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Decentralized Targeting of Agricultural Credit Programs: Private Versus Political Intermediaries

Author

Listed:
  • Pushkar Maitra
  • Sandip Mitra
  • Dilip Mookherjee
  • Sujata Visaria

Abstract

We conduct a field experiment in India comparing two ways of delegating selection of microcredit clients among smallholder farmers to local intermediaries: a private trader (TRAIL), versus a local–government appointee (GRAIL). Selected beneficiaries in both schemes were equally likely to take up and repay loans, and experienced similar increases in borrowing and farm output. However farm profits increased and unit costs of production decreased significantly only in TRAIL. While there is some evidence of superior selection by ability and landholding in TRAIL, the results are mainly driven by greater reduction of unit production costs for TRAIL treated farmers than GRAIL treated farmers of similar ability or landholding. We develop and test a model where the TRAIL agents’ role as middlemen in the agricultural supply chain enabled and motivated them to offer treated farmers business advice, which helped them lower unit costs.

Suggested Citation

  • Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2024. "Decentralized Targeting of Agricultural Credit Programs: Private Versus Political Intermediaries," Journal of the European Economic Association, European Economic Association, vol. 22(6), pages 2648-2699.
    • Handle: RePEc:oup:jeurec:v:22:y:2024:i:6:p:2648-2699.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvae018
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    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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