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

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  • Remya Tressa Jacob

    (Indian Institute of Management Kozhikode)

  • Rudra Sensarma

    (Indian Institute of Management Kozhikode)

  • Gopakumaran Nair

    (NABARD, Arunachal Pradesh Regional Office)

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.

Suggested Citation

  • Remya Tressa Jacob & Rudra Sensarma & Gopakumaran Nair, 2021. "Is Rural Household Debt Sustainable in a Financially Included Region? Evidence from Three Districts of Kerala, India," Working papers 430, Indian Institute of Management Kozhikode.
    • Handle: RePEc:iik:wpaper:430
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