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Caste and credit: A woeful tale?

Research output: Contribution to journalArticle

Sunil Mitra Kumar, Ragupathy Venkatachalam

Original languageEnglish
JournalJOURNAL OF DEVELOPMENT STUDIES
Early online date1 Mar 2018
DOIs
Accepted/In press3 Jan 2018
E-pub ahead of print1 Mar 2018

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Abstract

This paper examines caste-based differences in farmers’ access to bank loans in rural India. We investigate whether banks practice taste-based discrimination on the basis of caste. In order to identify potential discrimination, we consider loan applications and approval decisions separately. We find significant inter-caste differences in application rates, and evidence of discrimination against Scheduled Tribe borrowers at the approval stage. To rule out the role of statistical discrimination, we simulate unobserved credit histories with various distributions. Evidence for taste-based discrimination persists despite accounting for unobservables. However, we find that this discrimination does not affect small farmers.

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