Which is the most popular means of providing non institutional finance?

Key Points

• Mahajan is the most popular means of providing non-institutional finance in India.
• Non-institutional finance refers to credit provided by sources other than formal financial institutions like banks.
• Mahajans, also known as moneylenders, play a crucial role in rural and semi-urban areas where access to formal banking services may be limited.
• They offer quick and flexible loans, often without the need for extensive documentation or collateral.
• However, the interest rates charged by Mahajans can be significantly higher compared to institutional lenders.

Additional Information

• Non-institutional finance sources also include friends, relatives, traders, and landlords.
• Despite the high interest rates, many people rely on non-institutional finance due to the ease of access and the lack of stringent requirements.
• The government has been making efforts to improve financial inclusion and reduce dependence on non-institutional sources by promoting microfinance and other financial services in underserved areas.
• In some cases, the practices of non-institutional lenders have led to exploitation and financial distress among borrowers, prompting regulatory interventions.