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Informal finance and rural finance policy in India: historical and contemporary perspectives

Jones, J.H.M. (2008) Informal finance and rural finance policy in India: historical and contemporary perspectives. Contemporary South Asia, 16 (3). pp. 269-285. ISSN 0958-4935

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To link to this item DOI: 10.1080/09584930802271315

Abstract/Summary

From the 1950s up to the early 1990s the All-India data show an ever-declining share of informal credit in the total outstanding debt of rural households. Contemporaneous micro-level studies, using more qualitative research methodologies, provide evidence that questions the strength of this trend, and more recent All-India credit surveys show, first, a levelling, and then a rise, in the share of rural informal credit in 1990/91 and 2000/01, respectively. By reference to findings of a study of village moneylenders in Rajasthan, the paper notes lessons to be drawn. First, informal financial agents have not disappeared from the rural financial landscape in India. Second, formal-sector financial institutions can learn much about rural financial service needs from the financial products and processes of their informal counterparts. Third, a national survey of informal agents, similar to that of the 1921 Census survey of indigenous bankers and moneylenders, would provide valuable pointers towards policy options for the sector. A recent Reserve Bank of India Report on Moneylender Legislation not only explores incentive mechanisms to better ensure fair practice, but also proposes provision for a new category of loan providers that would explicitly link the rural informal and formal financial sectors.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Life Sciences > School of Agriculture, Policy and Development
ID Code:8731

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