Ramanagaram Financial Diaries: Loan Repayments and Cash Patterns of the Urban Slums

This paper provides the preliminary analysis of a three-month pilot study tracking daily cash inflows and outflows of 20 households in two urban slums of Ramanagaram indebted to microcredit organizations. The study examined the actual use that household made of borrowings from MFIs and the pattern and sources of cash inflows and outflows that result from managing the rigid microfinance loan and repayment structure. A key finding of the study was that these households were indebted to multiple MFIs. Findings include:

• Each household spent a large part of its budget towards servicing loan repayments;
• Loan repayments vied with food in the expenditure profiles of most households;
• Households recycled their debts to a substantial extent;
• Over 27% of borrowings were being used to finance various kinds of borrowings including those from MFIs and SHGs;
• Most of these borrowings were taken as small sums from several entities and were not used for productive purposes.

The study indicates that for urban poor, organizing lives around multiple lending organizations introduces serious limitations on their schedules and stress of managing debts of small amounts from various lenders.