Financial Status of Rural Poor: A Study in Udaipur District

Abstract

The paper discusses the findings of a primary survey carried out in one village in Udaipur District of Rajasthan. The objectives of the study were to understand the financial flows of the rural poor and to have an insight into their financial status. Data was collected from 36 households classified as below-poverty-line on various aspects through a questionnaire.

The findings indicate that the overall levels of indebtedness of these poor families are not alarming, as they have sufficient assets. The poor borrow from various sources to meet their needs. The most striking finding was that the poor resort to borrowing from the local money lender even for asset purchase, while they stash away their savings in earthen pots. Both these indicate the failure of the financial institutions in capitalizing on a small market opportunity.

Most of the borrowings particularly for social consumption come from relatives – the poor seem to be juggling around with loans that cost heavily along with some interest free informal loans to manage their liquidity. The findings also support the possibility of differential pricing of loan products using social controls on end use monitoring – this is evidenced by the controls exercised by relatives in funding social consumption beyond certain limits. On the savings it was possible to conclude that the poor look for security more than liquidity and returns as an attribute. This study re-confirms the earlier findings that health related expenses are one of the major causes of indebtedness amongst the poor.