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Home Credit survey of how India borrows in 2021 shows recovery in positive consumer borrowing
Posted on November 16, 2021
- The HIB survey shows a sharp drop in household borrowing to 4% in 2021 from 85% in 2020, indicating a transition from borrowing based on needs to borrowing based on desire
- Sharp increase in borrowing needs for business needs or setting up, home renovations, purchasing durable consumer goods in the post-pandemic era
- Almost 40% of Millennial-Led borrowers willing to skip the online lending pathway versus traditional offline channels for future borrowing
- Borrowing is high in cities like Bangalore (67%) and Hyderabad (49%), followed by Delhi (42%) and Jaipur (39%)
New Delhi : Home Credit India, a local arm of the international consumer credit provider with operations in Europe and Asia and committed to fostering financial inclusion in India, today released its annual ‘How India Borrows’ (HIB ). The 2021 HIB study concludes the year 2021, after the second wave of the Covid-19 pandemic, shows a largely positive trend in consumer borrowing and, therefore, reflects a return to normal as consumer sentiment is positive and dynamic in terms of economic recovery. The study provides insight into India’s borrowing patterns and individual reasons during and after the second wave of Covid-19.
The HIB study was conducted in 9 cities which included Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Calcutta, Patna, Ranchi. The main sample size is over 1200 respondents (Home Credit clients) in the 21-45 age group, with an income of less than Rs 30,000 per month.
The research report shows a sharp drop in borrowing for household current expenditure to 4% in 2021 from 85% last year, showing a shift from borrowing based on need to borrowing based on desire. There was a notable increase in borrowing for business creation or expansion (28%), followed by small loans or credits for the purchase of durable consumer goods to 26% of total borrowing. Other positive reasons were home renovation / new construction (13%), medical emergency (2%), vehicle loan (9%), marriage (3%), student loan (2 %), investments and repayment of a previous loan et al (1%). The survey identified a more than 50% increase in borrowing in 2020, but borrowing for households under management has declined.
Another positive element has thwarted the trend towards digital empowerment. The HIB report shows that nearly 40% of borrowers have expressed a willingness to switch to digital platforms to take loans, i.e. over 15% of clients who have already switched to the online lending journey instead of traditional offline channels. . While technology has been a key enabler, survey results reveal that, like all digital trends, chatbot familiarity and trust is governed by age – with younger customers in the lead.
Speaking on the survey, Mr. Vivek Kumar Sinha, Marketing Director, Home Credit India, said: âThe annual internal consumer borrowing trends study, How India Borrows 2021, indicates the resumption of positive borrowing as people struggle to recover from the varied losses suffered during the pandemic year 2020. This resilience of consumers is reflected in the increase in borrowing of business loans, home renovations and other positive reasons in relation to borrowing mainly to meet the needs of households and families in 2020. The pandemic has also led to the acceleration of digitization as a growing number of borrowers show a preference for adopting an online lending pathway for future borrowing, hence enhancing digital empowerment in financial services, although the penetration of financial literacy is always a work in progress.
Further adding, he said: âHome Credit believes in empowering people’s lives through financial inclusion and credit penetration for all of its markets especially in India and the HIB study is one approach. to understand changing borrowing behavior and then provide appropriate support to consumers, bringing forward the key factors for credit enhancement, access to financial loans to increase income, increase resilience and improve life .
With many people experiencing job losses, pay cuts, this has resulted in an increased need for consumers to relaunch businesses this year. Regionally, survey results indicate that Bengaluru and Hyderabad have recovered more quickly from the pandemic, with 41% of respondents in Hyderabad taking loans for business revival and 42% of respondents in Bengaluru for purchases of durable consumer goods.
While states like Bihar and Jharkhand have the lowest internet population at 24% and 29% respectively, digital literacy in terms of mobile phone use in Patna and Ranchi has been recorded at 64% and 65%. respectively.
Research also found that Kolkata and Delhi have a higher proportion of female borrowers compared to cities like Jaipur. Respondents interviewed during the research pointed out that with some grip and guidance in financial and digital literacy, their lending journey will be hassle-free and independently.