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Agent Intermediated Lending: A New Approach to Microfinance

Author

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

Abstract

We study trader agent intermediated lending (TRAIL), a new version of microfinance where local intermediaries (lenders) are appointed as agents to recommend borrowers for individual liability loans designed to allow the financing of agricultural operations. The scheme involves no peer monitoring, group meetings or savings requirements. In a randomized evaluation conducted in West Bengal, India, TRAIL loans have higher take-up rates and higher repayment rates than traditional group-based joint liability loans. This can be explained by a model of segmented informal credit markets with adverse selection, in which repayment-based commissions deter collusion and motivate agents to recommend low-risk borrowers.

Suggested Citation

  • Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Alberto Motta & Sujata Visaria, 2013. "Agent Intermediated Lending: A New Approach to Microfinance," Monash Economics Working Papers 16-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2013-16
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2013/1613agentmaitramitramookmottavis.pdf
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    Citations

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    Cited by:

    1. Islam, Asadul & Nguyen, Chau & Smyth, Russell, 2015. "Does microfinance change informal lending in village economies? Evidence from Bangladesh," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 141-156.
    2. Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2013. "Asymmetric Information and Middleman Margins: An Experiment with West Bengal Potato Farmers," Working Papers id:5545, eSocialSciences.
    3. Mookherjee, D. & Motta, A., 2016. "A theory of interactions between MFIs and informal lenders," Journal of Development Economics, Elsevier, vol. 121(C), pages 191-200.
    4. Hameem Raees Chowdhury, 2016. "Joint-Liability in Microcredit: Evidence from Bangladesh," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 105-129, March.

    More about this item

    Keywords

    Microfinance; Agent Based Lending; Group Lending; Selection; Takeup; Repayment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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