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Sectoral credit choice in rural India

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  • Pal, Debdatta
  • Laha, Arnab K.

Abstract

This article examines the question, what makes a rural household a preferred choice for formal lenders? A sample selected ordered probit model is developed 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 hierarchical order. Using household data from six Indian states, this study finds corroborative evidence that relatively resource-rich households, even while staying at distant locations, enjoy greater access to formal creditors. It also identifies a new factor, i.e., interlinked credit, as a significant variable influencing access to formal credit.

Suggested Citation

  • Pal, Debdatta & Laha, Arnab K., 2015. "Sectoral credit choice in rural India," Journal of choice modelling, Elsevier, vol. 14(C), pages 1-16.
  • Handle: RePEc:eee:eejocm:v:14:y:2015:i:c:p:1-16
    DOI: 10.1016/j.jocm.2015.03.001
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    References listed on IDEAS

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    1. repec:eee:ecosys:v:41:y:2017:i:3:p:420-432 is not listed on IDEAS
    2. Twine, Edgar & Rao, Elizaphan & Baltenweck, Isabelle & Omore, Amos, 2015. "Credit, Technology Adoption and Collective Action in Tanzania’s Smallholder Dairy Sector," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204198, Agricultural and Applied Economics Association;Western Agricultural Economics Association.

    More about this item

    Keywords

    Rural credit; Sample selected ordered probit; India;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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