ABSTRACT
In spite of the phenomenal expansion of a variety of formal financial institutions that are supposed to replace the "outmoded and exploitation-infested" informal financial agencies, the latter's popularity is on the rise in India. An indigenous financial institution commonly found in South India is a nidhi, often called a mutual benefit fund or permanent fund. In India, the Hire-Purchase Finance companies finance mainly the purchase of commercial and other vehicles of not older than three to five years. Informal financial institutions especially show their superiority over the formal financial institutions in loan recovery. The demand for the services of informal finance is of two types. One is direct demand from both business and households, and the other is indirect demand emanating from the unsatisfied clients of the formal sector. The informal financial agencies not only fill a gap left by the formal banking sector but also support development.
