Decentralized Targeting of Agricultural Credit Programs: Private Versus Political Intermediaries

46 Pages Posted: 11 Feb 2020

See all articles by Pushkar Maitra

Pushkar Maitra

Monash University - Department of Economics

Sandip Mitra

Indian Statistical Institute, New Delhi

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: February 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.

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Suggested Citation

Maitra, Pushkar and Mitra, Sandip and Mookherjee, Dilip and Visaria, Sujata, Decentralized Targeting of Agricultural Credit Programs: Private Versus Political Intermediaries (February 2020). NBER Working Paper No. w26730, Available at SSRN: https://ssrn.com/abstract=3535320

Pushkar Maitra (Contact Author)

Monash University - Department of Economics ( email )

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Sandip Mitra

Indian Statistical Institute, New Delhi ( email )

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Dilip Mookherjee

Boston University - Department of Economics ( email )

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Sujata Visaria

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

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Hong Kong

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