Joint versus Individual Liability in Microfinance – A Comparative Impact Evaluation Through Natural Experiment

Abstract

In this paper we want to do a comparative impact evaluation among the participants of two separate types of microfinance system; a microfinance system operated through individual liability microcredit contract represented by VSSU and a microfinance system under SGSY scheme of the Government of India which is operated through joint liability microcredit contract through forming Self-Help Group among the rural people mainly married women. This impact evaluation is done through Natural experiment whose time span is two years. It was observed that in the base line period the participants of VSSU are comparatively in better economic position than the participants of SGSY scheme and non participants who are treated as control group in our experiment. It is established that increment of monthly income among the member households of VSSU is more than the member households under SGSY scheme but when we consider the outcome variable as increment of monthly per capita consumption expenditure we see the reverse picture. There is no significant difference on expenditure for human development purposes is observed among the participants of two different types of microfinance system and even at the end line period both the member households still consider expenditure for health and education is luxury. When we consider intra household decision making power through constructing Women’s Empowerment Index as an outcome variable then the change is maximum among the female SHG members under SGSY scheme. We have also estimated the optimum size of micro credit which is helpful for all types of rural participants to improve their economic conditions within a short span of time.Individual Liability, Joint Liability, Income, Consumption Expenditure, Human Capital Expenses, Women’s Empowerment