Determinants of Credit Market Participation: Evidence from North-Eastern States of India

We examine the extent of households’ participation in credit market in general for the North-Eastern states of India. Using data from India Human Development Survey (IHDS, 2011-12) for the formal and the informal credit sectors and using Probit specification to model demand (application) and supply (approval) decisions, this study finds that volume of land ownership and religious group belonging are significant determinants of both demand and supply decisions, while caste is insignificant. Households that have ration card and invested in life insurance are more likely to get credit relative to those that do not. Health insurance increases the probability of application but reduces the chances of approval.