Group lending or individual lending? Evidence from a randomised field experiment in Mongolia

Although microfinance institutions across the world are moving from group lending towards individual lending, this strategic shift is not substantiated by sufficient empirical evidence on the impact of both types of lending on borrowers. We present such evidence from a randomised field experiment in rural Mongolia. We find a positive impact of access to group loans on food consumption and entrepreneurship. Among households that were offered group loans the likelihood of owning an enterprise increases by 10 per cent more than in control villages. Enterprise profits increase over time as well, particularly for the less-educated. For individual lending on the other hand, we detect no significant increase in consumption or enterprise ownership. These results are in line with theories that stress the disciplining effect of group lending: joint liability may deter borrowers from using loans for non-investment purposes. Our results on informal transfers are consistent with this hypothesis. Borrowers in group-lending villages are less likely to make informal transfers to families and friends while borrowers in individual-lending villages are more likely to do so. We find no significant difference in repayment rates between the two lending programmes, neither of which entailed weekly repayment meetings.Microcredit; group lending; poverty; access to finance; randomised field experiment

Microcredit Contracts, Risk Diversification and Loan Take-Up

We study theoretically and empirically the demand for microcredit under different liability arrangements and risk environments. A theoretical model shows that the demand for joint-liability loans can exceed that for individual-liability loans when risk-averse borrowers value their long-term relationship with the lender. Joint liability then offers a way to diversify risk and reduce the chance of losing access to future loans. We also show that the demand for loans depends negatively on the riskiness of projects. Using data from a randomised controlled trial in Mongolia we find that these model predictions hold true empirically. In particular, we use innovative data on subjective risk perceptions to show that expected project risk negatively affects the demand for loans. In line with an insurance role of joint-liability contracts, this effect is muted in villages where joint-liability loans are available

Holy Cows or Cash Cows? The Economic Return to Livestock in Rural India

This paper revisits recent claims that poor households owning cattle in developing countries settings do not behave according to the tenets of capitalism. We point out that the discussion was based on evidence from one single year only, while cows and buffalos are assets whose return varies through time. In drought years, when fodder is scarce and more expensive, milk production is lower and profits are low. In nondrought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. Therefore, the return on cows and buffalos, like that of many stocks traded on Wall Street, is positive in some years and negative in others. The fact that in a given year the observed return on a risky asset is negative could certainly not be used as a contradiction of one of the basic tenets of capitalism. We report evidence from 3 years of data on the return on cows and buffalos in the district of Anantapur and show that in one of the 3 years returns are very high, while in drought years they are predominantly negative

Mothers’ Social Networks and Socioeconomic Gradients of Isolation

Social connections are fundamental to human wellbeing. This paper examines the social networks of young married women in rural Odisha, India.. This is a group, for whom highly-gendered norms around marriage, mobility, and work are likely to shape opportunities to form and maintain meaningful ties with other women. We track the social networks of 2,170 mothers over four years, and find a high degree of isolation. Wealthier women and women more-advantaged castes have smaller social networks than their less-advantaged peers. These gradients are primarily driven by the fact that more-advantaged women are less likely to know other women within their same socioeconomic group than are less-advantaged women are. There exists strong homophily by socioeconomic status that is symmetric across socioeconomic groups. Mediation analysis shows that SES differences in social isolation are strongly associated to caste, ownership of toilets and distance. Further research should investigate the formation and role of female networks

Group lending or individual lending? Evidence from a randomised field experiment in Mongolia

Although microfinance institutions across the world are moving from group lending towards individual lending, this strategic shift is not substantiated by sufficient empirical evidence on the impact of both types of lending on borrowers. We present such evidence from a randomised field experiment in rural Mongolia. We find a positive impact of access to group loans on food consumption and entrepreneurship. Among households that were offered group loans the likelihood of owning an enterprise increases by 10 per cent more than in control villages. Enterprise profits increase over time as well, particularly for the less-educated. For individual lending on the other hand, we detect no significant increase in consumption or enterprise ownership. These results are in line with theories that stress the disciplining effect of group lending: joint liability may deter borrowers from using loans for non-investment purposes. Our results on informal transfers are consistent with this hypothesis. Borrowers in group-lending villages are less likely to make informal transfers to families and friends while borrowers in individual-lending villages are more likely to do so. We find no significant difference in repayment rates between the two lending programmes, neither of which entailed weekly repayment meetings

Effects of a scalable home-visiting intervention on child development in slums of urban India: evidence from a randomised controlled trial

Background: An estimated 63.4 million Indian children under 5 years are at risk of poor development. Home visits that use a structured curriculum to help caregivers enhance the quality of the home stimulation environment improve developmental outcomes. However, achieving effectiveness in poor urban contexts through scalable models remains challenging. Methods: Using a cluster randomised controlled trial, we evaluated a psychosocial stimulation intervention, comprising weekly home visits for 18 months, in urban slums of Cuttack, Odisha, India. The intervention is complementary to existing early childhood services in India and was run and managed through a local branch of a national NGO. The study ran from August 2013 to July 2015. We enrolled 421 children aged 10–20 months from 54 slums. Slums were randomised to intervention or control. Primary outcomes were children's cognitive, receptive language, expressive language and fine motor development assessed using the Bayley‐III. Prespecified intent‐to‐treat analysis investigated impacts and heterogeneity by gender. Trial registrations: ISRCTN89476603, AEARCTR‐0000169. Results: Endline data for 378 (89.8%) children were analysed. Attrition was balanced between groups. We found improvements of 0.349 of a standard deviation (SD; p = .005, stepdown p = .017) to cognition while impacts on receptive language, expressive language and fine motor development were, respectively, 0.224 SD (p = .099, stepdown p = .184), 0.192 SD (p = .085, stepdown p = .184) and 0.111 (p = .385, stepdown p = .385). A child development factor improved by 0.301 SD (p = .032). Benefits were larger for boys. The quality of the home stimulation environment also improved. Conclusions: This study shows that a potentially scalable home‐visiting intervention is effective in poor urban areas

Group Sessions or Home Visits for Early Childhood Development in India: A Cluster RCT

OBJECTIVES: Poor early childhood development in low- and middle-income countries is a major public health problem. Efficacy trials have shown the potential of early childhood development interventions but scaling up is costly and challenging. Guidance on effective interventions' delivery is needed. In an open-label cluster-randomized control trial, we compared the effectiveness of weekly home visits and weekly mother-child group sessions. Both included nutritional education, whose effectiveness was tested separately. METHODS: In Odisha, India, 192 villages were randomly assigned to control, nutritional education, nutritional education and home visiting, or nutritional education and group sessions. Mothers with children aged 7 to 16 months were enrolled (n = 1449). Trained local women ran the two-year interventions, which comprised demonstrations and interactions and targeted improved play and nutrition. Primary outcomes, measured at baseline, midline (12 months), and endline (24 months), were child cognition, language, motor development, growth and morbidity. RESULTS: Home visiting and group sessions had similar positive average (intention-to-treat) impacts on cognition (home visiting: 0.324 SD, 95% confidence interval [CI]: 0.152 to 0.496, P = .001; group sessions: 0.281 SD, 95% CI: 0.100 to 0.463, P = .007) and language (home visiting: 0.239 SD, 95% CI: 0.072 to 0.407, P = .009; group sessions: 0.302 SD, 95% CI: 0.136 to 0.468, P = .001). Most benefits occurred in the first year. Nutrition-education had no benefit. There were no consistent effects on any other primary outcomes. CONCLUSIONS: Group sessions cost $38 per child per year and were as effective on average as home visiting, which cost$135, implying an increase by a factor of 3.5 in the returns to investment with group sessions, offering a more scalable model. Impacts materialize in the first year, having important design implications