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Access to Finance and Its Association with Development in Rural India

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  • Das, Khanindra Ch.

Abstract

Financial development has been correlated with better development outcomes. Even so, the access dimension of financial development has often been overlooked. In this context, the paper throws initial light on the nuances of horizontal inequality in the access to finance from institutional sources and development outcomes such as poverty, educational attainment and standard of living in rural area for Indian states. It is seen that the percentage of rural households getting access to finance from institutional agencies has remained considerably low and there is significant variation across states. More importantly, there is significant amount of horizontal inequality in the access to finance from institutional sources. Interestingly, better access to finance is found to be associated with better development outcomes. The most important finding of the paper is that lower (higher) inequality in the access to finance from institutional sources is associated with better (worse) development outcomes.

Suggested Citation

  • Das, Khanindra Ch., 2009. "Access to Finance and Its Association with Development in Rural India," MPRA Paper 20033, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20033
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    References listed on IDEAS

    as
    1. Bhandari, Amit Kumar, 2009. "Access to Banking Services and Poverty Reduction: A State-wise Assessment in India," IZA Discussion Papers 4132, Institute of Labor Economics (IZA).
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    5. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
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    7. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," The World Bank Economic Review, World Bank, vol. 19(2), pages 263-286.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    access to finance; development; horizontal inequality; rural household;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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