Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries

69 Pages Posted: 5 Feb 2020

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)

Multiple version iconThere are 3 versions of this paper

Date Written: January 1, 2020

Abstract

We compare two different methods of appointing a local commission agent as an intermediary for a credit program. In the Trader-Agent Intermediated Lending Scheme (TRAIL), the agent was a randomly selected established private trader, while in the Gram Panchayat-Agent Intermediated-Lending Scheme (GRAIL), he was randomly chosen from nominations by the elected village council. More TRAIL loans were taken up, but repayment rates were similar, and TRAIL loans had larger average impacts on borrowers’ farm incomes. The majority of this difference in impacts is due to differences in treatment effects conditional on farmer productivity, rather than differences in borrower selection patterns. The findings can be explained by a model where TRAIL agents increased their middleman profits by helping more able treated borrowers reduce their unit costs and increase output. In contrast, for political reasons GRAIL agents monitored the less able treated borrowers and reduced their default risk.

Keywords: Targeting, Intermediation, Decentralization, Community Driven Development, Agricultural Credit, Networks

JEL Classification: H42, I38, O13, O16, O17

Suggested Citation

Maitra, Pushkar and Mitra, Sandip and Mookherjee, Dilip and Visaria, Sujata, Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries (January 1, 2020). HKUST IEMS Working Paper No. 2020-70 , Available at SSRN: https://ssrn.com/abstract=3531549 or http://dx.doi.org/10.2139/ssrn.3531549

Pushkar Maitra (Contact Author)

Monash University - Department of Economics ( email )

Wellington Road
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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 )

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Kowloon, 999999
Hong Kong

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