| Summary: | In light of the recent microfinance
crisis in South India, government-run institutions in
general, and primary agricultural credit cooperatives in
particular, may end up playing a larger role in the
provision of financial services for the poor. Using survey
data collected in 2007 from three districts in Andhra
Pradesh, this paper assesses the performance of 72 primary
agricultural credit cooperatives and finds lack of training
among the management. In addition, primary agricultural
credit cooperatives tend to be used as political instruments
and, as a result, borrowers prioritize all debt obligations
(microfinance institutions, informal lenders, etc.) before
repaying their primary agricultural credit cooperative
loans. The authors suggest that if the performance of
primary agricultural credit cooperatives does not improve, a
larger government role in the supply of credit may undermine
the culture of repayment.
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