Informal Labour and Credit Markets: A Survey.

• men are over-represented in the top segment while women are over-represented in the
bottom segment and the share of women/men in the intermediate segments varies
across sectors and countries (SF 14)¹⁷

From those facts emerge an informal sector which is mainly voluntary for employees while
salaried and casual workers are often left with no other choice than to accept the job avail-
able for them given their skills and constraints (i.e. women and requirement of flexibility).
We think, more theoretical work is required to address stylized facts 13 and 14.

2.4.2 Informal credit markets

Informality in credit markets is strong in many developing countries like India, Pakistan,
Indonesia, Brazil and many African countries, but also in emerging market countries like
China. Unfortunately, data on the size of informal credit markets is scant. According to
Bell (1990), over 80 percent of all Indian rural households’ debt was borrowed from the
informal credit agencies (excluding relatives and friends which cover about 11 percent) in
1951 but it was a mere 24 percent in 1981. At the same time, the proportion of debt owed
to the formal credit institutions has risen dramatically overtime from 61 percent in 1981 to
7 percent in 1951 and thus the share of informal credit markets is about 39 percent. This
follows the creation of the rural cooperatives in the 1950s that is believed to have displaced
the informal moneylenders in India. However, such figures for the informal credit market
have not changed very much in the 1980s. Data from the All-India Debt and Investment
Survey (AIDIS, 2003) shows that for the Indian economy the share of moneylenders is
over 9 percent while the share of non-institutional to total is over 36 p ercent.

From the above trends, an additional set of stylized facts (SF) emerges:

• economies with less developed credit markets tend to have more segmented credit
markets, and thus, greater informal credit markets (SF 15)

In conjunction with the previous stylized fact, Barth et al. (2004) and Beck et al. (2004)
observe that:

• both formal and informal lenders in less developed credit markets have extensive
market power (SF 16)

¹⁷See Figure 1 in Chen (2007) for details.

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