Rural credit : role of informal sector

The supply-led approach to institutional credit has been thought for long as a panacea for much of the ills of the rural sector. Those, who live amidst the rural milieu, know that the informal sector of the rural money market is an integral part of rural life. Not only it is almost as important in aggregate terms as the formal financial sector, often it is more dynamic and people-friendly. Yet for a variety of reasons, not much is really known about informal finance. The book attempts to fill that gap.

The classic studies made by Malcolm Darling, as a result of his horseback tours throughout Punjab in the second decade of the century, comment on the problem of indebtedness in rural areas. Seven decades afterwards another civil servant has ventured into the same field, in the same State. Most of the studies available on rural credit deal with global issues relating to the formal sector of rural money market. The informal sector has not been studied and analysed to that extent and that too, seldom for Punjab,which occupies a unique position in the country.

The informal sector finance occurs among and be tween all economic classes. Its existence and persis tence will have to be acknowledged. The attitude towards informal sector cannot be negative and one cannot adopt a 'no policy' approach towards the same. The archar views to hold the informal sector lending Art of evil ust be given up.

The Book nas discussed and analysed the whole gamut of rural lending system in India and then tested these findings through field investigations conducted in three districts of Punjab. The gap between the credit requirement and credit supply are huge and the supply side from the formal sector can never reach anywhere near the demand. A polarisation is visible, for the role of informal sector in remaining the dominant purveyor of production credit. A contrived casualness will not suffice; the Book pleads for a wisdom requiring a recognition and application of the indestructible role of informal rural finance.