Determinants of access to credit by the rural households of Andhra Pradesh, India

Abstract

Socio-economic development of rural households is directly linked with the extent of access and usage of financial services. The access to credit helps them in upliftment of their status by investing in the production processes. Despite possessing bank account by all rural households under study, access and usage of the financial services was found to be very low. The present study, to analyze the determinants of access to credit by the rural households in Andhra Pradesh state was conducted during 2019-20. A total of 410 rural households in Andhra Pradesh state were selected using multistage sampling procedure. The data on the determinants of access to credit were analysed through logistic regression using SPSS version 20.0 software. Explanatory variables like land holding, occupation and income level of the household were statistically significant and a one unit increase in these variables favours the odds ratio of their access to credit. The higher level of education did not significantly influenced the credit accessibility, but it influenced the choice of sources of borrowing by the rural households. So, to improve the accessibility and usage of formal financial services, by the rural households there is need to simplify the lending procedures and security norms of financial institutions. Financial literacy has to be increased by conducting periodical training programmes by the concerned banks in the area to strengthen the accessibility to financial services.