Sectoral Choice of Credit in Rural India

Debdatta Pal and A. K. Laha

No WP2013-03-01, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: This article examines, what makes rural household a preferred choice for formal lenders? It develops sample selected ordered probit model to address this question. While, the selection equation models the determinants of access to credit, an ordered probit model is used to determine the factors affecting the choice of credit sources in a hierarchical order. Using household data from six Indian states this study finds corroborative evidence that relatively resource rich households even while staying at distant location enjoy greater access to formal creditors. It also identifies a new factor i.e., interlinked credit as a significant variable influencing the access to formal credit.

Date: 2013-03-04
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Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:11970

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