IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-05701286.html

Social Proximity and Loan Terms: Evidence from Informal Credit Markets in Rural India

Author

Listed:
  • Arnaud Natal

    (BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IFP - Institut Français de Pondichéry - MEAE - Ministère de l'Europe et des Affaires étrangères - CNRS - Centre National de la Recherche Scientifique)

  • Damien Girollet

    (BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

How does social proximity between borrowers and lenders influence informal lending terms in rural areas of the Global South? We answer this question using a unique dataset collected in 2020-2021 in rural South India. We examine four dimensions of loan agreements: interest rates, collateral, services provided by lenders and borrowers. We analyse the role of social proximity (i.e., homophily and strength of ties) in determining credit terms using loan-level probit models. We find two key results. First, social proximity operates as an ambivalent resource: while homophily and strong ties reduce the financial cost of borrowing, they are also associated with reciprocal obligations. Second, the benefits of social proximity are unequally distributed across social groups. These findings suggest that informal credit markets are deeply embedded in local hierarchies and that policies addressing household indebtedness must go beyond financial inclusion to tackle the structural inequalities shaping credit relations.

Suggested Citation

  • Arnaud Natal & Damien Girollet, 2027. "Social Proximity and Loan Terms: Evidence from Informal Credit Markets in Rural India," Post-Print hal-05701286, HAL.
    • Handle: RePEc:hal:journl:hal-05701286
    DOI: 10.1080/00220388.2026.2749399
    Note: View the original document on HAL open archive server: https://hal.science/hal-05701286v2
    as

    Download full text from publisher

    File URL: https://hal.science/hal-05701286v2/document
    Download Restriction: no
    File URL: https://libkey.io/10.1080/00220388.2026.2749399?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-05701286. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.