Caste Dominance in Agricultural Credit Markets, but for Whom? Evidence from India

Abstract Caste-based disparities in formal agricultural credit markets are well documented, but the mechanisms behind these differences remain underexplored. We examine several potential pathways: first, whether Scheduled Castes/Scheduled Tribes (SC/STs) have a lower probability of formal credit use; second, if higher caste diversity amplifies caste-based differences (out-group threat and diversity effects); third, whether ‘enclave effects’ influence outcomes; and fourth, the salience of caste identity (identity effects) across social groups. Using data from the National Sample Survey Office Land and Livestock Holdings and Situation Assessment of Agricultural Households (2018-19), probit model estimates suggest that, compared with Other Backward Class (OBCs)/Others households, SC/ST households have a lower probability of receiving formal credit. An increase in caste diversity intensifies these disparities in districts dominated by OBC/Others, highlighting the presence of enclave effects for OBC/Others only. Notably, the salience of caste identity appears more pronounced for OBCs/Other individuals, who experience greater identity effects, suggesting that caste identities matter mostly for OBCs/Others.