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Interest Rate Determination in Underdeveloped Rural Areas

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  • Anthony Bottomley

Abstract

Interest rates for rural and unorganized money markets in third world societies have not been extensively studied. This paper uses a comprehensive review of agricultural credit literature to explore the relationships between the costs of extending credit, amounts loaned, and the borrower's ability to absorb further capital. High costs in administering small loans and resistance to repay suggest the convenience of linkages between lending agencies and marketing boards for the crops upon which loans are made. Village moneylenders-cum-traders may be able to operate more efficiently than public agencies, particularly when trained staff are in short supply.

Suggested Citation

  • Anthony Bottomley, 1975. "Interest Rate Determination in Underdeveloped Rural Areas," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(2), pages 279-291.
    • Handle: RePEc:oup:ajagec:v:57:y:1975:i:2:p:279-291.
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    File URL: http://hdl.handle.net/10.2307/1238503
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    Cited by:

    1. Pal, Debdatta & Laha, Arnab K., 2015. "Sectoral credit choice in rural India," Journal of choice modelling, Elsevier, vol. 14(C), pages 1-16.
    2. Jacinta C. Nwachukwu & Aqsa Aziz & Uchenna Tony‐Okeke & Simplice A. Asongu, 2018. "The determinants of interest rates in microfinance: Age, scale and organizational charter," Review of Development Economics, Wiley Blackwell, vol. 22(3), pages 135-159, August.
    3. 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.
    4. Anwar Ahmed, 1994. "The Informal Financial Sector in Bangladesh: An Appraisal of its Role in Development — A Comment," Development and Change, International Institute of Social Studies, vol. 25(3), pages 635-640, July.
    5. Craig P. Aubuchon & Rajdeep Sengupta, 2008. "The microfinance revolution: an overview," Review, Federal Reserve Bank of St. Louis, vol. 90(Jan), pages 9-30.
    6. Arndt, Channing & Schiller, Rico & Tarp, Finn, 2001. "Grain transport and rural credit in Mozambique: solving the space-time problem," Agricultural Economics, Blackwell, vol. 25(1), pages 59-70, June.
    7. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    8. Stephen W. Polk & Daniel K.N. Johnson, 2012. "A Quantile Regression Analysis of Micro-lendings Poverty Impact," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 491-502, July.
    9. Thi Thu Tra Pham & Robert Lensink, 2008. "Household Borrowing in Vietnam," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 7(3), pages 237-261, December.
    10. Giné, Xavier, 2011. "Access to capital in rural Thailand: An estimated model of formal vs. informal credit," Journal of Development Economics, Elsevier, vol. 96(1), pages 16-29, September.
    11. Machiko Nissanke & Ernest Aryeetey, 2006. "Institutional Analysis of Financial Market Fragmentation in Sub-Saharan Africa: A Risk-Cost Configuration Approach," WIDER Working Paper Series RP2006-87, World Institute for Development Economic Research (UNU-WIDER).
    12. Corsepius, Uwe, 1986. "Erfolgsbedingungen einer Zinsliberalisierung in Entwicklungsländern," Kiel Working Papers 251, Kiel Institute for the World Economy (IfW Kiel).
    13. M. Irfan & G. M. Arif & Syed Mubashir Ali & Hina Nazli, 1999. "The Structure of Informal Credit Market in Pakistan," PIDE-Working Papers 1999:168, Pakistan Institute of Development Economics.
    14. 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.
    15. Abhijit V. Banerjee & Esther Duflo, 2010. "Giving Credit Where It Is Due," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 61-80, Summer.
    16. R. Yabile Kinimo, 1985. "Recherche sur l'équilibre financier d'un programme de crédit agricole en Côte-d'Ivoire," Économie rurale, Programme National Persée, vol. 170(1), pages 36-38.
    17. Maanik Nath, 2022. "Credit risk in colonial India," Economic History Review, Economic History Society, vol. 75(2), pages 396-420, May.
    18. Braverman, Avishay & Guasch, J. Luis, 1989. "Rural credit in developing countries," Policy Research Working Paper Series 219, The World Bank.
    19. Anthony Bottomley, 1980. "Western Textbook Theory and the Developing Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 19(2), pages 143-157.
    20. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 1996. "Delayed formal credit, bribing and the informal credit market in agriculture: A theoretical analysis," Journal of Development Economics, Elsevier, vol. 51(2), pages 433-449, December.
    21. 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.
    22. Khan Jahirul Islam, 2023. "Strategic default, multiple installments, and the role of informal moneylender in microcredit contract," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(2), pages 204-220, June.

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