• Antoinette Schoar, Rohit Mukkawar
Business logistics of informal lending

Small Enterprise Finance Centre has been interacting with SMEs across India for quite some time and very often they hear Credit being the biggest hurdle for their growth; if not the availability, the interest rates. There is ample evidence that many small businesses use loans from private informal moneylenders for their business purposes despite the rapid growth of Indian banking sector and SME friendly credit policies. There have been many attempts to find out the cost of capital for moneylenders and margins made by them compared to the formal financial sector. Most of these had been based on interactions with borrowers than with the moneylenders themselves due to their low visibility and unwillingness to reveal details about their businesses. The aim of this research paper is to know how moneylenders are organised, how they do the business, and effects of changing legal environment on them.

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