Agent Intermediated Microcredit: Borrower Selection & Impacts on Agricultural Borrowers

Research Seminars
Academic Areas Economics and Public Policy
Sujata Visaria, Assistant Professor, Department of Economics, Hong Kong University of Science & Technology
July 5, 2013 | 3:00 PM - 4:30 PM | Friday
AC 2 Mini Lecture Theatre (MLT), hyderabad, India
For ISB Community


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.

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