Credit Constraints and Distress Sales in Rural India: Evidence from Kalahandi District, Orissa

Risk‐coping, Land Tenure and Land Markets: An Overview of the Literature

“…Sahu et al . (), as Sarap (), also observe distress sales in the province of Orissa in India, and identify the source in the credit market that works imperfectly in a rural environment. Deininger and Jin () also observe that the sales market is less efficient than the rental market in post land‐reform Vietnam, mainly as a consequence of distress sales.…”

Linking Credit with other Markets: A Review of the Issues in Rural Economies

“…On the demand side, this in turn depends on the farmers' differential access to the formal credit market where the nominal interest rate of credit would be less while the transaction cost associated with the borrowing from the formal sector may be high (Mahajan and Ramola, Forum for Development Studies 1996). From a primary survey conducted in the Kalahandi district (one of the backward districts) of the Indian state of Orissa, Sahu et al (2004) note that the difference between the prices in an open market transaction and under interlinked output contract, that is ( p − p * ) , depends on the relative bargaining power of the trader and the farmer, intensity of the immediate liquidity requirement of the agricultural household, differential access of the farmer to the institutional credit sources, and effectiveness of the implementation of minimum support price extended by the government as an alternative outlet available to the farmer to sell the output.…”

Credit off-take from formal financial institutions in rural India: quantile regression results

“…Earlier analyses (see, Datta 2003;Sahu et al 2004) of the determinants of the loan amount (Y) from the formal sector used ordinary least squares (OLS) regression methods. However, these OLS estimates of the various effects on the conditional mean of the loan amount, E(Y | covariates), may not truly represent the nature and size of those effects on the lower tail of the loan amount distribution.…”

“…Secondly, it would elucidate the extent of the gap between the credit off-take from the formal financial sector by the rich and poor households in the context of a developing country like India. Moreover, apart from including those variables mentioned in earlier studies, namely Datta (2003) and Sahu et al (2004), this study also attempts to capture the effects of village-level attributes, such as the distance of households from commercial, financial, and educational institutions, on the loan amount.…”

“…Academic inquiries to identify the causes of such dismal performance on the part of the formal financial sector in agrarian economies can be classified under three broad groups: first, those that attempt to identify factors affecting the choice of credit sectors in rural economies (see, for example, Kochar 1997;Pal 2002;Sahu et al 2004;Boucher and Guirkinger 2007;Datta and Ghosh, 2013;Pal and Laha 2013), second, those that explore the determinants of credit amounts received by rural households from the formal sector (see, for example, Datta 2003;Sahu et al 2004) and third, those that estimate the effects of the lack of access to formal-sector credit on agricultural production (Carter 1989;Guirkinger and Boucher 2008). The first two groups of empirical investigations indicate that a large agricultural land size, good land quality, the presence of irrigation and regarding the loan applicant, membership in a higher caste and higher levels of educational attainment increase the applicant's chance of gaining access to formal credit sources as well as the quantum of credit disbursed by the formal sector.…”