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Relief from usury: Impact of a self-help group lending program in rural India

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  • Hoffmann, Vivian
  • Rao, Vijayendra
  • Surendra, Vaishnavi
  • Datta, Upamanyu

Abstract

Provision of low-cost credit to the poor through self-help groups (SHGs) has been embraced as a key poverty-reduction strategy in developing countries, but evidence on the impact of this approach is thin. Using a randomized program rollout over 180 panchayats, we evaluate the impact of a government-led SHG initiative in the Indian state of Bihar. Two years after the start of the program, we find a dramatic increase in SHG membership, borrowing from SHGs, and a corresponding decline in the use of informal credit. Fewer informal lenders are operating in treatment villages, and those who do charge lower interest rates. While these credit market impacts could lead to substantial improvements in economic well-being over time, the short-run impact of the program on such outcomes is modest.

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  • Hoffmann, Vivian & Rao, Vijayendra & Surendra, Vaishnavi & Datta, Upamanyu, 2021. "Relief from usury: Impact of a self-help group lending program in rural India," Journal of Development Economics, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:deveco:v:148:y:2021:i:c:s0304387820301425
    DOI: 10.1016/j.jdeveco.2020.102567
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    7. Subash Surendran Padmaja & Aditya Korekallu Srinivasa & Pooja Trivedi & Kondapi Srinivas, 2023. "Women self‐help groups and intra‐household decision‐making in agriculture," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(3), pages 857-876, September.
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