Objective: This work assesses purpose and utilisation of credit taken by small borrowers and to observe whether the credit taken by the borrowers have been utilised as per the purpose stated while taking credit from different sources. This study has also made an attempt to find out the degree of such deviations between the purpose and utilisation of loans taken by small borrowers.
Methods/Analysis: This study based on primary data, collected from the four blocks and one municipal corporation area of the District of Darjeeling. In total, 244 households of small borrower of various social communities, who had taken loan of less than ₹ 200000 from lender was surveyed and the data, were collected in a structured questionnaire. The method of purposive sampling was used to collect sample and only the borrowers were interviewed.
Findings: It was found that near about 89% of the borrowers showed the cause of taking loans was businesses. The per percentage of taking loans for emergency need arising out of treatment, obsequies etc. was only around 9%. The percentage of the borrowers who were found in the vicious cycle of debt trap was around 6% of the total respondents. The deviation from the stated purpose while utilising the loans amount was observed and found that it was maximum in case of business loans.
Application: It was further found that the informal loans were utilised as per the stated purpose more than the loans taken from formal sources.