Bane of rural credit market: presence of money lender or absence of structural synchronicity

Working out ways to lift people out of poverty is a key objective within development economics. One policy area that has attracted a lot of theoretical attention is credit, access to which is often seen as critical in enabling people to transform their production and employment activities and to exit poverty. Of the total households in rural India, approximately 41 percent of the households are without any cultivable land. Along with growing landlessness there has been an increase in no occupation among the rural households. Since indebtedness is directly related to the expenditure level of the rural households, the growing landlessness and no occupation among rural households has led to overall decrease in rural indebtedness in 1999-2000. The money lenders have again emerged as the major sources of rural debt compared to the period during 1983-1993 when banks had a major share of debt for the rural households. The real issue before rural credit market is not the presence or absence of money lenders but the synchronicity between rural capital structure and the productive activities in these areas which has been the missing link.