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The Structure of Informal Credit Market in Pakistan

Author

Listed:
  • M. Irfan

    (Pakistan Institute of Development Economics, Islamabad.)

  • G. M. Arif

    (Pakistan Institute of Development Economics, Islamabad.)

  • Syed Mubashir Ali

    (Pakistan Institute of Development Economics, Islamabad.)

  • Hina Nazli

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

This study has examined the structure of informal credit market in Pakistan by combining two approaches; a field survey administering semi-structured questionnaire to more than 1000 informal lenders supplemented by case studies. According to the survey, a good deal of interlinkages exists between formal and informal credit institutions. However, iriformal credit system draws readily on additional sources JncIuding friends and moneylenders. Informal credit market can be characterized as competitive. If a monopolistic situation prevails in the market it is because of peculiarirelationship between lender and borrower, such as landlord vs. tenant. It appears from the survey that like the formal financial market, lenders in the informal markets also follow credit worthiness as the major criteria to lend. This reduces considerably the levels of funds allocated to less privileged and assetless.

Suggested Citation

  • M. Irfan & G. M. Arif & Syed Mubashir Ali & Hina Nazli, 1999. "The Structure of Informal Credit Market in Pakistan," PIDE-Working Papers 1999:168, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:wpaper:1999:168
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    References listed on IDEAS

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    1. Sarfraz K. Qureshi & Kalbe Abbas & Ahmed Naeem Siddiqui & Ejaz Ghani, 1984. "Rural Credit and Rural Development.Some Issues," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 23(2-3), pages 273-285.
    2. Sarfraz Khan Qureshi & Akhtiar H. Shah, 1992. "A Critical Review of Rural Credit Policy in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 31(4), pages 781-801.
    3. Bell, Clive, 1990. "Interactions between Institutional and Informal Credit Agencies in Rural India," The World Bank Economic Review, World Bank, vol. 4(3), pages 297-327, September.
    4. Anthony Bottomley, 1975. "Interest Rate Determination in Underdeveloped Rural Areas," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(2), pages 279-291.
    5. Lipton, Michael, 1976. "Agricultural finance and rural credit in poor countries," World Development, Elsevier, vol. 4(7), pages 543-553, July.
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    Cited by:

    1. Nicoletta Batini & Young-Bae Kim & Paul Levine & Emanuela Lotti, 2009. "Informal Labour and Credit Markets: A Survey," School of Economics Discussion Papers 0609, School of Economics, University of Surrey.
    2. Muhammad Khalid Bashir & Zulfiqar Ahmad Gill & Sarfraz Hassan, 2009. "Impact of credit disbursed by commercial banks on the productivity of wheat in Faisalabad district," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 1(3), pages 275-282, May.
    3. Athar Iqbal & Bilal Hamid, 2012. "Retail Business Owners Preference: Why not Formal Financing?," South Asian Journal of Management Sciences (SAJMS), Iqra University, Iqra University, vol. 6(1), pages 18-22, Spring.
    4. Nazli, Hina & Haider, Syed Hamza & Hausladen, Stephanie & Sheik, Asjad Tariq & Shafiq, Hassan & Shahzad, Saqib & Mehmood, Amina & Shahzad, Asma & Whitney, Edward, 2012. "Pakistan Rural Household Panel Survey 2012 (Round 1): Household characteristics:," PSSP working papers 8, International Food Policy Research Institute (IFPRI).
    5. Madestam, Andreas, 2014. "Informal finance: A theory of moneylenders," Journal of Development Economics, Elsevier, vol. 107(C), pages 157-174.
    6. Rashida Haq, 1999. "Income Inequality and Economic Welfare: A Decomposition Analysis for the Household Sector in Pakistan," PIDE Research Report 1999:170, Pakistan Institute of Development Economics.
    7. Montgomery, Heather & Weiss, John, 2011. "Can Commercially-oriented Microfinance Help Meet the Millennium Development Goals? Evidence from Pakistan," World Development, Elsevier, vol. 39(1), pages 87-109, January.
    8. Zafar Mahmood, 1999. "Growth Potential of Small and Medium Industries in Pakistan," PIDE Research Report 1999:169, Pakistan Institute of Development Economics.
    9. Rizwana Siddiqui & Zafar Iqbal, 1999. "Social Accounting Matrix of Pakistan for 1989-90," PIDE Research Report 1999:171, Pakistan Institute of Development Economics.
    10. Mohammad, Irfan, 1999. "Rural non-farm sector in Pakistan," MPRA Paper 38152, University Library of Munich, Germany.

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