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Characterizing the Over-indebted: An Event History Analysis of Financial Diaries

Author

Listed:
  • Sachit Rao
  • Navitha Parthasarathy

Abstract

Low-income households (HHs) face vagaries in income and expenses. These often require the HH to borrow and can cause the HH to become over-indebted. Financial Diaries capture information on incomes, expenses, loans, and shocks with fine granularity and at frequent intervals. In this article, such a dataset is analyzed using the event history analysis approach in order to quantify the risk of HHs becoming over-indebted. Over-indebtedness is defined using two rubrics: monthly debt-to-income ratio and sacrifices made by the HH. The results of this analysis may be used by institutions to customize financial instruments based on the characteristics of an HH. JEL Codes: C410, C810, C830

Suggested Citation

  • Sachit Rao & Navitha Parthasarathy, 2022. "Characterizing the Over-indebted: An Event History Analysis of Financial Diaries," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 21(3), pages 245-264, September.
    • Handle: RePEc:sae:emffin:v:21:y:2022:i:3:p:245-264
    DOI: 10.1177/09726527221079957
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    References listed on IDEAS

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    1. Nitin Kumar & Rudra Sensarma, 2017. "Efficiency of Microfinance Institutions in India: A Stochastic Distance Function Approach," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 16(2), pages 151-168, August.
    2. Jessica Schicks, 2013. "The Sacrifices of Micro-Borrowers in Ghana -- A Customer-Protection Perspective on Measuring Over-Indebtedness," Journal of Development Studies, Taylor & Francis Journals, vol. 49(9), pages 1238-1255, September.
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