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

77 Pages Posted: 12 Jan 2016

See all articles by Brian Greaney

Brian Greaney

Yale University

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: January 14, 2016

Abstract

We provide an experimental and theoretical evaluation of a cost-reducing innovation in the delivery of "self-help group" microfinance services, in which privatized agents earn payments through membership fees for providing services. Under the status quo, agents are paid by an outside donor and offer members free services. In our multi-country randomized control trial we evaluate the change in this incentive scheme on agent behavior and performance, and on overall village-level outcomes. We find that privatized agents start groups, attract members, mobilize savings, and intermediate loans at similar levels after a year but at much lower costs to the NGO. At the village level, we find higher levels of borrowing, business-related savings, and investment in business. Examining mechanisms, we find that self-help groups serve more business-oriented clientele when facilitated by agents who face strong financial incentives.

Keywords: Microfinance, Self-Help Groups, Privatized Delivery

JEL Classification: O1, O12, O16

Suggested Citation

Greaney, Brian and Kaboski, Joseph P. and Van Leemput, Eva, Can Self-Help Groups Really Be 'Self-Help'? (January 14, 2016). FRB International Finance Discussion Paper No. 1155. Available at SSRN: https://ssrn.com/abstract=2714274 or http://dx.doi.org/10.17016/IFDP.2015.1155r

Brian Greaney (Contact Author)

Yale University ( email )

New Haven, CT 06520
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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