Determinants Influencing a Rural Household's Preference to Join Individual Liability or Joint Liability Micro Credit Contract Operated by Primary Aagricultural Credit Society

This paper identifies factors which influence a rural household to link directly or jointly through self-help groups (SHGs) with the Primary Agricultural Credit Society (PACS).

Small and marginal farmers can access credit either through individual liability credit contracts or through joint liability contracts under the PACS. The study analyzes data from Hooghly district of West Bengal, India to reveal that:

• Rural households owning larger tracts of land are more likely to take direct membership of PACS and access credit through individual liability;
• Ownership of land and its size are not considered during the time of forming SHGs under PACS, indicating that risky borrowers are not avoided during group formation;
• Higher income from other sources decreases the possibility of a rural household taking direct membership of PACS;
• Higher education levels and age discourage rural households from joining SHGs.

Finally, farmers are motivated to join SHGs because it gives them the opportunity to save in small amounts and borrow at low interest rates without collateral.