Centre for Development Economics
Department of Economics

Delhi School of Economics


Does “Financial Affirmative Action” Affect Minority Well-Being? Evidence from a Directed Credit Program


S.K. Ritadhi (Ashoka University)
(Thursday, April  6, 2023, 3:15 PM IST)
Venue: New seminar room (Room 116)


Can government policies relax credit constraints faced by minority citizens and affect their economic well-being? We examine this question exploiting an unique policy intervention in India which targeted credit towards religious minorities. The policy encouraged commercial banks to expand credit in “minority concentration” districts — districts where the share of religious minorities exceeded 25% of the district population. Comparing districts within a narrow window around the discontinuity threshold in the spirit of a regression discontinuity design, we identify substantial increases in minority credit access along both the extensive, and the intensive margins. The expansion in credit access is primarily driven by increased lending from bank operated self-help groups, suggesting banks’ use of local information networks to target credit to relatively poor minority households. Credit from informal sources also increase, pointing to an overall expansion in liquidity in local credit markets. The increased credit to religious minorities is driven by consumption and non-farm business loans, and there is suggestive evidence of higher fixed capital ownership by these households. Consistent with an increase in non-farm business credit, minority workers in minority concentration districts have a disproportionately higher likelihood of being employed in the manufacturing sector, and also increase their labour supply hours in manufacturing activities.
All are cordially invited.

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