Indian Cooperative Credit and the Sustainability Issue

Resource allocation in non-farm sector of less developed economies is generally not done according to any accepted theoretical behaviour pattern. Rural Credit cooperatives or credit unions as they are being called in many African countries provide one such illustration. Lack of efficiency in allocating credit is intimately associated with the sustainability issue of such cooperatives. The paper discusses the factors that need to be taken into account in formalizing cooperative behaviour. Two alternative criteria of efficiency namely optimizing returns and minimizing transaction cost have been highlighted in the paper. It does not however, develop a full fledged model depending on either of these behaviour assumptions.