Abstract:
Informal credit sector plays a vital role in the rural sector in developing
countries since formal credit institutions failed to provide access to rural
credit to poor farmers. This study is an attempt to analyze various theoretical
aspects of interlinked credit transactions in the rural credit market in
developing countries. This is a qualitative approach and the relevant
information were collected from secondary sources such as books and
journals. Furthermore, this study tried to explain positive and negative
theoretical concepts in regard to interlinked credit transactions in agrarian
sector. The finding shows that the poor farmers in rural sector are exploited
by lenders in the form of cash or kind or labour. However, the finding further
indicates interlinked credit transactions may cause positive impacts in the
rural credit markets. Hence, policy makers should give more focus on it to
eradicate the above problem and should have a vibrant plan to give several
subsidies to the poor, to make investment in rural areas, to strengthen easy
marketing facilities etc.
