Over-Indebtedness Among Microfinance Borrowers: A Poverty Line Based Approach.

18 Pages Posted: 20 Dec 2017 Last revised: 21 Dec 2017

Date Written: December 16, 2017


The current literature of over-indebtedness in general and microfinance in particular suffers from a serious weakness of not being able to identify an objective threshold of indebtedness level, beyond which a household can be treated as over-indebted. This paper tries to overcome this weakness by exploiting the peculiar situation in India of having a formally identified poverty line. We arrive at a measure of over-indebtedness by using per capita consumption expenditure at poverty line. Based on this definition about 39% of sample respondents (N = 210) were found to be over-indebted, mainly driven by economic shocks, earnings volatility, household income and expenditure levels, number of credit arrangements and dependence on informal sources of credit. Findings of the study highlight the need to prioritize income generating schemes over credit access promotion schemes as instruments of social policy.

Keywords: Microfinance, Over-indebtedness, Poverty line

JEL Classification: C93, C51, D14, D92, I31

Suggested Citation

Puliyakot, Sunil, Over-Indebtedness Among Microfinance Borrowers: A Poverty Line Based Approach. (December 16, 2017). Available at SSRN: https://ssrn.com/abstract=3088917 or http://dx.doi.org/10.2139/ssrn.3088917

Sunil Puliyakot (Contact Author)

Rajagiri Business School ( email )

Rajagiri Business School
Rajagiri Valley (PO)
Kochi, Kerala 682039
9787702003 (Phone)
9787702003 (Fax)

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