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 t...
| Main Authors: | , , , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/619581491240135589/Relief-from-usury-impact-of-a-community-based-microcredit-program-in-rural-India http://hdl.handle.net/10986/26366 |
| Summary: | 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. |
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