Board of Governors of the Federal Reserve System

January 2016 (Revised January 2016)

Can Self-Help Groups Really Be 'Self-Help'?

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

Abstract:

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 behavior 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.

Revised Paper DOI: http://dx.doi.org/10.17016/IFDP.2015.1155r

Original Version (PDF)

Original Paper DOI: http://dx.doi.org/10.17016/IFDP.2015.1155

Keywords: Microfinance, self-help groups, privatized delivery

DOI: http://dx.doi.org/10.17016/IFDP.2015.1155r1

PDF: Full Paper