Horizontal and Vertical Linkages between Formal and Informal Credit Markets in Backward Agriculture: A Theoretical Analysis
Sarbajit Chaudhuri () and
Jayanta Dwibedi ()
MPRA Paper from University Library of Munich, Germany
The paper shows that the policy of forging a vertical linkage between the formal and informal credit markets is distinctly superior to the existing credit policy of horizontally substituting the informal sector by the formal one. An inflow of subsidized formal credit to the informal lenders not only ensures better terms of borrowing to the small borrowers but also leads to higher agricultural productivity vis-à-vis the horizontal linkage case. Even if the informal sector lenders are allowed to collude, the informal interest rate is still lower in the vertical linkage case.
Keywords: Formal credit; informal credit; horizontal linkage; vertical linkage; moneylender; collusion. (search for similar items in EconPapers)
JEL-codes: D89 O1 O17 Q1 Q14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-iue and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/55666/1/MPRA_paper_55666.pdf original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:55666
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().