Dualism, technical change, and rural finance markets in developing countries

Farrukh Iqbal

Published 1981

This study investigates the anatomy of rural finance markets (RFMs) in a major developing country, India. The heart of the study consists of an empirical model of the determinants of moneylender interest rates which takes into account both the special features of Indian RFMs as revealed by a cursory overview of the distribution of rural loans by size, type, purpose, and source and some special features of the dataset used. The model allows tests of some important propositions linking RFMs to various aspects of rural economic development. The results show that interest rates charged by rural moneylenders are sensitive to a host of borrower-specific and locational characteristics that are affected by the process of economic development. It is concluded that the provision of technical change and investment opportunities may be less costly than direct subsidization as a way of bringing down rural interest rates in developing countries.

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Document Details

  • Copyright: RAND Corporation
  • Availability: Web Only
  • Year: 1981
  • Pages: 39
  • Document Number: N-1723-AID

Citation

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Iqbal, Farrukh, Dualism, technical change, and rural finance markets in developing countries. Santa Monica, CA: RAND Corporation, 1981. https://www.rand.org/pubs/notes/N1723.html.
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