HomeAsia-Pacific Social Science Reviewvol. 11 no. 1 (2011)

Joint versus Individual Liability in Microfinance — a Comparative Impact Evaluation through a Natural Experiment

Amit Kundu



In this paper we aim to do a comparative impact evaluation of participants of two separate types of microfinance system: a microfinance system operated through individual liability microcredit contract represented by Vivekananda Seva Kendra-O-Sishu Uddyan; and a microfinance system under Swarnajayanti Grameen Swarojgari Yojana scheme of the Government of India which is operated through a joint liability microcredit contract under which was established the Self-Help Group among rural people, mainly married women. This impact evaluation was done through a natural experiment over a two-year period. It was observed that in the baseline period the participants of VSSU were comparatively better off economically than the participants of the SGSY scheme and non participants who were treated as the control group in our experiment. In the study, it was established that the increment of monthly income of member households of VSSU was more than that of member households under SGSY scheme; but when we considered the outcome variable as the increment of monthly per capita consumption expenditure, we saw the reverse to be true. No significant difference on expenditure for human development purposes was observed among participants of the two different types of microfinance system, and even at the end-line period both member households still considered expenditures for health and education a luxury. When we considered intrahousehold decision-making power through a Women’s Empowerment Index as an outcome variable, there was maximum change among female SHG members under the SGSY scheme. We 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.