The Equity Impacts of Targeted Smallholder Agricultural Credit

44 Pages Posted: 3 Mar 2017

See all articles by Pushkar Maitra

Pushkar Maitra

Monash University - Department of Economics

Sandip Mitra

Indian Statistical Institute, Kolkata

Dilip Mookherjee

Boston University - Department of Economics

Sujata Visaria

Hong Kong University of Science & Technology (HKUST)

Date Written: March 3, 2017

Abstract

We examine the distributive impacts of two alternative approaches to deliver agricultural credit to smallholders: TRAIL (or trader-agent intermediated lending), where local traders recommend village residents for individual liability micro-leans, and GBL (or group-based lending), where households self-select into groups and receive joint liability loans. We use data from a field experiment in eastern India to estimate how the effects of these schemes differ by economic (proxied by landownership) and social (proxied by caste and religion) status of households. Our method accounts for endogenous selection frequencies in each group and the treatment effects on farm income conditional on selection, to estimate the impacts of each scheme on Atkinson-based measures of welfare and inequality. We find that TRAIL loans increased farm incomes for all land groups, but particularly for landless households. As a result, across land groups, the TRAIL scheme generated significantly greater welfare than the GBL scheme, irrespective of inequality aversion. The GBL scheme generated larger effects among the socially disadvantaged minority groups. This suggests that the efficiency and equity implications of the two schemes might be different depending on how we partition households.

Keywords: agricultural finance, agent based lending, group lending, distributive impacts

JEL Classification: D82, O16

Suggested Citation

Maitra, Pushkar and Mitra, Sandip and Mookherjee, Dilip and Visaria, Sujata, The Equity Impacts of Targeted Smallholder Agricultural Credit (March 3, 2017). HKUST IEMS Working Paper No. 2017-41. Available at SSRN: https://ssrn.com/abstract=2926770 or http://dx.doi.org/10.2139/ssrn.2926770

Pushkar Maitra (Contact Author)

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

Sandip Mitra

Indian Statistical Institute, Kolkata ( email )

203 B.T. Road
Kolkata, West Bengal 700108
India

Dilip Mookherjee

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4392 (Phone)
617-353-4143 (Fax)

Sujata Visaria

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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