Working Paper: CEPR ID: DP14382
Authors: Dilip Mookherjee; Pushkar Maitra; Sandip Mitra; Sujata Visaria
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 Codes: H42; I38; O13; O16; O17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| TRAIL loans (H81) | average farm value-added (Q12) |
| GRAIL loans (H81) | average farm value-added (Q12) |
| TRAIL loans (H81) | unit production costs (D24) |
| GRAIL loans (H81) | unit production costs (D24) |
| unit production costs (D24) | profits (TRAIL) (L21) |
| unit production costs (D24) | profits (GRAIL) (H27) |
| agents' motivations (L85) | agricultural outcomes (Q11) |
| TRAIL scheme design (F16) | selection of productive borrowers (G21) |
| selection of productive borrowers (G21) | treatment effects on income (H31) |