Informal Credit Markets in Asian Developing Countries

Informal credit markets form an important part of the financial systems of Asian developing countries, constituting as much as half of rural credit and a significant part of urban credit in many of them. They play a particularly important role in channeling credit to small and poor borrowers in both urban and rural areas, serving to underpin the credit requirements of a large part of total employment, income and output. Moreover, they constitute a major source of working capital for enterprises of all sizes and serve generally to ameliorate inefficiencies in the allocation of credit from the formal sector. However, information about informal credit markets is fragmentary. Much of it is impressionistic, or based on stereotypes. Despite some excellent microeconomic studies, they do not provide us with an understanding at the macroeconomic level of the existing or potential role of informal credit markets in financial and overall development…