institute for Emerging Market Studies, revised Oct 2014.
    17. Romain Houssa & Paul Reding & Albena Sotirova, 2017. "Methodological issues of an impact evaluation of development support in agriculture," BeFinD Working Papers 0120, University of Namur, Department of Economics.
    18. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2020. "Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries," HKUST IEMS Working Paper Series 2020-70, HKUST Institute for Emerging Market Studies, revised Jan 2020.

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    More about this item

    Keywords

    Agricultural Finance; Agent Based Lending; Group Lending; Selection; Repayment;
    All these keywords.

    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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