Is awareness of credit sources prerequisite for their use? A study of rural Assam

The purpose of this paper is to analyze the determinants of awareness and use of credit sources. The paper attempts to answer the critical question: is awareness of credit sources prerequisite for their use?

This study is conducted in Assam, India, and uses a two-stage econometric model to reduce possible selection bias.

This study argues that awareness of credit sources may be a necessary but not sufficient prerequisite for use. It is found that, in general, formal, semiformal and informal sources attract different classes of the population with respect to economic and social indicators.

The study recommends expanding the scope of semiformal and informal credit sources in rural areas of Assam only for income generating activities with proper market linkages. The possible limitation of the study can be due to exclusion of the role of traditional community-based organizations in rural Assam while analyzing the awareness and use of credit sources.

The study contributes to the literature by assessing the probable differences among formal, semiformal and informal credit sources with respect to their determinants of awareness and use.