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Collateral and other Forms of Guarantee in Rural Credit Markets: Evidence from Eastern India

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  • Kailas Sarap

    (Maharishi Dayanand University)

Abstract

This study uses original survey data from six villages in Orissa, India to identify and analyse the system of guarantee prevalent in informal sector markets with diverse socio-economic conditions. The survey data reveal that the system of guarantee available to the lenders is much more complex and diverse than assumed in the theoretical literature. The money lender, through a variety of guarantee systems including collateral requirement and personal relationship, is in a position to screen and monitor the borrowers with negligible cost so that there is hardly any risk of default.

Suggested Citation

  • Kailas Sarap, 1991. "Collateral and other Forms of Guarantee in Rural Credit Markets: Evidence from Eastern India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 26(2), pages 167-188, July.
    • Handle: RePEc:dse:indecr:v:26:y:1991:i:2:p:165-188
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    Cited by:

    1. Biswaroop Das & Gagan Bihari Sahu, 2019. "Coping with Cities and Connecting with Villages: Migrant Workers in Surat City," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(1), pages 89-112, March.
    2. Lahkar, Ratul & Pingali, Viswanath, 2016. "Expansion and welfare in microfinance: A screening model," Economic Modelling, Elsevier, vol. 53(C), pages 1-7.
    3. Shirley J. Ho & Sushanta K. Mallick, 2017. "Does Institutional Linkage of Bank-MFI Foster Inclusive Financial Development Even in the Presence of MFI Frauds?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(3), pages 283-309, July.
    4. Sudha Narayanan & Judhajit Chakraborty, 2019. "Land as collateral in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-006, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Bardsley, Peter & Meager, Rachael, 2019. "Competing lending platforms, endogenous reputation, and fragility in microcredit markets," European Economic Review, Elsevier, vol. 112(C), pages 107-126.

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