Persistence of Informal Credit in Rural Karnataka, India-Some Evidences from Primary Data

Abstract

Purpose: The aim of the study is to examine the rural credit markets in Karnataka region in India. The rural credit structure in India consists of two sectors-formal and informal. This study focuses on understanding farm credit and mixed households (households with farm and non-farm workers) in the rural economy in terms of socioeconomic status, credit structure, linkage, and so on. Design/methodology/approach: A quantitative research approach and a cross-sectional research design were adopted in the study. Primary Data on 100 households collected from two villages in Karnataka India. An attempt was made to understand the difference between informal and formal credit between two villages using cross tabulation and percentage analysis. Findings: The results shows the role of informal credit has declined, it still holds a large share in the rural economy. There is a significant difference between loans give agricultural and mixed households. The results showed that the interlinked credit transactions are less in the developed village, while such transactions are highly prevalent in the backward village Originality/value: The study based on recent changes pertaining to credit markets in the rural Karnataka.