Study on the Drivers of Over-Indebtedness of Microfinance Borrowers in India: An In-Depth Investigation of Saturated Areas

What factors lead to over-indebtedness, and how can it be prevented?

Despite the rapid growth of microfinance in India in the past few years, incidences of over-indebtedness (OID) have been reported in various parts of the country. This study aims to provide a comprehensive understanding of the problem of over-indebtedness in selected areas, in order to gain a better perception of client OID in the microfinance sector and the extent to which different factors, especially multiple borrowing, can lead to OID. Specifically, the study explores:

  • Understanding the level and nature of OID of microfinance institution clients and their households from all sources (formal and informal) in the selected areas;
  • Identify the factors responsible for this over-indebtedness and study how they correlate with each other in different thresholds of OID;
  • Investigate the linkages, if any, between multiple borrowings and cases of over-indebted clients;
  • Map out any struggles faced by the clients in repayment of loans;
  • Suggest remedial measures, if necessary, to microfinance institutions and credit bureaus in order to prevent the sector from being hit by another crisis.

About this Publication

By Srivastava, S. , Mohan, S.