IDEAS home Printed from https://ideas.repec.org/a/bla/ajecsc/v52y1993i2p166-181.html
   My bibliography  Save this article

Usufructuary Mortgages in Rural South Asian Economies

Author

Listed:
  • M. Abdullah Shibli

Abstract

. A section of the informal credit market in an agrarian society is explored, namely the usufructuary land mortgage, a type of money‐lending contract that is common in rural economies of South Asia. In this type of transaction, the lender charges no explicit interest on the loan, but since the mortgagee is free to utilize the land for his own cultivation, net income from the land is, in effect, an implicit form of interest payment. Issues relating to the determination of the rate of interest and the oft‐found phenomenon of undervaluation of the collateral are discussed. A model is provided that shows the proper relationship between undervaluation of collaterals and the high implicit usufruct rates of interest. This relationship can only be understood by defining the opportunity cost of money in terms of purchasing new land. It is shown that, for any rate of default less than 100%, return from money lending is lower than return from land purchase under certain circumstances. It is then argued that undervaluation of collateral may be a mechanism to compensate the lender for the opportunity cost of his funds.

Suggested Citation

  • M. Abdullah Shibli, 1993. "Usufructuary Mortgages in Rural South Asian Economies," American Journal of Economics and Sociology, Wiley Blackwell, vol. 52(2), pages 166-181, April.
    • Handle: RePEc:bla:ajecsc:v:52:y:1993:i:2:p:166-181
    DOI: 10.1111/j.1536-7150.1993.tb02528.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1536-7150.1993.tb02528.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1536-7150.1993.tb02528.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Millard Long, 1968. "Interest Rates And The Structure Of Agricultural Credit Markets," Oxford Economic Papers, Oxford University Press, vol. 20(2), pages 275-288.
    2. Bhaduri, Amit, 1977. "On the Formation of Usurious Interest Rates in Backward Agriculture," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(4), pages 341-352, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ilo:ilowps:408917 is not listed on IDEAS
    2. Balkenhol, Bernd. & Schütte, Haje, 2001. "Collateral, collateral law and collateral substitutes," ILO Working Papers 994089173402676, International Labour Organization.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. S. P. Chakravarty & D. D. Thomakos & K. I. Nikolopoulos, 2016. "Growth, deregulation and rent seeking in post-war British economy," Applied Economics, Taylor & Francis Journals, vol. 48(18), pages 1719-1729, April.
    2. Basu, Santonu, 1997. "Why institutional credit agencies are reluctant to lend to the rural poor: A theoretical analysis of the Indian rural credit market," World Development, Elsevier, vol. 25(2), pages 267-280, February.
    3. Braverman, Avishay & Guasch, J. Luis, 1989. "Rural credit in developing countries," Policy Research Working Paper Series 219, The World Bank.
    4. Gupta, Manash Ranjan, 1997. "Informal sector and informal capital market in a small open less-developed economy," Journal of Development Economics, Elsevier, vol. 52(2), pages 409-428, April.
    5. Somasree Poddar & Sarbajit Chaudhuri, 2016. "Economic Reforms and Gender-Based Wage Inequality in the Presence of Factor Market Distortions," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 301-321, December.
    6. Wendy Olsen, 2006. "Pluralism, poverty and sharecropping: Cultivating open-mindedness in development studies," Journal of Development Studies, Taylor & Francis Journals, vol. 42(7), pages 1130-1157.
    7. Manojit Bhattacharjee & Meenakshi Rajeev & B.P. Vani, 2009. "Asymmetry in Information and Varying Rates of Interest," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(4), pages 339-364, October.
    8. Craig P. Aubuchon & Rajdeep Sengupta, 2008. "The microfinance revolution: an overview," Review, Federal Reserve Bank of St. Louis, vol. 90(Jan), pages 9-30.
    9. Ajit K. Ghose, 2011. "Forum 2011," Development and Change, International Institute of Social Studies, vol. 42(1), pages 284-296, January.
    10. Sarbajit Chaudhuri & Somasree Poddar Roychowdhury & Salonkara Chaudhuri, 2019. "Gender-based wage inequality and economic liberalism in the presence of endogenous supply of female labour," Indian Economic Review, Springer, vol. 54(2), pages 239-260, December.
    11. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2013. "Endogenous Capital Market Imperfection, Informal Interest Rate Determination and International Factor mobility in a General Equilibrium Model," MPRA Paper 51157, University Library of Munich, Germany.
    12. Abhijit Banerjee & Sendhil Mullainathan, 2010. "The Shape of Temptation: Implications for the Economic Lives of the Poor," NBER Working Papers 15973, National Bureau of Economic Research, Inc.
    13. Zeller, Manfred & Ahmed, Akhter U. & Babu, Suresh Chandra & Broca, Sumiter S. & Diagne, Aliou & Sharma, Manohar, 1996. "Rural finance policies for food security of the poor," FCND discussion papers 11, International Food Policy Research Institute (IFPRI).
    14. Sudipta Bhattacharyya & Nikhil Kumar Mandal, 2021. "Transition in the Rural Credit Structure of West Bengal: The Case of Murshidabad District," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 10(2), pages 210-248, August.
    15. repec:foi:wpaper:2010_14 is not listed on IDEAS
    16. Samar K. Datta & Jeffrey B. Nugent & Asher Tishler, 2004. "Contractual Mix Between Cash and Kind Wages of Casual Workers in an Agrarian Economy," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 521-540, November.
    17. Brake, John R. & Melichar, Emanuel, 1977. "Agricultural Finance and Capital Markets," A Survey of Agricultural Economics Literature, Volume 1: Traditional Fields of Agricultural Economics 1940s to 1970s,, Agricultural and Applied Economics Association.
    18. Madestam, Andreas, 2014. "Informal finance: A theory of moneylenders," Journal of Development Economics, Elsevier, vol. 107(C), pages 157-174.
    19. Rajeev, Meenakshi & Vani, B.P., 2014. "Uncertainty, risk and risk mitigation: Field experiences from farm sector in Karnataka," Working Papers 320, Institute for Social and Economic Change, Bangalore.
    20. Platteau, J.-Ph. & Abraham, A., 1985. "An Inquiry Into Quasi-Credit Systems In Traditional Fishermen Communities: The Role Of Reciprocal Credit And Mixed Contracts," Discussion Papers 272827, University of Warwick - Department of Economics.
    21. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ajecsc:v:52:y:1993:i:2:p:166-181. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0002-9246 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.