A pan-India footprint of over-indebtedness of microfinance borrowers from an exploratory survey
Over-indebtedness of borrowers is a burning issue threatening the social mission of microfinance as a means for financial inclusion of the ‘unbanked’ poor. Action-oriented research is called for owing to rapid changes in the global financial industry. Longitudinal panel studies to track multiple borrowing that often leads to over-indebtedness take time and are costly. This paper presents results from a single household survey that tracked the loan history of the four most recent loans of each household for 1,433 women borrowers across 13 states in India. The analysis shows significant differences by region and age. We suggest that microfinance institutions should not use a one-size-fits-all model for designing products, including setting of interest rates, and that this can contribute to improved financial management and reduced over-indebtedness.