Interest rate formation in informal credit markets in India: does level of development matter?
Access by the poor to financial resources on favourable terms and conditions is a necessary prerequisite for achieving any developmental goal for an economy. However, in India, about 50 percent of the population are financially excluded from the formal banking network. These households avail loans from informal lenders, who generally impose unfavourable terms and conditions on the borrower. This paper, based on an in-depth analysis of National Sample Survey Organisation (59th round, All India Debt and Investment Survey, 2003) unit record data, seeks to understand the factors that influence the formation of interest rates in the developed region vis-àvis the less developed ones, as the latter are seen to experience higher rates of interest. Using an ordered logit model, our analysis shows how in the developed regions the lack of monopoly power of lenders brings down interest rate levels.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Humanities Bridgeford Street, Oxford Road,Manchester, M13 9PL|
Phone: +44(0)7717 881567
Web page: http://www.gdi.manchester.ac.uk/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bwp:bwppap:12610. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rowena Harding)
If references are entirely missing, you can add them using this form.