Relief from usury: Impact of a community-based microcredit program in rural India
The impact of micro-credit interventions on existing credit markets is theoretically ambiguous. Previous empirical work suggests the entry of a joint-liability lender may lead to a positive impact on the informal lending rate. This paper presents the first randomized controlled trial–based evidence...
| Main Authors: | , , , |
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| Format: | Artículo preliminar |
| Language: | Inglés |
| Published: |
World Bank
2017
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10568/148210 |
| _version_ | 1855538837042757632 |
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| author | Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu |
| author_browse | Datta, Upamanyu Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi |
| author_facet | Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu |
| author_sort | Hoffmann, Vivian |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | The impact of micro-credit interventions on existing credit markets is theoretically ambiguous. Previous empirical work suggests the entry of a joint-liability lender may lead to a positive impact on the informal lending rate. This paper presents the first randomized controlled trial–based evidence on this question. Households in rural Bihar, India, were offered low-cost credit through a government-led self-help group program, the rollout of which was randomized at the panchayat level. The intervention led to a dramatic 14.5 percent decline in the use of informal credit, as households substituted to lower-cost self-help group loans. Due to the program, the average rate paid on recent loans fell from 69 to 58 percent per year overall. Rates on informal loans also declined slightly. Among landless households, informal lending rates fell from 65.5 to 63.2 percent, decreasing by 40 percent the gap in rates paid by landless versus landowning households. Two years after the initiation of the program, significant positive impacts on asset ownership among landless households were apparent. Impacts on various indicators of women’s empowerment were mixed, and showed no clear direction when aggregated, nor was there any impact on consumption expenditures. |
| format | Artículo preliminar |
| id | CGSpace148210 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2017 |
| publishDateRange | 2017 |
| publishDateSort | 2017 |
| publisher | World Bank |
| publisherStr | World Bank |
| record_format | dspace |
| spelling | CGSpace1482102025-12-08T10:11:39Z Relief from usury: Impact of a community-based microcredit program in rural India Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu rural communities interest rates microcredit economic development rural finance self-help groups poverty credit monetary policies The impact of micro-credit interventions on existing credit markets is theoretically ambiguous. Previous empirical work suggests the entry of a joint-liability lender may lead to a positive impact on the informal lending rate. This paper presents the first randomized controlled trial–based evidence on this question. Households in rural Bihar, India, were offered low-cost credit through a government-led self-help group program, the rollout of which was randomized at the panchayat level. The intervention led to a dramatic 14.5 percent decline in the use of informal credit, as households substituted to lower-cost self-help group loans. Due to the program, the average rate paid on recent loans fell from 69 to 58 percent per year overall. Rates on informal loans also declined slightly. Among landless households, informal lending rates fell from 65.5 to 63.2 percent, decreasing by 40 percent the gap in rates paid by landless versus landowning households. Two years after the initiation of the program, significant positive impacts on asset ownership among landless households were apparent. Impacts on various indicators of women’s empowerment were mixed, and showed no clear direction when aggregated, nor was there any impact on consumption expenditures. 2017 2024-06-21T09:24:03Z 2024-06-21T09:24:03Z Working Paper https://hdl.handle.net/10568/148210 en World Bank Hoffmann, Vivian; Rao, Vijayendra; Surendra, Vaishnavi; and Datta, Upamanyu. 2017. Relief from usury: Impact of a community-based microcredit program in rural India. Policy Research Working Paper 8021. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/619581491240135589/pdf/WPS8021.pdf |
| spellingShingle | rural communities interest rates microcredit economic development rural finance self-help groups poverty credit monetary policies Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu Relief from usury: Impact of a community-based microcredit program in rural India |
| title | Relief from usury: Impact of a community-based microcredit program in rural India |
| title_full | Relief from usury: Impact of a community-based microcredit program in rural India |
| title_fullStr | Relief from usury: Impact of a community-based microcredit program in rural India |
| title_full_unstemmed | Relief from usury: Impact of a community-based microcredit program in rural India |
| title_short | Relief from usury: Impact of a community-based microcredit program in rural India |
| title_sort | relief from usury impact of a community based microcredit program in rural india |
| topic | rural communities interest rates microcredit economic development rural finance self-help groups poverty credit monetary policies |
| url | https://hdl.handle.net/10568/148210 |
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