IDEAS home Printed from https://ideas.repec.org/a/unt/jnapdj/v13y2006i1p101-127.html
   My bibliography  Save this article

Implications of informal credit for policy development in India for building inclusive financial sectors

Author

Listed:
  • Shaheel Rafique

    (Rural Development Consultant, North-Eastern Development Finance Corporation Limited, Assam, India)

Abstract

This paper examines the characteristics of the informal credit market in India by giving a historical overview of that market. It also provides a microlevel analysis of the role of informal credit, with the help of a case study of a migrant professional moneylender in an Indian village. India has a long history of professional moneylending. This paper is part of an ethnographic study which fills a research gap in the study of the informal credit market in India. This paper addresses two main issues. The first is the place of a Kabuliwallah, (professional moneylender in the village financial system) and the complementarities with other intermediaries in a village, as well as other dimensions of that business in a district. The second is the implications of the research for formal financial institutions in India. Data from the account books of a Kabuliwallah show that he was complementing the financial services provided by the formal credit institutions operating in the same geographical area. It is a unique business approach, with flexible contractual terms and conditions. The study concludes that, although the informal sector is acknowledged in policy, it is not clear as to how the formal sector should operate in the presence of the informal sector, where the activities of a professional moneylender is a good example. Keeping in view the findings presented, the paper concludes that the adoption of a decentralized process for the formulation of a financial intermediation strategy is required for building an inclusive formal financial sector.

Suggested Citation

  • Shaheel Rafique, 2006. "Implications of informal credit for policy development in India for building inclusive financial sectors," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 13(1), pages 101-127, June.
    • Handle: RePEc:unt:jnapdj:v:13:y:2006:i:1:p:101-127
    as

    Download full text from publisher

    File URL: http://www.unescap.org/sites/default/files/apdj-13-1-5-rafique.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bolnick, Bruce R., 1992. "Moneylenders and informal financial markets in Malawi," World Development, Elsevier, vol. 20(1), pages 57-68, January.
    2. Christensen, Garry, 1993. "The limits to informal financial intermediation," World Development, Elsevier, vol. 21(5), pages 721-731, May.
    3. Vijay Mahajan & Bharti Gupta Ramola, 1996. "Financial services for the rural poor and women in India: Access and sustainability," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(2), pages 211-224.
    Full references (including those not matched with items on IDEAS)

    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. Tang, Shui-Yan, 1995. "Informal credit markets and economic development in Taiwan," World Development, Elsevier, vol. 23(5), pages 845-855, May.
    2. Supriya Garikipati, 2012. "Microcredit and Women's Empowerment: Through the Lens of Time-Use Data from Rural India," Development and Change, International Institute of Social Studies, vol. 43(3), pages 719-750, May.
    3. Zhang, Yanlong, 2015. "The contingent value of social resources: Entrepreneurs' use of debt-financing sources in Western China," Journal of Business Venturing, Elsevier, vol. 30(3), pages 390-406.
    4. A. P. Pati, 2015. "Are Regulatory Microfinance Institutions of India Better Off than Non-regulatory Ones? A Comparison of Performance and Sustainability," Paradigm, , vol. 19(1), pages 21-36, June.
    5. Martin Petrick, 2005. "Empirical measurement of credit rationing in agriculture: a methodological survey," Agricultural Economics, International Association of Agricultural Economists, vol. 33(2), pages 191-203, September.
    6. 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.
    7. Aruna Balammal & R. Madhumathi & M.P. Ganesh, 2016. "Pentagon Performance Model of Indian MFIs," Paradigm, , vol. 20(1), pages 1-13, June.
    8. Hoff, Karla & Stiglitz, Joseph E., 1998. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 55(2), pages 485-518, April.
    9. Ngalawa, Harold & Viegi, Nicola, 2013. "Interaction of formal and informal financial markets in quasi-emerging market economies," Economic Modelling, Elsevier, vol. 31(C), pages 614-624.
    10. Ky, Serge Stéphane & Rugemintwari, Clovis & Sauviat, Alain, 2021. "Friends or Foes? Mobile money interaction with formal and informal finance," Telecommunications Policy, Elsevier, vol. 45(1).
    11. Deepak Varshney & Anjani Kumar & Ashok K. Mishra & Shahidur Rashid & Pramod K. Joshi, 2021. "COVID‐19, Government Transfer Payments, and Investment Decisions in Farming Business: Evidence from Northern India," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 248-269, March.
    12. Comlanvi Jude EGGOH, 2009. "Développement financier et croissance : Une synthèse des contributions pionnières," LEO Working Papers / DR LEO 442, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    13. Sebastian O Uremadu & Florence O Ariwa & Charity E Duru Uremadu, 2018. "Impact of Government Agricultural Expenditure on Agricultural Productivity in Nigeria," Current Investigations in Agriculture and Current Research, Lupine Publishers, LLC, vol. 5(3), pages 679-688, November.
    14. Demont, Timothée, 2016. "Microfinance spillovers: A model of competition in informal credit markets with an application to Indian villages," European Economic Review, Elsevier, vol. 89(C), pages 21-41.
    15. Konstantinos Loizos, 2018. "The Financial Repression†Liberalization Debate: Taking Stock, Looking For A Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 440-468, April.
    16. Wynne, Adrian T. & Lyne, Michael C., 2004. "Rural economic growth linkages and small scale poultry production: A survey of producers in KwaZulu-Natal," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 43(01), pages 1-21, March.
    17. World Bank, 2003. "Rural Financial Services : Implementing the Bank's Strategy to Reach the Rural Poor," World Bank Publications - Reports 14677, The World Bank Group.
    18. Danby, Colin, 1995. "Challenges and opportunities in El Salvador's financial sector," World Development, Elsevier, vol. 23(12), pages 2133-2152, December.
    19. Steel, William F. & Aryeetey, Ernest & Hettige, Hemamala & Nissanke, Machiko, 1997. "Informal financial markets under liberalization in four African countries," World Development, Elsevier, vol. 25(5), pages 817-830, May.
    20. Jennifer Remnant & Lena Wånggren & Sarah Huque & Katherine Sang & Limbani Kachali & James Richards, 2022. "Disability inclusive employment in urban Malawi: A multi‐perspective interview study," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(5), pages 1002-1017, July.

    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:unt:jnapdj:v:13:y:2006:i:1:p:101-127. 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: Macroeconomic Policy and Development Division, ESCAP (email available below). General contact details of provider: https://edirc.repec.org/data/escapth.html .

    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.