An empirical analysis of the sources and use of small farmer credit in India – Assessing impact of borrower household and village attributes on rural credit portfolio

Against the background of an agricultural household model, wherein borrowings are determined by household-specific characteristics, and using an all-India credit data of 700 borrower households, this paper attempts to apply a multinomial logistic model to assess the role of borrower village and household characteristics in determining the borrowers’ access to various sources of loans (e.g., formal, informal, or both, and more specifically whether commercial banks, cooperatives, SHGs, or a combination thereof in case of formal sector loans) and for different purposes (whether to support production, consumption or both). Although this paper stops short of explaining the joint determination of various quantitative and qualitative features of loans, borrower village and household characteristics are found to go a long way in explaining a large part of the qualitative variation in borrower's access to various sources of loans and for various purposes. Role of spatial location and socio-economic characteristics of borrower villages, besides socio-economic and demographic features of borrower households in this exercise provides multiple avenues for policy intervention in improving credit access of borrowers.