Socially Disadvantaged Groups and Microfinance in India

28 Pages Posted: 27 Nov 2015

See all articles by Jean-Marie Baland

Jean-Marie Baland

Facult├ęs Universitaires Notre-Dame de la Paix (FUNDP)

Rohini Somanathan

University of Delhi - Department of Economics

Lore Vandewalle

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; University of Oslo

Date Written: November 2015

Abstract

In this paper we provide an empirical analysis of the social composition and performance of microfinance groups, known as Self-Help Groups, based on an original census we carried out in a poor area of Northern India. We examine whether traditionally disadvantaged villagers, such as scheduled tribes and landless farmers, are as likely to draw benefits from these SHGs as other villagers. While the initial participation in the groups closely reflects the social composition of the village, we find evidence of a selective attrition process against scheduled tribes who are less likely to remain members. Their expected access to bank loans - which is the primary aim of those groups - is also much more limited. By contrast, landless farmers are over-represented in these groups. As a result, even though they are more likely to leave the groups, they tend to benefit disproportionately from the SHGs. In expected terms, they receive more than two times the amount of bank loans given to other farmers. Overall, the program has therefore non trivial but important distributional implications.

Keywords: india, microfinance, selective attrition, Self-Help Groups

JEL Classification: G21, O1

Suggested Citation

Baland, Jean-Marie and Somanathan, Rohini and Vandewalle, Lore, Socially Disadvantaged Groups and Microfinance in India (November 2015). CEPR Discussion Paper No. DP10944, Available at SSRN: https://ssrn.com/abstract=2696135

Jean-Marie Baland (Contact Author)

Facult├ęs Universitaires Notre-Dame de la Paix (FUNDP) ( email )

8 Rempart de la Vierge
B-5000 Namur
Belgium

Rohini Somanathan

University of Delhi - Department of Economics ( email )

Delhi-110007
India

Lore Vandewalle

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

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