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Additionality, Fungibility, Convergence and Income and Substitution Effects of Micro-credit: Findings of an Empirical Study in Andhra Pradesh, India by Dayachari, P.; Subrahmanyam, P.; Reddy, G. R. is a Agricultural and Biological Sciences article available to read on EtoBox.

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Additionality of credit, especially from formal agencies (priority sector lending programmes, as they are called in India), tends to reduce the credit gap depressing the prevailing rates of interest in the informal segment of the credit market. This process leads to a reduction in the segmentation of the credit market often leading to extensity and purity. Fungibility buttresses this tendency. This phenomenon is described as convergence culminating in substitution and income effects, the benefits of which are harvested by borrowers. These effects are analysed by the method of comparative statics based on an inductive investigation of 166 sample households from Ne/lore district of Andhra Pradesh in India. The indifference curve technique innovated by JR Hicks is also used to demonstrate these effects. Though the income and substitution effects are considered position-and size-neutral, their magnitudes show a marginal variation across groups. Our analysis showed that the substitution effect has a built-in bias towards the richer strata, whereas the income effect shows a stronger effect in the non-delta village and among the weaker strata of society. There is a need for future researc

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Author

Dayachari, P.; Subrahmanyam, P.; Reddy, G. R.

Publisher

SAGE Publications; Center on Integrated Rural Development For Asia And the Pacific (ISSN 1018-5291)

Published

2000

Language

EN

Field

Agricultural and Biological Sciences (Life Sciences)