In this paper, the authors explore the hypothesis that traditional joint-liability microfinance programs fail to increase borrower incomes in part because they cannot screen out unproductive borrowers. In randomly selected villages in West Bengal, India, a study was implemented in which local trader-lender agents were incentivized through repayment-based commissions to select borrowers for individual liability loans. In other randomly selected villages, a group-based lending (GBL) program was organised in which individuals formed 5-member groups and received joint liability loans.