Does Credit Utilization Pattern Promote Poverty Alleviation? An Evidence from India

Government of India has introduced various schemes for the uplift of the deprived section of the urban poor. As a result, the proportion of India's poor with respect to total population has dropped in both urban and rural areas, but then again, the absolute number of the urban poor is growing. Therefore, this article tries to analyse the utilization pattern of credit availed through various credit expansion avenues by the urban poor households, thereafter examining its impact on poverty alleviation at different levels. Snowball sampling method was used to collect data from 598 respondents living in the most populous cities of Punjab and the union territory (UT) of Chandigarh using the references of registered deprived urban poor, who are continuously being recorded and monitored by top non-governmental organizations (NGOs) and banks. Apart from descriptive statistics, exploratory factor analysis was used to categorize the utilization pattern and poverty alleviation dimensions into the valid factors. Finally, structural equation modelling (SEM) was employed to test the proposed hypothesis. The study found that the productive utilization of credit availed by the Economic Weaker Section (EWS) of the urban poor through various government credit schemes is highly associated with poverty alleviation at individual level (beta = 0.55 and p = 0.000) followed by that at regional (beta = 0.29 and p = 0.009) and community levels (beta = 0.18, and p = 0.001). Social structure of the families is found to be an important deciding factor in how productively a household channelizes its loan amount or grants to move out of poverty and to become self-reliant. The article is limited to only government-backed credit expansion schemes for the EWS of the urban poor residing in the most populous areas of Punjab and Chandigarh. The development of the evaluation model is expected to lead towards better implementation of government credit schemes for the EWS of the urban poor, which would be practically helpful in policymaking. Also, the development of suggestive measures is expected to complement effective, efficient and more cohesive implementation of government schemes for the urban poor, which would be socially more sustainable. With policy emphasis in recent times for the urban poor, the topic is of utmost importance for research.