What Constrains Financial Inclusion for Women? Evidence from Indian Micro data

Purpose – The purpose of this paper is to investigate how relational capital contributes to the startup phase of women-owned micro-enterprises. The motivation for the study stems from the fact that micro-enterprises are key drivers of economic growth and that woman entrepreneurs are key developers of these businesses. Design/methodology/approach – To gather data for our study, a qualitative research methodology was adopted using a case study approach based on examining current events of real life in depth (Yin, 2009). Nine cases of micro-enterprises run by women are analysed, focusing on the management of the start-up phase to investigate the nature and role of the relationships that are activated by the entrepreneurs. Findings – The paper develops the CAOS model of micro-entrepreneurship, examining the personal characteristics of the female entrepreneur (C); the environment in which the micro-enterprise operates (A); organizational and managerial aspects (O); and the motivations for starting a new busine...

The relational capital of micro-enterprises run by women: the startup phase

This paper looks at the role of credit to agricultural sector in Pakistan. It begins with an analysis of credit as indirect input to agricultural sector. It helps the farmers to buy modern and expensive inputs such as tractor, tubewel, seeds, fertilizers etc. the study covers the period from 1974 to 2008. The empirical findings show that there is a significant role of credit in agriculture sector.

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Impact of Institutional Credit on Agricultural Output: A Case Study of Pakistan

A burgeoning recent literature emphasizes "livelihood" diversification among smallholder populations (Chambers and Conway 1992, Davies 1993, Ellis 1998, Bryceson 1999, Ellis 2000, Little et al. 2001). While definitions vary within this literature, the concept of livelihoods revolves around the opportunity set afforded an individual or household by their asset endowment and their chosen allocation of those assets across various activities to generate a stream of benefits, most commonly measured as income. This holistic perspective has the potential to enhance our understanding of the strategies that farm households pursue to ensure food and income security given the natural and economic environment in which they operate. Diversification patterns reflect individuals' voluntary exchange of assets and their allocation of assets across various activities so as to achieve an optimal balance between expected returns and risk exposure conditional on the constraints they face (e.g., due to missing or incomplete markets for credit, labor, or land). Because it offers a glimpse as to what people presently consider their most attractive options, given the incentives and constraints they face, the study of diversification behavior offers important insights as to what policy or project interventions might effectively improve either the poor's asset holdings or their access to higher return or lower risk uses of the assets they already possess. Since diversification is not an end unto itself, it is essential to connect observed livelihood strategies back to resulting income distributions and poverty. Not all diversification into off-farm or non-farm income earning activities offers the same benefits and not all households have equal access to the more lucrative diversification options. Yet the livelihoods literature offers little documentation or explanation of important differences between observed diversification strategies. This paper addresses that gap by offering a comparative analysis using data from three different countries, Cote d'Ivoire, Kenya and Rwanda. Like Dercon and Krishnan (1996) and Omamo (1999), we emphasize that interhousehold heterogeneity in constraints and incentives must factor prominently in any sensible explanation of observed diversification behaviors. Indeed, section 4 demonstrates that at a very fundamental level - the choice of basic livelihood strategy - households would prefer locally available livelihood strategies other than those they choose, were they not constrained from doing so. A simple appeal to the principle of revealed preference thus suggests that heterogeneous constraints and incentives play a fundamental role in determining livelihood diversification patterns manifest in income diversification data. The plan for the remainder of this paper is as follows. The next section presents the basic conceptual foundation from which we operate. Section 3 then introduces the data sets and definitions employed in the analysis. Section 4 presents findings relating to the observed variation in income sources across the income distribution, to distinct livelihood strategies pursued by rural African households, to the determinants of strategy choice, and to the effects of alternative livelihood strategies on income dynamics. These findings point especially to significant rural markets failures - especially with respect to finance and land - that force poorer subpopulations to select strategies offering demonstrably lower returns while wealthier subpopulations are able to enjoy higher return strategies to which entry is at least partly impeded by fixed costs and lower marginal costs of participation. Section 5 concludes.

Heterogeneous Constraints, Incentives And Income Diversification Strategies In Rural Africa

Creditable Lives: Microfinance, Development, and Financial Risk in India

Access by the poor to financial resources on favourable terms and conditions is a necessary prerequisite for achieving any developmental goal for an economy. However, in India, about 50 percent of the population are financially excluded from the formal banking network. These households avail loans from informal lenders, who generally impose unfavourable terms and conditions on the borrower. This paper, based on an in-depth analysis of National Sample Survey Organisation (59th round, All India Debt and Investment Survey, 2003) unit record data, seeks to understand the factors that influence the formation of interest rates in the developed region vis-avis the less developed ones, as the latter are seen to experience higher rates of interest. Using an ordered logit model, our analysis shows how in the developed regions the lack of monopoly power of lenders brings down interest rate levels.

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Interest rate formation in informal credit markets in India: does level of development matter?

hile the importance of formal credit, especially for self-em - ployed households has been well- recognised, and consequently a fin ancial inclusion drive is in progress in most states of India, a large percentage of the households continue to depend on informal sources of credit. Notwithstanding the introduction of no frill accounts and a mobile banking system (Dev 2006), the relationship of banks with small and mar- ginal farmers or micro and small entre- preneurs has remained distant, raising doubts about the sustainability of the fin- ancial inclusion drive. In the literature on fi nancial inclusion, socially backward classes are often highlighted but certain weaker sections do not attract as much discussion. Against this background, we explore the availability of credit to female- headed households and argue why they need special attention from the formal credit system. Even though the self-help group (SHG)-bank linkage programmes have established that women borrowers are comparatively less risky (Veershekhara- ppa 2006 and Rajeev et al 2010), our anal- ysis shows that they do not r eceive equal treatment when it comes to individual access to regular (non-scheme based) credit. The present analysis utilises the unit

Credibility of Equal Access to Credit: Does Gender Matter?

This paper examines the nature and extent of household indebtedness in West Bengal, focusing on households’ access to credit and factors influencing interest rate determination in informal credit markets. As far as accessibility is concerned, it finds that the urban poor face greater problems than their rural counterparts in accessing formal and informal sources of credit. Using an ordered logit model it shows how information and monitoring opportunities play a critical role in arriving at a rate of interest for the lender.

Asymmetry in Information and Varying Rates of Interest: A Study of the Informal Credit Market in West Bengal

This paper examines the nature and extent of farmers’ indebtedness in India using the unit record data from the 59th round of the NSSO, provides a comparative picture of the major Indian States and an in-depth analysis of Karnataka. In terms of access to credit, seen through the extent of indebtedness, Karnataka is better placed than many Indian States, however, Andhra Pradesh, Tamil Nadu, Punjab and Kerala are ahead of Karnataka. Ironically, almost half of the credit is still provided by the informal sector in Karnataka (on an average). Poor farmers with lower land holdings are much more deprived of formal sources of credit than the comparatively richer ones. Thus, they also pay a much higher rate of interest with modal value of 36 per cent. Nevertheless, it is heartening to note that loans are taken mostly for income generating purposes; but it also indirectly implies that the poor are not getting access to formal sources of credit even for the income generating purposes.

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Manojit Bhattacharjee

Papers

Interest rate formation in informal credit markets in India: does level of development matter?

Credibility of Equal Access to Credit: Does Gender Matter?

Asymmetry in Information and Varying Rates of Interest: A Study of the Informal Credit Market in West Bengal

Nature and Dimensions of Farmers’Indebtedness in India and Karnataka

Impact of Credit Accessibility on the Earnings of Self-employed Businesses in India