La escuela en la actual Sociedad de la Información

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shopkeeper credit. I found that the borrowing choices of salaried microborrowers are influenced by a range of factors other than interest rates such as ease of access, high loan ceilings, loan forgiveness, installment arrangements, level of pressure on timely repayments, and the need for collateral or bribes. Guerin et al. (2011) emphasise borrowers’ preference for low interest, flexibility in repayment arrangements and avoidance of shameful debt whereas Alam and Molla (2012:51) call for more flexibility in credit delivery, gender preference, loan size, disbursement and repayment schedules and interest rate charges. Some financial diary households cannot access certain types of loans because of exclusionary criteria, for example age, gender or ethnic restrictions, land ownership, training requirements or restrictions on loan use. In addition, the extent of lender pressure on repayments affects the borrower’s strategy for repaying multiple loans and leads to prioritisation of NGO loan repayment. Although borrowers characterise loan types in terms of their various advantages and disadvantages, their borrowing preferences can exacerbate the risk of household over-indebtedness when they choose loan types with a higher financial cost or avoid making repayments on higher-interest loans.

Research Objective Three

Explore how the income, expenditure and financial behaviour of salaried-microborrowers has influenced household over-indebtedness.

KHCP salaries are the main income source for the households of all financial diary participants, supplemented in some cases by secondary income earners and livestock income. The household sizes range between three and eight members and many provide financial support to people outside the household such as elderly parents, nieces and nephews. Most households spend within their income for basic household needs but rely on loans for intermittent expenditure such as land purchase, other productive investments, hostel accommodation, tertiary education, marriages, funerals, religious festivals and building, repairing or improving homes. Because they borrow large amounts or take multiple loans they often struggle to manage repayments from their salaries, leading to further loan taking to repay earlier loans. In only one of the households was poor financial management a contributing factor to over-indebtedness. There is no noticeable savings culture amongst the financial diary participants, other than savings compelled by their employers or lending organisations, and they did not lend to others. Many factors have influenced household over-indebtedness including insufficient income, inadequate housing, the low profit margins and risks associated with productive investments, social aspirations such as better housing and higher quality education for their children, and cultural expectations surrounding inheritance, religious festivals, weddings and the giving of dowry.

CBB

Contribution 1

The socio-cultural aspects of debt need to be better researched and understood by those designing microfinance programmes and other programmes to assist the indebted poor.

The clear preference of academics to focus on objective signs of over-indebtedness such as the borrower’s ratio of income to debts (for example Maurer & Pytkowska, 2010) fails to recognise that it is not just the amount of debt that is relevant. Certain types of debt can be more socially stigmatising than others, and this influences the type of lender that borrowers approach for funds and the strategies by which they manage repayments. This is recognised by Guerin et al. (2011) but less so by other academics (see Khandker et al., Maurer & Pytkowska, 2010, Alam, 2012). For example, NGO lenders in Bangladesh tend to visit the borrower’s home and demand immediate repayment if they fail to pay their weekly or monthly installment at the sub-centre. To avoid the stigma of this borrowers often take haolatsfrom family or friends to make up the difference or prioritise loan repayment over other household needs. Those assisting the indebted poor need to understand that they do not make decisions purely based on financial factors. Households in Bangladesh are also community-orientated, as this study shows, and often try to hide their extent of over-indebtedness so they do not lose status in the community. To be considered over-indebted leads to fewer social invites because they are not able to reciprocate (Guerin et al, 2011), and leads to a sense of isolation for the borrower.

Contribution 2

Using a continuum to understand levels of indebtedness

Drawing on various over-indebted symptoms identified by focus group participants, I created a continuum of over-indebtedness in chapter four (Figure 9), which is reproduced below. Even those with no debt may have to borrow in future, as many households struggle to put aside sufficient savings for major expenses. There is a clear difference between borrowers who are ‘indebted’ but able to make timely repayments on all of their loans using disposable income, and those who are ‘over-indebted’ as they generally resort to further borrowing to pay their loan installments. Seriously over-indebted households face constant lender visits which leads to social stigma, and the sale of assets or a reduction in their standard of living. Those who are ‘extremely over-indebted’ are forced to take the drastic step of selling off land or facing a

shalish or court case to resolve outstanding debt.