The Challenge

Access to formal credit remains a persistent challenge for small business owners in emerging economies, particularly for female entrepreneurs who are more likely to rely on informal lenders charging exorbitant interest rates. Market vendors in Tamil Nadu face acute credit constraints as they require short-term, flexible working capital that traditional microfinance institutions do not provide. As a result, vendors frequently turn to moneylenders charging around 40 percent APR or suppliers offering credit at rates as high as 5 percent per day. These costs drain business profits and trap vendors in cycles of debt that prevent reinvestment and growth, with women potentially facing even greater challenges in accessing appropriate credit.

Given these challenges, innovative credit products could allow greater flexibility for borrowers and prevent them from having to take up informal lending. One of these innovations is Tatkal-M, a loan product designed specifically for market vendors in Tamil Nadu that requires short repayment periods but at a lower interest rate similar to microfinance. Despite these advantages, little is known about whether formal alternatives such as Tatkal-M can effectively compete with informal lending in this context, or whether male and female market vendors utilize such products differently. Understanding the impact of this innovation—and specifically its effects on female entrepreneurs—has important implications for financial inclusion and women's economic empowerment across India and similar contexts where market vendors remain underserved by traditional financial institutions.

The Evaluation

In collaboration with J-PAL South Asia and Sanghamithra Rural Financial Services, researchers will implement a survey with 800 market vendors at the end of an ongoing randomized evaluation in Tamil Nadu in South India to evaluate the impact of Tatkal-M.

Researchers will focus both on the loan’s overall impact, given this product is the first of its kind, and impacts specifically on women—who make up 30 percent of borrowers. Researchers will also explore why initial results in the middle of the intervention suggest women are more likely than men to divert the loan for non-business purposes, and if there are product modifications that could address this.

Results

Results will be available in 2026.

Implementing Partners