THE CO-OPTION OF LOW-INCOME BORROWERS BY INFORMAL CREDIT SUPPLIERS - A CREDIT DELIVERY MODEL FOR SQUATTER HOUSING

This study takes a fresh look at informal credit markets by emphasisin g their function in complementing the formal finance sector. The credi t delivery model presented aims to hh the huge gap between the credit demanded by and supplied to low-income households. The model is based on the profile of borrowers, informal credit suppliers and agents invo lved in upgrading squatter settlements in Bangalore, India. A 'precede nce network' depicting critical actions of all agents involved helps t o determine the organisational and operational capabilities of settlem ent-based credit committees required to tap savings and mobilise exter nal resources. Dynamic changes in scope and complexity of the committe e's functions evolve over four distinct development stages, in which i ntensifying linkages with commercial banks facilitate the establishmen t of channels to deliver formal credit.