Determinants of Access to Rural Credit

Abstract

Credit rationing is an inherent characteristic of the institutional and non-institutional credit market. There are two types of credit rationing in the credit market. In the former type, the borrower is refused access to institutional credit irrespective of whether he has fulfilled the specified terms and conditions. In the latter instance, a rural household may borrow, but not to the extent it desires or requires. This paper aims to investigate the household characteristics that influence initial access to the credit market. The paper also examines household characteristics which influence the degree of accessibility, measured in terms of the quantity of loans received. This is done using primary data from Bihar. Self-cultivated area and distance of the household from a metalled road affect initial credit market access. The literacy of household head, land ownership, and distance from a metalled road influence the quantity of loan secured. The social category of the household impacts both credit market access and loan amount secured.