An Analysis of Social Proximity and Interest Rate in Rural South India

• Autorzy: Augendra Bhukuth , Jérôme Ballet , Katia Radja
• Języki publikacji: EN

Abstrakty

EN

In this article we present the role of social proximity in the formation of the interest rate in the informal credit market in the state of Tamil Nadu, India. This paper is unique in the sense that it deals with social proximity and the formation of interest rate. If a lot of articles deal with the interest rate and social capital, none of them have attempted to link the two variables. A qualitative and quantitative survey was conducted on debt bondage in 2003-2004. The impact of social proximity defined as strong and weak is captured by a simple regression model. We show that a strong social proximity has a negative impact on the interest rate. Furthermore, the frequency of transactions has a positive impact on the interest rate, which means that asymmetrical information does not play a central role in our study. We then explain the relation between social proximity and interest rate by using the concept of rights and obligations.(original abstract)

Słowa kluczowe

EN

Social capital; Poverty; Interest rate; Indebtedness

PL

Kapitał społeczny; Ubóstwo; Stopa procentowa; Zadłużenie

• Czasopismo: Economics & Sociology
• Rocznik: 2018
• Tom: 11
• Numer: nr 1
• Strony: 156--171

Twórcy

autor

Augendra Bhukuth

• Ipag Business School and ITSMI Ecole de Management, Paris, France

autor

Jérôme Ballet

• University of Bordeaux, GREThA, France

autor

Katia Radja

• Université de Versailles-St Quentin en Yvelines, CEARC, Université Paris Saclay, Versailles, France

Bibliografia

• Aleem, I. (1990). Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan. World Bank Economic Review, 4(3), 329-349.
• Banerjee, A. V. and Duflo, E. (2007). The Economic Lives of the Poor. Journal of Economic Perspectives, 21(1), 141-167.
• Bardhan, P. and Rudra, A. (1978). Interlinkage of Land, Labour and Credit Relations. An Analysis of Village Survey Data in East India. Economic and Political Weekly, Annual Number, February 1978, 367-84.
• Barslund, M. (2007). Microeconometric Application in Development Economics. PhD Thesis n°152, University of Copenhagen.
• Basu, P. (2005). A Financial System for India's Poor. Economic and Political Weekly, September 10, 2005.
• Basu, K. (1991). Rural Credit Markets: The Structure of Interest Rates, Exploitation, and Efficiency. In: The Economic Theory of Agrarian Institutions, pp. 147-166. Oxford Scholarship Online Monographs.
• Bell, C. (1990). Interactions between Institutional and Informal Credit Agencies in Rural India. World Bank Economic Review, 4(3), 297-327.
• Bhende, M. J. (1986). Credit Markets in Rural South India. Economic and Political Weekly, 21(38/39), A119-A124.
• Bhandari, R. (2007). The Role of Social Distance in Sharecropping Efficiency: The Case of Two Rice-Growing Villages in Nepal. Journal of Economic Studies, 34(4), 290-310.
• Bhukuth, A. (2006). Debt Bondage in the Brokerage System: A Case Study of Sugarcane Migrants in the State of Tamil Nadu (India). International Journal of Development Issues, 5(1), 65-84, June 2006.
• Bhukuth, A. Ballet, J. And Sirven, N. (2016). Bonded labour or What Else? A Case Study in Tamil Nadu India. Journal of International Development, first online October 21 2016.
• Bhukuth, A., Ballet, J. and Guérin, I. (2007). The Brokerage System and the Social Capital: the Formation of Debt Bondage in South India. Journal of Economic Studies, 34(4), 311-3212.
• Bhukuth, A., Parthesarathy, R. and Venkatachellum, G. (2006). The Brokerage System in the Brick Kiln Industry in Tamil Nadu, India. Forum for Social Economics, 35(2), 55-74.
• Bottomley (1963). The Premium for Risk as a Determinant of Interest Rate in Undeveloped Rural Areas. Quaterly Journal of Economics, 77(4), 637-647.
• Bose, P. (1998). Formal-informal sector interaction in rural credit markets. Journal of Development Economics, 56(2), 265-280.
• Braverman, A. and Guash, J. L. (1986). Rural Credit Markets and Institutions in developing Countries: Lessons for Policy Analysis from Practice and Modern Theory. World Development, 14(10-11), 1253-1267.
• Braverman, A. and Stiglitz, J. (1982). Share Cropping and Interlinking of Agrarian Markets. American Economic Review, 72, 695-715.
• Calvo-Armengol, A. and Jackson, M. O. (2005). Networks in Labour Market: Wage and Employment Dynamics and Inequality. Journal of Economic Theory, 132(1), 27-46
• Chakrabarty, D. and Chaudhuri, A. (2001). Formal and informal sector credit institutions and interlinkage. Journal of Economic Behavior & Organization, 46(3), 313-325.
• Chavan, P. (2007). Access to bank Credit: Implication for Dalit Rural Households. Economic and Political Weekly, August 4, 2007.
• Churchill and Guérin, I. (2004). Microfinance-led Strategies to Eliminate Bonded Labor. Paper presented to the Symposium "Microenterprise Solutions for the World's Poorest. December 8, Metropolitan College, New York City.
• Diagne, A. (1999). Determinants of Household Access to and Participation In Formal and Informal Credit Market in Malawi. FCND Discussion paper N°67, International Food Policy Research Institute. Washington D.C.
• Fischer, C. (1982). To Dwell Among Friends: Personal Networks in Town and City. University of Chicago Press, Chicago.
• Ghosh, P., Mookherjee, D. and Ray, D. (2000). Credit Rationing in developing Countries: An Overview of the Theory. In: A Reader in Development Economics. Mookherjee D. and Ray D. (eds.). London, Blackwell.
• Ghosh, P. and Ray, D. (2001). Information and Enforcement in Informal Credit Market. Working paper University of British Columbia and New York University.
• Giné, X. (2010). Access to Capital in Rural Thailand: An Estimated Model of Formal vs. Informal Credit. Working paper The World Bank, Washington D.C.
• Granovetter, M. S. (1982). The Strength of Weak Ties: A Network Theory Revisited. In: Social Structure and Network Analysis. Marsden P. V. et Lin N (eds.). Beverly Hills, California, pp.105-130.
• Granovetter, M. S. (1973). The Strength of Weak Ties. The American Journal of Sociology, 78, 1360-1380.
• Guérin, I., Roesch, M., Venkatasubramanian, G., D'Espallier, B. (2012). Credit from Whom and for What? Diversity in Borrowing Sources and Uses in Rural South India. Journal of International Development, 24, S122-S137.
• Guérin, I., Bhukuth, A. Parthesarathy, R., Venkatasubramanian, G. (2007). Labour in Brick Kilns: A Case Study in Chennai. Economic and Political Weekly February 17, 599-606
• Guérin, I., Bhukuth, A., Marius-Gnanou, K., Servet, J. M. and Venkatasubramanian, G. (2004). Indebtedness, Vulnerability to Bondage and Microfinance. Report for the ILO (Social Finance Unit). Institut Français de Pondichéry, November 2004
• Guirkinger, C. (2008). Understanding the Coexistence of Formal and Informal Credit Markets in Piura, Peru. World Development, 36(8), 1436-1452.
• Gupta, M. R. and Chaudhuri, S. (1997). Formal Credit, Corruption and the Informal Credit Market in Agriculture: a Theoretical Analysis. Economica, 64, 331-343.
• Hoff, K. and Stiglitz, J. E. (1993). Imperfect Information and Rural Credit Markets: Puzzles and Policy Perspectives. In The Economics of Rural Organization: Theory, Practice, and Policy. K. Hoff, A. Braverman, and J. E. Stiglitz (eds), pp. 33-52. New York, Oxford University Press for the World Bank
• Kirman, A. and Vriend, N. (2001). Evolving Market Structure: An ACE Model of Price Dispersion and Loyalty. Journal of Economic Dynamics and Control, 25(3-4), 459-502.
• Kochar, A. (1997). An empirical investigation of rationing constraints in rural credit markets in India. Journal of Development Economics, 53(2), 339-371.
• Krishna, A., Kapila, M., Pathak, S., Porwal, M., Singh, K. and Singh, V. (2004). Falling into Poverty in Villages of Andra Pradesh: Why Poverty Avoidance Policies are Needed. Economic and Political Weekly, June 17, 2004.
• Krishna, A., Kapila, M., Porwal, M. and Singh, V. (2003). Falling into Poverty in a High-Growth State. Economic and Political Weekly, 43(26), December 6, 2003.
• Mahieu, F. R. (2001). Ethique économique. Fondements anthropologiques. Paris L'Harmattan.
• Marsden, P. V. (1987). Core Discussion Networks of Americans. American Sociological Review, 52, 122-131.
• Murdoch, J. (2000). The Microfinance Schism. World Development, 28(4), 617-629.
• Nagarajan, G., Meyer, R. L. and Hushak, L. J. (1995). Segmentation in the informal credit markets: the case of the Philippines. Agricultural Economics, 12(2), 171-181.
• Nisbet, C. (1967). Interest Rates and Imperfect Competition in the Informal Credit Market of Rural Chile. Economic Development and Cultural Change, 16(1),73-90.
• Ramachandran, V. K. and Swaminathan, M. (2001). Does Informal Credit Provide Security? Rural Banking Policy in India. International Labour Office, Geneva.
• Sriram, M. S. and Parhi, S. (2006). Financial Status of Rural poor: A Study in Udaipur District. Economic and Political Weekly, December 23, 2006.
• Stiglitz, J. E. and Weiss, A. (1981). Credit Rationing in Market with Imperfect Information. American Economic Review, 71(3), 393-410.
• Swaminathan, M. (1991). Segmentation, Collateral Undervaluation, and the rate of Interest in Agrarian Credit Market: Some Evidence from Two Villages in South India. Cambridge Journal of Economics, 15(2), 161-178.
• Timberg, T. and Aiya, C. V. (1980). Informal Credit Markets in India. Economic and Political Weekly, 15(5/7), 279-302.
• Tsai, K. (2004). Imperfect Substitutes: the Local political Economy of Informal Finance and Microfinance in Rural China and India. World Development, 32(9), 1487-1507.
• Van Bastelaer, T. and Leathers, H. (2006). Trust in Lending: Social Capital and Joint Liability Seed Loans in Southern Zambia. World Development, 34(10), 1788-1807
• Wahba, J. and Zenou, Y. (2005). Density, Social Networks and Job Search Methods: Theory and Application to Egypt. Journal of Development Economics, 78, 443-473.
• Zeller, M. (1994). Determinants of Credit Rationing: A Study of Informal lenders and Formal Groups in Madagascar. World Development, 22(12), 1895-1907.

Identyfikatory

DOI

10.14254/2071-789X.2018/11-1/10