Journal Article

Can Self-Help Groups Really Be “Self-Help”?

Brian P. Greaney, Joseph P. Kaboski and Eva Van Leemput

in The Review of Economic Studies

Volume 83, issue 4, pages 1614-1644
Published in print October 2016 | ISSN: 0034-6527
Published online January 2016 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1093/restud/rdw004

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We provide an experimental and theoretical evaluation of a cost-reducing innovation in the delivery of “self-help group” microfinance services, in which privatized agents earn payments through membership fees for providing services. Under the status quo, agents are paid by an outside donor and offer members free services. In our multi-country randomized control trial, we evaluate the change in this incentive scheme on agent behaviour and performance, and on overall village-level outcomes. We find that privatized agents start groups, attract members, mobilize savings, and intermediate loans at similar levels after a year but at much lower costs to the NGO. At the village level, we find higher levels of borrowing, business-related savings, and investment in business. Examining mechanisms, we find that self-help groups serve more business-oriented clientele when facilitated by agents who face strong financial incentives.

Keywords: Microfinance; Self-help groups; Privatized delivery; Cost sharing; O1; O12; O16

Journal Article.  17605 words.  Illustrated.

Subjects: Economic Development