Nationwide survey of 15 states exposes microfinance debt trap for women

By Jag Jivan

A nationwide survey has exposed the growing debt crisis faced by women borrowers in India’s microfinance sector. The study, conducted by the All India Democratic Women’s Association (AIDWA) across 15 states and covering 6,685 women, reveals how non-banking finance companies (NBFCs) and microfinance institutions (MFIs) have become sources of distress rather than relief.

According to the survey, more than 60% of women have taken loans from at least two lenders, and nearly one-third are indebted to more than three. Many are compelled to take fresh loans to repay older ones, with between 40% and 50% trapped in this cycle of indebtedness. Almost half of those surveyed reported debt burdens ranging from ₹50,000 to over ₹2.5 lakh, even though most households earn less than ₹10,000 a month.

The social impact is equally troubling. Over 30% of respondents reported harassment and verbal abuse from recovery agents, while 5% said they had faced physical or sexual violence. Women are also being forced to pledge jewellery, Aadhaar cards, or even house papers as collateral—practices that go against Reserve Bank of India (RBI) guidelines.

The Centre for Financial Accountability (CFA), which released the report From Credit to Crisis: India’s Women in Debt, blamed government policy for enabling this situation. The report notes that public sector banks have steadily withdrawn from direct lending to poor women, instead channeling funds to NBFCs and MFIs that charge interest rates as high as 22–26%. With shrinking state support for food, health, housing, and education, women are being pushed to borrow simply to survive.

“This is not financial inclusion but financial exploitation,” the CFA said in a statement. “When institutions meant to empower women push them deeper into debt and expose them to harassment and violence, the model must be rethought. The government and the RBI can no longer shield NBFCs and MFIs—they must ensure accountability in lending.”

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