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Determinants Influencing a Rural Household's Preference to Join Individual Liability or Joint Liability Micro Credit Contract Operated by Primary Aagricultural Credit Society

  • Kundu, AMIT
  • MITRA, SURANJANA

Agriculture credit which is one form of micro credit mainly for the small and marginal farmers can be borrowed under two different types of short-term credit contracts: individual liability credit contract or joint liability credit contract under Primary Agricultural Credit Society (PACS). The basic objective of this paper is to identify the factors which influence a rural household to link himself directly with PACS for credit contract under individual liability micro credit contract or to take the initiative to join self-help group under PACS so that if required he/she can take credit under joint liability credit contract. Results reveal that higher education level and age reduces the probability of a rural people to join self-help group but aged farmers with certain size of land prefers to take credit under individual liability loan contract after taking direct membership of PACS. But ownership of land and its size is not a decision making factor during the time of formation self-help groups under PACS. Actually poor people with zero or small size of assets i.e. mainly the risky type borrowers were not ignored during the time of group formation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21784.

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Date of creation: 07 Mar 2009
Date of revision: 10 Oct 2009
Publication status: Forthcoming in Microfinance Review July-Dec, 2009.2(2010): pp. 45-56
Handle: RePEc:pra:mprapa:21784
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  1. Dean Karlan & Xavier Gine, 2006. "Group versus individual liability: A field experiment in the philippines," Natural Field Experiments 00253, The Field Experiments Website.
  2. Christian Ahlin & Robert Townsend, 2002. "Using Repayment Data to Test Across Models of Joint Liability Lending," Vanderbilt University Department of Economics Working Papers 0227, Vanderbilt University Department of Economics.
  3. Ghatak, Maitreesh, 2000. "Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, vol. 110(465), pages 601-31, July.
  4. Christian Ahlin & Robert Townsend, 2003. "Selection into and across Credit Contracts: Theory and Field Research," Vanderbilt University Department of Economics Working Papers 0323, Vanderbilt University Department of Economics.
  5. Ghatak, M. & Guinnane, T.W., 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Papers 791, Yale - Economic Growth Center.
  6. Alessandro Fedele, 2006. "Joint Liability Lending in Microcredit Markets with Adverse Selection: a Survey," Working Papers 20060901, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica, revised Sep 2006.
  7. Jonathan Conning, 2000. "Monitoring by Peers or by Delegates? Joint Liability Loans under Moral Hazard," Department of Economics Working Papers 2000-07, Department of Economics, Williams College.
  8. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, June.
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