Financial Status of Rural Poor: A Study in Udaipur District

The paper presents and discusses the findings of a primary survey, in an Indian village, aimed at understanding the financial flows and status of the rural poor. The survey attempts to build an understanding for better design of savings and loan products in the microfinance sector.

The data set comprises 36 households that fall in the 'below poverty line category'. The survey finds:

• Not a very high level of indebtedness is observed amongst the families surveyed;
• Borrowing from local money-lender is common even for asset purchase;
• Health related expenses as one of the major causes of indebtedness;
• Indicated failure of financial institutions to penetrate the savings and loan market;
• Informal loans from relatives/ friends is common for social consumption purposes;
• Possibility of differential pricing of loan products using social controls on end use monitoring;
• The poor rate security of their savings over other features like liquidity and returns.

Finally, the paper:

• Suggests the issues that need to be addressed at a larger scale;
• Indicates carrying the study forward for better designing of microfinance services to the poor;
• Identifies the limitations of the current study.