Institute for Social and Economic Change

Working Paper: 414

Urban Household Enterprises and Lack of Access
to Production Loans


Shika Saravanabhavan
Meenakshi Rajeev


This paper examines the state of credit access to the urban self-employed households and studies the differential access across various regions of the country and also across the various social and economic classes, using the unit record data from NSS 70th round. Most of these households are usually own account enterprise owners, with little or no savings, and so they are in regular need of funds to meet the fixed and working capital requirements of their businesses. However, we see from our analysis that the access to production loan is low for all regions. Moreover, from the regression analysis, where we use a probit model with sample selection, we find that the households in the services sector are better off as compared to the manufacturing sector. Also, it is established that economic status and education play a crucial role in accessibility. In order to understand the causes of exclusion, we also present the results and analysis of a field survey, which is based on street vendors in major markets of selected districts of Karnataka. The results from the survey also show substantial financial exclusion of the urban self-employed and they are seen to be using informal financial services to meet their demand.


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