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Sectoral Choice of Credit in Rural India

Author

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  • Pal, Debdatta
  • Laha, A. K.

Abstract

This article examines, what makes rural household a preferred choice for formal lenders? It develops sample selected ordered probit model to address this question. While, the selection equation models the determinants of access to credit, an ordered probit model is used to determine the factors affecting the choice of credit sources in a hierarchical order. Using household data from six Indian states this study finds corroborative evidence that relatively resource rich households even while staying at distant location enjoy greater access to formal creditors. It also identifies a new factor i.e., interlinked credit as a significant variable influencing the access to formal credit.

Suggested Citation

  • Pal, Debdatta & Laha, A. K., 2013. "Sectoral Choice of Credit in Rural India," IIMA Working Papers WP2013-03-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:11970
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    Cited by:

    1. Ankur TUTLANI, 2016. "Borrowers’ Participation in Group Borrowing," Turkish Economic Review, KSP Journals, vol. 3(1), pages 170-187, March.
    2. Ankur TUTLANI, 2016. "Effective Cost of Borrowing from Microfinance Institutions," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 134-147, March.
    3. Debdatta Pal & Arnab Laha, 2014. "Credit off-take from formal financial institutions in rural India: quantile regression results," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 2(1), pages 1-20, December.

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