| Abstract: |
In the face of many debt-ridden farmers committing suicide, the agricultural
credit delivery system assumes a significant role in the agrarian economy of
India. This paper looks at the credit delivery system in rural India on the
basis of a field survey carried out in the State of West Bengal. Given the
reality that access to formal sector credit is not smooth for the marginal
farmers, the emergence of a trader class as a major source of credit for
working capital (without demanding any collateral), appears to be beneficial
for these poor farmers. Surprisingly, the repayment rates of the comparatively
poorer farmers are found to be better than that of the financially better-off
farmers. The paper constructs a game theoretic model to show how in the face
of asymmetric information, necessity to build trust has led to this behaviour. |