1

Centre for Micro Finance at IFMR Research

Access to Finance in Rural Andhra Pradesh, 2009

Doug Johnson and Sushmita Meka

The Survey

First survey of household access to finance which:

– includes information on microfinance– is representative of an entire state’s (Andhra

Pradesh) rural population– discloses data publicly

Objective

We wanted to learn more about:

– The state of financial inclusion in rural areas– The number of people reached by various types

of financial service providers.– The demographic and economic characteristics

of the clients of various financial service providers (as well as the unbanked).

Methodology

Survey details:– 8 districts (randomly selected from 22 districts

of AP)– 64 villages (randomly selected from these 8

districts)– 1920 households (randomly selected from the

64 villages)

Survey conducted in June to November 2009 using a rigorous random sampling methodology

BORROWING

5

Indebtedness by Source

6

Share of Total Loan Outstanding by Source

7

Usage of Loan Money by Lender Type

8

Bank SHG MFI Informal

Buy agricultural inputs 58% 19% 13% 20%Consumption 27% 50% 32% 25%Repay old debt 15% 20% 25% 7%Health 11% 19% 11% 25%Home improvement 10% 13% 22% 14%Start New Business 2% 2% 3% 1%Marriage 4% 2% 5% 12%Other festival 1% 4% 4% 5%Education 4% 6% 4% 5%Purchase stock for existing business 3% 4% 10% 3%

Buy livestock 3% 6% 6% 2%Purchase land 1% 1% 1% 1%

Multiple Borrowing

9

.0718

.0994

.1228.1285 .1264

.1207

.1035

.0749

.0588

.0317

.0193 .0177

.0094 .0073.00265.2e-04.001 .0016 .0021

0.0

5.1

.15

Sh

are

of H

ouse

ho

lds

0 5 10 15 20Total Number of Loans

Source: A2F, 2009

Share of Households with Multiple Loans from a Given Source

10

Multiple Borrowing by Active Clients of a Given Source

11

Multiple Borrowing

• Multiple borrowing also prevalent among the better off (represented by higher PPI scores)

• Many cases of multiple borrowing appear to be driven by an inability to obtain sufficient credit from a single source– A large share of households with multiple loans

outstanding took two or more loans in the same month for the same purpose indicating that they are unable to fulfill their credit needs from one single source

12

Share of Total Outstanding from MFI Loans

13

SAVINGS

14

Share of Rural AP Households with a Savings Account by Bank Type

Share of Households with a Savings Account

Share of Households with a Savings Account (excluding 0 and Rs 50 balance accts)*

Private Sector Bank 1% 1 %

Public Sector Bank 41 % 36 %

Regional Rural Bank 14 % 13 %

Cooperative Bank 14 % 12 %

Post Office 42 % 11 %

Any of the above 78% 61 %

Stated Reasons for Opening Savings Account

18

Thank you

Districts Selected for Surveying

19

DistrictShare of poor

from NSSOPoverty Stratum MFI penetration MFI stratum Adjusted MFI Stratum

Final Stratum

Selected for Surveying?

Medak 9.3 Not so poor 11.3 High penetration High penetration 1 YES

Nalgonda 5.4 Not so poor 14.5 High penetration High penetration 1 YES

East Godavari 3.3 Not so poor 12.5 High penetration High penetration 1 NO

West Godavari 4.4 Not so poor 12.3 High penetration High penetration 1 NO

Krishna 2.8 Not so poor 18.7 High penetration High penetration 1 NA

Guntur 3.9 Not so poor 13.2 High penetration High penetration 1 NO

Vizianagaram 4.7 Not so poor 4.7 Low penetration Low penetration 2 YES

Cuddapah 5.4 Not so poor 9.9 High penetration Low penetration 2 YES

Karimnagar 7.2 Not so poor 5.5 Low penetration Low penetration 2 NO

Warangal 0.9 Not so poor 6.1 Low penetration Low penetration 2 NO

Srikakulam 6.0 Not so poor 4.4 Low penetration Low penetration 2 NO

Nizamabad 23.1 Poor 9.1 High penetration High penetration 3 YES

Visakhapatnam 18.9 Poor 10.6 High penetration High penetration 3 YES

Khammam 13.1 Poor 10.1 High penetration High penetration 3 NO

Nellore 14.1 Poor 10.9 High penetration High penetration 3 NO

Kurnool 24.6 Poor 8.6 Low penetration High penetration 3 NO

Mahbubnagar 11.8 Poor 2.9 Low penetration Low penetration 4 YES

Prakasam 9.9 Poor 7.7 Low penetration Low penetration 4 YES

Adilabad 26.1 Poor 4.0 Low penetration Low penetration 4 NO

Rangareddi 10.9 Poor 6.0 Low penetration Low penetration 4 NO

Anantapur 20.2 Poor 4.1 Low penetration Low penetration 4 NO

Chittoor 15.9 Poor 8.4 Low penetration Low penetration 4 NO