Why are Kerala’s poorest families falling into debt? Home loans and medical bills top the list

Thiruvalla: In Kerala, only 4% of the state’s ultra-poor have fallen into a debt trap due to borrowing for their children’s education. In contrast, a remarkable 25.4% ended up in debt after taking loans to build homes.

Medical expenses come a close second, pushing 23.5% of these families into financial distress. Loans for children’s weddings accounted for debt in 6.8% of cases. These insights come from data compiled by the State Decentralised Planning Committee, which analysed debt trends among Kerala's ultra-poor, with information collected at the district level.

A total of 12,326 ultra-poor families across Kerala have borrowed money from various institutions. In districts like Thiruvananthapuram, Kollam, Ernakulam, Thrissur, Palakkad and Malappuram, over 1,000 families each have taken loans.

Worryingly, 19.6% of borrowers have not repaid even a single instalment, including interest. Around 40% have repaid less than 25% of the loan amount.

Who are they borrowing from?

The majority have taken loans from co-operative banks, accounting for over 32% of the total debt. Kudumbashree’s microfinance schemes follow, covering 25% of borrowers. Commercial banks provided loans to 12.7%, while private moneylenders account for about 12%.

How big are the loans?

Most loans taken fall between ₹10,000 and ₹2 lakh, with 75% of families borrowing within this range. Loans between ₹2 lakh and ₹5 lakh make up about 14%, while 4% of families have debts exceeding ₹5 lakh.

Alarmingly, nearly 6% of the ultra-poor are currently facing repossession or recovery proceedings due to unpaid loans.