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Usufructuary Mortgages as a Source of Funds in Need: Some Theory and an Empirical Investigation

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  • Magnus Hatlebakk
  • Clive Bell

Abstract

This paper develops a theoretical framework in which the borrower, who mortgages out, and the lender, who mortgages in, a parcel of land reach their decisions when credit and land markets function imperfectly. The results cover what conditions and factors govern the decision to contract in the first place, and when and whether to repay or agree to a sale. The empirical investigation deals with such contracting in Orissa, based on a panel household survey over the period 2000–2013. Almost 20 percent had contracts in 2013, the borrowers’ chief need being to marry off a daughter, followed by coping with serious illness and bad harvests. The sums were quite large, indicating that these contracts offered the parties opportunities beyond those available through other forms of credit transactions. Mortgaging also appeared to promote the transfer of ownership rights from relatively land-rich to land-poor households.

Suggested Citation

  • Magnus Hatlebakk & Clive Bell, 2017. "Usufructuary Mortgages as a Source of Funds in Need: Some Theory and an Empirical Investigation," CMI Working Papers 6, CMI (Chr. Michelsen Institute), Bergen, Norway.
    • Handle: RePEc:chm:wpaper:wp2017-6
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    References listed on IDEAS

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    1. Swaminathan, Madhura, 1991. "Segmentation, Collateral Undervaluation, and the Rate of Interest in Agrarian Credit Markets: Some Evidence from Two Villages in South India," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 15(2), pages 161-178, June.
    2. Bell, Clive & Srinivasan, T N, 1989. "Interlinked Transactions in Rural Markets: An Empirical Study of Andhra Pradesh, Bihar and Punjab," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(1), pages 73-83, February.
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    2. Clive Bell & Abhiroop Mukhopadhyay, 2020. "Income Guarantees and Borrowing in Risky Environments: Evidence from India's Rural Employment Guarantee Scheme," Economica, London School of Economics and Political Science, vol. 87(347), pages 763-812, July.

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