Is Rural Household Debt Sustainable in a Financially Included Region? Evidence from Three Districts of Kerala, India

Tressa Jacob Remya (), Rudra Sensarma and Nair Gopakumaran ()
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Tressa Jacob Remya: Indian Institute of Management Kozhikode
Nair Gopakumaran: NABARD, Arunachal Pradesh Regional Office

No 430, Working papers from Indian Institute of Management Kozhikode

Abstract: This paper explores whether an institutional change brought about by financial inclusion has resulted in sustainable debt management by households. Towards this end, we analyse household indebtedness and its various dimensions using primary data collected from 600 households across 3 districts of rural Kerala in India. We find that more than half of the sample households are indebted and this is quite high when compared to the national average. Using two distinct methods (flow and stock analysis), we assess the repayment capacity of households. While the flow analysis based on interest and income comparison shows that debt is sustainable, the stock analysis indicates an alarming debt situation when we consider the illiquid nature of land assets. Both agricultural as well as non-agricultural households appeared to be in debt trap in this analysis. Our findings suggest that attempts to improve debt literacy could help in improving the rural poor’s financial wellbeing.

Keywords: financial inclusion; household debt; repayment capacity; rural India (search for similar items in EconPapers)
Pages: 40 pages
Date: 2021-03
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Journal Article: Is rural household debt sustainable in a financially included region? Evidence from three districts of Kerala, India (2022)
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