Lender Classifications and Contracts: Categorization in the All-India Surveys (1951–2012) and Evidence From the Account Books of a Moneylender in Rajasthan (1982–2015)

In the binary division between institutional (formal) and non-institutional (informal) finance, the latter is commonly perceived as inferior to its institutional counterpart. In financial inclusion surveys informal finance is often treated as a residual category, discounting any serious assessment of its role and contribution. Moneylenders, in particular, have long been vilified as the undesirable and unwanted face of financial services provision. In India, there has been a succession of institutional credit providers promoted as providing an alternative. Macro-level surveys in the country, which, to their credit, include detailed consideration of non-institutional credit agencies, show that this competition has achieved only partial success. Appraising the position and practice of moneylenders led to a closer examination of the binary division and a moving beyond the usual moneylender stereotypes: at the macro-level, by reference to the classification of institutional and non-institutional credit agencies in the country, and, at the micro-level, by reference to the lending records of a village moneylender. The contracts of the moneylender show that substitutability is related to multiple features of loan provision, not simply to relative interest rate charges and the proximity of institutional providers.