TY - JOUR AU - Maitra, Pushkar AU - Mitra, Sandip AU - Mookherjee, Dilip AU - Motta, Alberto AU - Visaria, Sujata TI - Financing Smallholder Agriculture: An Experiment with Agent-Intermediated Microloans in India JF - National Bureau of Economic Research Working Paper Series VL - No. 20709 PY - 2014 Y2 - November 2014 DO - 10.3386/w20709 UR - http://www.nber.org/papers/w20709 L1 - http://www.nber.org/papers/w20709.pdf N1 - Author contact info: Pushkar Maitra Monash University Department of Economics Clayton Campus, VIC 3800 Australia E-Mail: Pushkar.Maitra@monash.edu Sandip Mitra Indian Statistical Institute Sampling and Official Statistics Unit 203 BT Road Kolkata 700108 India E-Mail: sandipisi@gmail.com Dilip Mookherjee Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4392 Fax: 617/353-4143 E-Mail: dilipm@bu.edu Alberto Motta University of New South Wales School of Economics Sydney 2052 Room 3124 Australia Tel: +61 293859771 Fax: +61293136337 E-Mail: motta@unsw.edu.au Sujata Visaria Department of Economics Lee Shau Kee Business Building and Technology Clear Water Bay, Hong Kong Hong Kong E-Mail: svisaria@ust.hk M2 - featured in NBER digest on 2015-02-26 AB - Recent evaluations of traditional microfinance loans have found no significant impacts on borrower incomes or productive activities. We examine whether this can be remedied by (a) modifying loan features to facilitate financing of working capital needs of farmers, and (b) delegating selection of borrowers for individual liability loans to local trader-lender agents incentivized by repayment-based commissions. We conduct a field experiment in West Bengal where this design (called TRAIL) was offered in randomly selected villages. In remaining villages a more traditional design (called GBL) was offered, wherein five-member groups applied for joint liability loans with terms otherwise similar to TRAIL loans. TRAIL loans increased cultivation of potatoes (the major cash crop in the region) and farm incomes by 17–21%, whereas GBL loans had insignificant and highly dispersed effects. We argue this was because TRAIL agents selected borrowers that were low-risk and highly productive, whereas the GBL scheme attracted farmers that were riskier on average and highly heterogeneous in terms of productivity. TRAIL loans also achieved higher repayment and take-up rates, and lower administrative costs. ER -