Caste-ing wider nets of credit: A mixed methods analysis of informal lending and caste relations in Bihar

Rural Bihar has seen dramatic shifts in caste and economic relations in the past two decades, and yet few studies have examined how informal credit networks are organized in this new reality. Using a mixed-methods approach that combines extensive survey data from rural Bihar with four years of in-depth qualitative data on the supply and demand side of informal lending, we advance a holistic analysis of credit relations in Bihar. Our quantitative analysis demonstrates that despite the similarity in borrowing purpose, Scheduled Castes (SCs) are less likely to borrow within their kinship network and are charged a higher interest for smaller principal amounts. Evidence from survey data and qualitative interviews rule out market interlinkages or higher administrative costs of processing smaller loans as likely explanations. To explain the changing role of caste, we take an inter-disciplinary approach and borrow from sociological theories of relational inequalities, treating caste-based differentials in credit market outcomes as a dynamic relational problem between caste categories that are reproduced rather than erased over time. Using qualitative data, we demonstrate how, despite more suppliers trickling into the informal credit landscape, caste remains a defining feature, albeit through different causal mechanisms. SCs do not have access to upper-caste lenders throughjajmanities or cultural proximity; they also do not have collaterals to offer and rarely benefit from intra-kin lending due to limited SC lenders. These cumulative disadvantages have gradually and systematically sorted them into impersonal, but higher interest markets over time.