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Data Views

These unique demand-side views of financial services access and utilisation by India's paid workforce have been produced jointly with IIMS Dataworks and are based on the findings of the Invest India Incomes and Savings Survey 2007.
 
  • 83% of all loans taken by borrowers aged 18 to 59 years between 2005 and 2007 were taken by rural borrowers.  The single most significant purpose for which these loans were taken was to deal with a variety of financial emergencies including medical emergencies, with 42% of loans taken for this purpose. Of the remaining loans that were taken, 12.5% were farm loans and 10% were for business requirements.
  • Banks service less than 10% of the loan requirements of low income workers.  Between 2005 and 2007, low income workers made 25 million loans and only 9% of these were sourced with banks. The main purpose for which banks extended loans were farm loans, while the main purposes for which loans were taken from non-bank sources was financial emergencies. For those with outstanding loans the average debt was equivalent to 118% of their average annual earnings.
  • 82% of all loans made to members of the Indian workforce between 2005 and 2007 were sourced either with banks, moneylenders or relatives and friends.  Bank lending was more concentrated in collateral based loans such as property and other asset purchases, and in rural areas farm loans featured prominently in bank lending. Loans from moneylenders and social networks encompassed the full span of loan requirements but emergency loans were made almost exclusively from these two sources.
  • Only 188 million paid workers in 2007, or 58% of all paid workers at that time, had savings and investments of some kind.  Of their total annul savings flows in 2007, 78.8% of savings were directed at bank and postal savings, 9.4% at life insurance plans, 3.6% at mutual funds, 2.5% in direct equity investments, 1.1% at non-bank financial companies, 0.4% in community based savings schemes and 4.2% in gold investments.
  • Of the 11 million individuals in India planning to buy a house in 2008-09 two thirds are planning to take loans for the purpose.  Most of these loans will be sourced with banks and NBFCs. As the budgets for over 90% of these new home buyers will be less than 10 lakhs, the loan size requirement for most borrowers will be less than 5 lakhs.
  • Stress related loans accounted for 40% of all retail loans in India in the two years between 2005 and 2007.  The single most significant source of these loans in urban areas was relatives and friends, followed by moneylenders, and in rural areas the pattern was the same but in the reverse order. Banks played a very minor role in meeting these loan requirements having extended only 10% loans for this purpose to such borrowers. Of the 11 million individuals in India planning to buy a house in 2008-09 two thirds are planning to take loans for the purpose. Most of these loans will be sourced with banks and NBFCs. As the budgets for over 90% of these new home buyers will be less than 10 lakhs, the loan size requirement for most borrowers will be less than 5 lakhs.
  • 31% of borrowers in India continue to source loans with moneylenders. In the latter half of 2007 the aggregate  outstanding value of moneylender loans made in the two years previous was Rupees 13,700 crore. While rural borrowers were the heaviest users of moneylenders, moneylenders managed to extend a significant number of loans, 2.8 million, to urban borrowers over this period also. Moreover, of all moneylender loans 3% were made to individuals with annual incomes above Rupees one lakh.
  • 144 million (or 45%) of the 321 million working age Indians with cash incomes have bank accounts. Coverage levels  range from a high of 76% in metro cities to a low of 38% in rural areas. While women represent 12.7%, or one in eight paid workers, they represent only 8% of bank customers. Among paid workers, those who are married are 1.2 times more likely to have a bank account and those over the age of 25 years are 1.6 times more likely to have an account.
  • Bank customer debt to moneylenders in 2007 was an estimated Rs.14,000 crore.  The largest single group of these borrowers were SBI customers but even private banks had significant number of customers behaving in this way. For example, an estimated 25,000 ICICI customers took loans with moneylenders in 2007. The failure of banks to service these credit requirements is a lost business opportunity for banks as loan default rates with moneylenders generally are low.
  • Only 40 million of India’s 321 million paid workers, or 12.7% of all paid workers, are women.  Over 75% of these women are married and 17% are widowed or divorced, 80% reside in rural areas, only 9% have graduate education qualifications and 63% have not progressed beyond primary level education. The largest single group of women in paid employment are employed as wage labourers that account for over 52% of all paid women workers.
  • Shopkeeping is the dominant form of small business in India accounting for 50% of all small businesses.  In 2007 this translated to around 1.6 crore shopkeepers in the country. Most are small turnover operations producing only modest incomes for their operators. In 2007, nearly half of all shopkeepers in the country earned less than Rs. 68750. The largest single retailing type was India’s 88 lakh grocer shops. While being the most numerous retailing type, grocer shops are among the least profitable of the various retailing types returning an average annual income to most operators of Rs. 43,750 or less.
  • 32.7% of people receiving remittances in India are farmers.  All but a small fraction of this remittance income is sourced from inside India itself and not from family members working in foreign countries. In 2007, the value of these remittances was Rupees 5,020 crore. These remittance inflows into farm households have a beneficial impact on both the incidence and severity of rural poverty and need to be supported in sensible ways by government such as providing free or subsidised secure cash transfers through the bank and money transfer solutions companies.
  • 105 million paid Indian workers had active life insurance plans in 2007.  Up to 20% of the currently uninsured population has bought life insurance in the past but their policies have since matured or lapsed. Prospects for significant growth in the size of the customer base in the future are very bright as the size of the urban market where life insurance already sells very well continues to grow strongly and the rural market for life insurance at this point remains significantly undersold.
  • Over 50% of the paid members of the Indian workforce do not understand the concept of inflation.  With double digit inflation currently this means that the saving of many people are under more threat than would otherwise be the case because many would not be seeing the desirability of rethinking their normal savings preferences. Equally, many may make inadvisable expenditure decisions because they are not factoring in inflation to the decisions they make.
  • The aggregate accumulated savings of the customers of informal finance arrangements in India in 2007 was US$5.5 billion.  The underpinning customer base is overwhelmingly rural based with nine in ten people participating in informal finance being rural residents. Women figure more prominently in informal finance than in any other finance sector where they comprise 24% of total customers, and in the microfinance and Self Help Group sector 39% of customers.
  • 74% of the paid rural workforce does not have life insurance cover.  This compares with a figure of 53% in urban India. However, the demand for life insurance in rural India is growing strongly and in 2008 a further 12 million rural Indian workers will buy life insurance which will increase the aggregate size of the rural life insurance customer base by 20%. These new customers will buy insurance for LIC and private insurance companies both and as private insurers extend their reach into rural India their share of rural business will grow with that.
  • 54% of the Indian paid workforces are home owners. Home ownership rates are higher in rural areas at 57.5%, with the  corresponding percentage in urban areas being 47%. While most of these homes were acquired more than 10 years ago, housing demand, and with that home ownership rates, have lifted sharply in the past three years and may grow by as much as a further 10% in 2008-09.
  • 90% of Indians in paid work do not know what a mutual funds is and this is the main barrier facing the industry in building a  significant retail customer base. Once people are aware of mutual fund investment opportunities their inclination to invest is quite high with nearly one in five choosing to do so. The life insurance industry has already grown mass market of over 100 million insurance customers among members of the paid workforce. On a directly comparable basis, if mutual funds had the same visibility among members of the paid workforce the size of the retail mutual fund customer base would already be approaching 50 million investors.
  • 94% of working age Indians who buy gold do so mainly for social and cultural reasons and not investment purposes.  One third regards gold as a risky investment. Of the total investor population in India, only 6% do so as a preferred investment choice and 60% of those behaving in this way have annual incomes of less than Rupees 100,000. Some 61% of gold investors were urban and not rural residents. In 2006/2007 the estimated value of gold investments made by this group was US$6.4 billion.
  • The average Indian worker is not highly leveraged, with middle income groups on average having outstanding debts equivalent to only 60% of their annual incomes.  For high income individuals with annual incomes above Rupees 10 lakh debt burdens are lower again, being equivalent to only 21% of their annual incomes. Low income groups however are in a more serious situation as for the lowest income workers average debt burdens are equivalent to 118% of annual income.
  • No more than 20% of household savings in India are long term savings.  At the savings motivation level only 10% of people save and invest with wealth creation in mind, and minuscule numbers only contribute their own money to retirement savings schemes. The only popular long term savings products for smaller investors with annual savings less than Rs.10,000 is life insurance savings plans and in this case the share of total annual household savings devoted to such products is 19%.
  • The popular perception that membership of Self-Help Groups (SHGs) is exclusively  the poor is not accurate as an estimated 21 million individuals with incomes in India were members of SHGs in 2007, and between them they had placed more than Rupees 4,000 crore of their savings with SHGs. These savers also participate in bank, postal and insurance savings schemes in good numbers where over one half of them make regular savings.
  • According to IIMS Dataworks, 48% of micro-finance and Self Help Group (SHG) members in India have active loans.  The average outstanding value of these loans in 2007 was Rupees 32,000 which represented 230% of the average annual earnings of the group. Loans were taken mainly for financial emergencies that accounted for 46% of all loans taken in the previous two years. The other prominent purposes for which loans were taken were the purchase of residential housing, land or real estate.