The Burden of Microfinance Debt: Lessons from the Ramanagaram Financial Diaries

type="main"> The Indian microfinance institutes (MFI) crisis has spawned several debates on the MFI movement. What is sorely missing are the perspectives of the clients. Using the financial diary methodology in a study of 90 poor households in Ramanagaram town, in the district of Ramanagaram, Karnataka, India, this article analyses how household cash flows are impacted by the presence or absence of MFI loans. During the study period (September 2008–July 2009), an informal ban on MFI repayments was called which offered a rare opportunity to collect data from the same households in the presence and absence of MFI loan repayments. An analysis of their expenditures points to the genesis of the crisis, namely that MFI loan repayments led to impoverishment since these were made at the cost of basic household consumption, like food staples. The authors use the Ramanagaram financial diaries to provide a counter narrative to the dominant Yunusian Grameen narratives on microfinance and poverty alleviation by not looking at microfinance loans in isolation but by situating them in the context of the totality of consumption, cash inflows and debt that govern the lives of the poor.