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Asymmetry in Information and Varying Rates of Interest

Author

Listed:
  • Manojit Bhattacharjee
  • Meenakshi Rajeev
  • B.P. Vani

    (The Institute for Social and Economic Change, Bangalore–560072; E-mails: meenakshi@isec.ac.in, manojit850@gmail.com)

Abstract

This paper examines the nature and extent of household indebtedness in West Bengal, focusing on households’ access to credit and factors influencing interest rate determination in informal credit markets. As far as accessibility is concerned, it finds that the urban poor face greater problems than their rural counterparts in accessing formal and informal sources of credit. Using an ordered logit model it shows how information and monitoring opportunities play a critical role in arriving at a rate of interest for the lender.

Suggested Citation

  • 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.
    • Handle: RePEc:sae:mareco:v:3:y:2009:i:4:p:339-364
    DOI: 10.1177/097380100900300402
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    References listed on IDEAS

    as
    1. Sudipta Bhattacharyya, 2005. "Interest rates, collateral and (de-)interlinkage: a micro-study of rural credit in West Bengal," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(3), pages 439-462, May.
    2. Basu, Kaushik & Bell, Clive, 1991. "Fragmented duopoly : Theory and applications to backward agriculture," Journal of Development Economics, Elsevier, vol. 36(2), pages 145-165, October.
    3. 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.
    4. Narayanamoorthy, A. & Kalamkar, S.S., 2005. "Indebtedness of Farmer Households Across States: Recent Trends, Status and Determinants," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 60(3), pages 1-13.
    5. Priya Basu, 2006. "Improving Access to Finance for India's Rural Poor," World Bank Publications - Books, The World Bank Group, number 6927.
    6. Basu, Kaushik, 1983. "The Emergence of Isolation and Interlinkage in Rural Markets," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 262-280, July.
    7. 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.
    8. Basu, Kaushik, 1987. "Disneyland monopoly, interlinkage and usurious interest rates," Journal of Public Economics, Elsevier, vol. 34(1), pages 1-17, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Rajeev, Meenakshi & Vani, B P & Bhattacharjee, Manojit, 2012. "Nature and Dimensions of Farmers’ Indebtedness in India," MPRA Paper 42358, University Library of Munich, Germany.
    2. Manojit Bhattacharjee & Meenakshi Rajeev, 2014. "Accessibility to Credit and its Determinants: A State-level Analysis of Cultivator Households in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 8(3), pages 285-300, August.
    3. Rajeev, Meenakshi., 2015. "Financial inclusion and disparity : a case of India," ILO Working Papers 994883243402676, International Labour Organization.
    4. Manojit Bhattacharjee & Meenakshi Rajeev, 2013. "Credit Exclusion of the Poor: A Study of Cultivator Households in India," ICDD Working Papers 8, University of Kassel, Fachbereich Gesellschaftswissenschaften (Social Sciences), Internatioanl Center for Development and Decent Work (ICDD).
    5. repec:ilo:ilowps:488324 is not listed on IDEAS
    6. Kundu, Amit & DAS, SANGITA, 2021. "Accessibility of Institutional Credit among the Agricultural Labour Households and its Impact on their Livelihood," MPRA Paper 112791, University Library of Munich, Germany, revised 03 Mar 2022.

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    More about this item

    Keywords

    Indebtedness; Credit Market; Formal Lending Agency; Informal Lending Agency; Rate of Interest; Moneylender; JEL Classification: O12; JEL Classification: O16; JEL Classification: O17;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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