Performance Analysis of Microfinance Through Individual Liability Credit Contract System Operated By Primary Agricultural Credit Society

The basic objective of this paper is to investigate the effectiveness of micro-credit in the form of agricultural credit in improving the economic conditions of individuals under individual liability loan contract system operating through Primary Agricultural Credit Society in two blocks of Hooghly district of West Bengal. With the help of two period longitudinal data, the first-differenced method has been applied to minimise the possibility of selection bias as well as the presence of unobserved heterogeneity of data in this impact evaluation. It is observed that majority of the sample households belonging to treatment group are marginal farmers both in t^th as well as in the (t+1)^th period. Results reveal that micro-credit through individual liability loan contract system operated by PACS is ineffective in improving the living conditions of the participating farmers even though rate of interest charged by PACS for crop loan has reduced and the repayment rate is high because they repay the loan at the cost of consumption. The inability of the sample respondents to increase their land size during the concerned time period and high cost of cultivation is responsible for such a result. The positive aspect is that the individuals under individual liability credit contract system do not have to face peer pressure and group dynamics.