Credit risk in colonial India

Maanik Nath

Economic History Review, 2022, vol. 75, issue 2, 396-420

Abstract: Credit was scarce and expensive in colonial India. Existing explanations assume a lack of market competition let moneylenders charge high interest rates. The article challenges this view and constructs a novel framework to explain the rationality and strategies of lenders. Using new evidence from the Madras Presidency, the study finds that the interconnected issues of climate volatility and enforcement costs shaped the supply and prices of credit. Climate volatility and uncertain seasonal incomes led to high default rates. Enforcement of contracts through courts was expensive and not appropriate where there was no wilful breach of contract. Moneylenders responded to risk in innovative ways. They rationed credit and imposed inflexible enforcement terms in the dry regions that faced higher climatic risk, but used contracts and flexible pricing strategies in the irrigated zones where risks were lower.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/ehr.13108

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ehsrev:v:75:y:2022:i:2:p:396-420

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0117

Access Statistics for this article

Economic History Review is currently edited by Stephen Broadberry

More articles in Economic History Review from Economic History Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().