Dilip Mookherjee on decentralized targeting of agricultural credit in West Bengal: private vs. political intermediaries

Dilip Mookherjee will present at the WIDER Seminar Series on 27 February 2019. 

Abstract – Decentralized targeting of agricultural credit in West Bengal: private vs. political intermediaries

This paper reports results from a field experiment conducted in rural West Bengal, India which compares alternative ways to delegate selection of beneficiaries for an agricultural credit program to members of the local community. Both appoint a local agent who recommends borrowers to be offered an individual liability loan, and is incentivized using commissions that depend on repayments. In one treatment (TRAIL) the agent is chosen randomly from local traders; in the other (GRAIL) the agent is appointed by the local government.

We find that TRAIL performed significantly better than GRAIL in terms of impacts on production of high value cash crops and farm incomes, achieved higher take-up and a similar repayment rate of 95%. Part of the superior performance of TRAIL was associated with selection of more productive farmers by the TRAIL agent. However most of the difference was accounted by different patterns of engagement of the agent with treated farmers which affected their productivity (while controlling for ability). The TRAIL agent tended to interact more intensively with more able farmers, helping them to increase their productivity. The GRAIL agent interacted more intensively with the less able farmers, mainly to lower their default risk which ended up lowering their productivity. The differences between TRAIL and GRAIL can be explained by the contrast between the private incentives of the former and the political incentives of the latter.

About the speaker

Dilip Mookherjee is Professor of Economics and Director, Institute for Economic Development at Boston University. He received his PhD from the London School of Economics in 1982, and has previously taught at Stanford University and the Indian Statistical Institute. His research interests include development economics, contract and organization theory. Most of his work on development economics focuses on Bangladesh, India, Nepal and China, on topics such as agricultural development; financial inclusion, supply chain intermediaries, entrepreneurship, and governance. He serves on the Council of the Econometric Society and the Asian Regional Standing Committee, on research management committees of the International Growth Centre and Economic Development and Institutions network. He is co-editor of Theoretical Economics and the blog Ideas For India, and an associate editor at the Journal of Development Economics.

WIDER Seminar Series

The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, policy makers, and others interested in development topics. Click here to learn more.

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For more information email richardson@wider.unu.edu