The Structure of Informal Credit Market in Pakistan

This study has examined the structure of informal credit market in Pakistan by combining two approaches; a field survey administering semi-structured questionnaire to more than 1000 informal lenders supplemented by case studies. According to the survey, a good deal of interlinkages exists between formal and informal credit institutions. However, iriformal credit system draws readily on additional sources JncIuding friends and moneylenders. Informal credit market can be characterized as competitive. If a monopolistic situation prevails in the market it is because of peculiarirelationship between lender and borrower, such as landlord vs. tenant. It appears from the survey that like the formal financial market, lenders in the informal markets also follow credit worthiness as the major criteria to lend. This reduces considerably the levels of funds allocated to less privileged and assetless.