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...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2017
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| 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 |
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okr-10986-263662021-06-08T14:42:48Z Relief from Usury : Impact of a Community-Based Microcredit Program in Rural India Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu MICROFINANCE MICROCREDIT USURY SELF-HELP GROUPS RURAL CREDIT MARKETS COMMUNITY-BASED PROGRAM EMPOWERMENT 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. 2017-04-13T20:01:12Z 2017-04-13T20:01:12Z 2017-04 Working Paper 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 English en_US Policy Research Working Paper;No. 8021 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
MICROFINANCE MICROCREDIT USURY SELF-HELP GROUPS RURAL CREDIT MARKETS COMMUNITY-BASED PROGRAM EMPOWERMENT |
| spellingShingle |
MICROFINANCE MICROCREDIT USURY SELF-HELP GROUPS RURAL CREDIT MARKETS COMMUNITY-BASED PROGRAM EMPOWERMENT Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu Relief from Usury : Impact of a Community-Based Microcredit Program in Rural India |
| geographic_facet |
South Asia India |
| relation |
Policy Research Working Paper;No. 8021 |
| 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 |
Working Paper |
| author |
Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu |
| author_facet |
Hoffmann, Vivian Rao, Vijayendra Surendra, Vaishnavi Datta, Upamanyu |
| author_sort |
Hoffmann, Vivian |
| title |
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_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_sort |
relief from usury : impact of a community-based microcredit program in rural india |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
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 |
| _version_ |
1764461804994428928 |