Do the Heterogeneous Determinants of Repayment Affect Differently across Borrowers of Diverse Credit Sources in Rural Assam? A Double Hurdle Approach

Abstract

This study made an attempt to answer the question: Do the heterogeneous determinants of repayment affect the borrowers of diverse credit sources differently? The study is based on data collected from 240 households from three districts in the lower Brahmaputra valley of Assam through a carefully designed primary survey. Besides, the study uses the double hurdle approach and the instrumental variable probit model to reduce possible selection bias. It observes better repayment performance among formal borrowers, followed by semiformal borrowers, while occupation wise it is prominent among organised employees. It has been found that in general, the household characteristics, loan characteristics and location-specific characteristics significantly affect repayment performance of borrowers. However, the nature of impact of the factors influencing repayment performance is remarkably different across credit sources. It ignores the role of traditional community-based organisations in rural Assam while analysing the determinants of repayment performance. The study also recommends for ensuring productive opportunities and efficient market linkages in rural areas of Assam. The study is based on an original data set that has specially been collected to examine question that—do the heterogeneous determinants of repayment affect the borrowers of diverse credit sources differently in the lower Brahmaputra valley of Assam—which has not been studied before.