Metro Moneylenders - Microcredit Providers for Delhi's Poor
Patole, M. & Ruthven, O.
Publication Date: 3 Aug 2002
Published by: IDPM - Institute for Development Policy and Management
Document Type: Paper
Are money lenders important to urban slum dwellers?
Drawing from three case studies in Delhi slums, this paper examines the relevance of money lenders in urban areas. The authors attempt to explore the following questions:
- What are the sources of finances to the poor in these areas?
- How important are the money lenders to the residents?
- How do the money lenders operate?
- How are their products structured?
The authors find that though the money-lenders charge interest rates ranging from 61% to 700%, yet they are popular with the residents, since they:
- Offer flexible products;
- Bear most of the transaction costs themselves;
- Have successfully built a mixed portfolio which allows them to diversify risks;
- Do not impose strict conditions - unlike microfinance institutions (MFIs).
The authors conclude that, rather than perpetuating myths about moneylenders, policy makers and practitioners should try to help them provide better service to the poor, who otherwise have little access to financial services.
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