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Multiple Loans: How Frequently do Rural Poor Opt for Multiple Borrowing?
Analyzing multiple borrowing in Andhra Pradesh, India
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8 pages
This focus note provides insights into the behavior of 153 households in two districts of Andhra Pradesh (AP), India that had taken more than one loan within two successive months. It revisits findings from the Centre for Micro Finance’s (CMF) study on access to finance in AP, which was conducted in 2009.
The first study found that multiple borrowing is common among rural poor, with an estimated 84 percent of households having two or more loans from any source. It also implied that multiple borrowing could be driven by an inability to obtain sufficient credit from a single source. The current study revisits these implications. Findings include:
- Close to 98 percent of reported loans were borrowed from informal sources;
- Friends, family and relatives provided smaller sized loans;
- Landlords, employers and moneylenders provided bigger loans;
- Majority of the households reported taking one or more loans for household consumption, health expenditures and buying agricultural inputs;
- Only 9 percent of households took on another loan to repay old debts;
- Median loan size exclusively taken for buying agricultural products was two and five times more than the loan size exclusively taken for health and household consumption respectively.
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