This chapter investigates the relationship between small/marginal farmers and various informal lenders in the Indian Punjab. The authors examine pertinent aspects of lending practices relating to informal providers’ decision-making processes when lending to farmers. The findings indicate that financial lending structures, as well as borrowing decisions, depend largely upon a number of difficult-to-quantify factors such as culture, caste, family size, education, reputation and relational lending practices which are prominent amongst both formal and informal lenders. Informal lenders represent a dedicated and bespoke source of finance, a well-established ‘institution’ for several generations and serve a large population of small/marginal farmers. Hence in order to minimize adverse outcomes and improve access to finance, there is a need to regulate the informal lending sector of India.
Navjot Sandhu, Javed G. Hussain and Harry Matlay
Navjot Sandhu, Jonathan M. Scott, Jenny Gibb, Javed Ghulam Hussain, Michèle Akoorie and Paresha Sinha
Our exploratory chapter offers contextualized empirical evidence and theory of how entrepreneurial finance supports women-led firms in an emergent entrepreneurial ecosystem within the state of Punjab, in northern India. By emphasizing the social, cultural, and informal aspects, we posit that the Punjab context is an emergent entrepreneurial ecosystem in which informal institutions (social structure, culture, entrepreneurs, households, and lenders) and more formal institutions (such as formalized bank lending and educational establishments) are interwoven and interdependent. Drawing on questionnaires of selected women entrepreneurs located in five districts of the Punjab, we found that women entrepreneurs in emergent entrepreneurial ecosystems possess few overall assets, suffer from weak enforcement of financial rights and the existence of unequal inheritance rights. Consequently, they have limited access to community and social resources. Gender-based obstacles, conventional thinking and socio-cultural values aggravate the difficulties faced by women. Due to their lack of access to formal finance, women must approach informal lenders. For example, a quarter of women interviewed reported incidents of sexual harassment by informal lenders, especially in the rural and semi urban areas. Indeed, one-fifth who were exploited by informal lenders belonged to the scheduled classes or lower castes (Dalits: literally ‘the oppressed’), or so-called ‘untouchables’, illustrating the relationship between their caste and types of treatment and behaviour by these informal lenders.