Determinants of Financial Services to the Households in India:Empirical Evidence from IHDS (2005)

Access to credit is widely accepted as a means to improve the welfare of individuals and households, both in the short, and long-runs. Credit facilitates investment in human and physical capital, thereby helps in achieving growth, globalization and development in the long-run. In short-run, it allows consumption smoothing in the event of an adverse income shock to the households. Keeping the importance of credit, this study evaluates various factors influencing demand for credit, its formal sources and access to insurance to the households in India. The study shows that the demand for credit is strongly influenced by location, sources of income, size of the family, membership of SHGs and other factors. Regional variances identified in the study show the urgent need for policy intervention to emancipate the urban dwellers in regions where demand for and access to credit are lowest.