Paper
From Cheap Credit to Easy Money: How to Undermine Rural Finance and Development
Reviewing intervention strategies for the provision of credit to the poor
7 pages
Takes an in depth look at the financial landscape in India, illustrated through case studies at the village level.
Assesses effects on pre-existing financial arrangements after village bank financing becomes available. Data collected from formal and informal lenders is analysed as follows:
- Lending activities of an individual unlicensed lender, a shopkeeper, and the village bank are compared;
- Lending records of the informal lender are examined in the period 1982- 83 and then six years after the bank was established in the village (1988-89);
- Lending records of financial intermediaries are also examined over the course of a full year 1988-89;
- Role of informal mutual finance is examined.
Conclusions drawn from this examination include:
- Informal finance does not decline in volume but instead grows after establishment of the village bank;
- There is also growth in the pawnbroking business and mutual finance groups;
- Pawnbroking businesses offer a viable, dependable, accessible and private system of loan provision, as opposed to the bank;
- Linkages between informal financial intermediaries and between informal and formal financial intermediaries are apparent;
- Separate types of credit are advanced by the same financial agent.
Considers implications of these results for macro-level surveys on the features of financial landscapes.
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