Ramanagaram financial diaries: loan repayments and cash patterns of the urban slums

Abstract

We provide the preliminary analysis of a three month pilot study tracking the daily cash inflows and outflows of twenty households in two urban slums of Ramanagaram, indebted to micro-credit organizations. Indebtedness of many of these households to multiple MFls was a result that came out very strongly from the analysis of the daily cash transactions of these financial diaries. Secondly, a rather disturbing finding related to this, is the size of each household's budget that goes towards servicing loan repayments. Loan repayments vied with food in the expenditure profiles of most of these households. Reinforcing this is our third finding that households are observed to recycle their debts to a substantial extent as evidence by over 27% of borrowings being used to finance various kinds of borrowings (including MFI and SHG borrowings). The fact that most of these borrowings are taken as small sums from several entities also does not boost the use of these funds towards productive purposes. All this points towards some pressing issues that need to be addressed in the fast-track growth of the microfinance sector in urban India.