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Sectoral credit choice in rural India

Debdatta Pal and Arnab K. Laha

Journal of choice modelling, 2015, vol. 14, issue C, 1-16

Abstract: This article examines the question, what makes a rural household a preferred choice for formal lenders? A sample selected ordered probit model is developed 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 hierarchical order. Using household data from six Indian states, this study finds corroborative evidence that relatively resource-rich households, even while staying at distant locations, enjoy greater access to formal creditors. It also identifies a new factor, i.e., interlinked credit, as a significant variable influencing access to formal credit.

Keywords: Rural credit; Sample selected ordered probit; India (search for similar items in EconPapers)
JEL-codes: C35 G21 Q14 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:eejocm:v:14:y:2015:i:c:p:1-16