The Importance of the Informal Financial Market for Rural Development Financing in Developing Countries: The Example of Pakistan

Winfried Manig

Abstract


The informal credit market is of crucial importance in the
rural areas in Pakistan, even after decades of considerable development
of formal credit organisations and of subsidised credit programmes by
the government. This is due mainly to the fact that informal credit
relations are embedded in the economic, political, and social
interaction networks of the inhabitants in the rural areas. These
interaction networks also maintain the direct credit costs and the
transaction costs at a low level. However, the national development
policy underestimates or even negates the significance of the informal
financial market. Here, political action is required for initiating
change.

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DOI: https://doi.org/10.30541/v35i3pp.229-239

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