Can Self-Help Groups Really Be "Self-Help"?

67 Pages Posted: 20 Apr 2013 Last revised: 8 Oct 2014

See all articles by Brian Greaney

Brian Greaney

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Joseph P. Kaboski

Ohio State University (OSU) - Economics; National Bureau of Economic Research (NBER); University of Notre Dame - Department of Economics

Eva Van Leemput

Board of Governors of the Federal Reserve System

Date Written: April 2013

Abstract

This paper examines a cost-reducing innovation to the delivery of "Self-Help Group" microfinance services. These groups typically rely on outside agents to found and administer the groups although funds are raised by the group members. The innovation is to have the agents earn their payment by charging membership fees rather than following the status quo in which the agents are paid by an outside organization and instead offer free services to clients. The theory we develop shows that such membership fees could actually improve performance without sacrificing membership, simply by mitigating an adverse selection problem. Empirically, we evaluate this innovation in East Africa using a randomized control trial. We find that privatized entrepreneurs providing the self-help group services indeed outperform their NGO-compensated counterparts along several dimensions. Over time, they cost the NGO less and lead more profitable groups; also, households with access to privately-delivered groups borrow and save more, invest more in businesses, and may have higher consumption. Consistent with the theory, these privatized groups attract wealthier, more business-oriented members, although they attract no fewer members.

Suggested Citation

Greaney, Brian and Kaboski, Joseph P. and Van Leemput, Eva, Can Self-Help Groups Really Be "Self-Help"? (April 2013). NBER Working Paper No. w18970. Available at SSRN: https://ssrn.com/abstract=2254223

Brian Greaney (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Joseph P. Kaboski

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Eva Van Leemput

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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