CGAP Blog Series on Over-indebtedness

Rich Rosenberg:

In a video-taped interview seven months ago, I expressed a degree of optimism that, historically at least, we had not been over-indebting unacceptable numbers of poor microborrowers, based on an admittedly tenuous inference from high repayment levels in most of the world. Since then, various conversations and data points have left me less comfortable with that inference.

If you were unfortunate enough to miss the session at the Financial Access Initiative conference last October at which Rich spoke about over-indebtedness, you get a second chance now. CGAP's main blog is running a series on the subject.The first post went up Monday and features the (brilliant) video Rich mentioned:Today's second post outlines his thinking on the devilishly difficult challenges of defining and measuring over-indebtedness. More posts are to come from other authors.In my conversations with Rich (some electronic, some old-fashioned), his strongest question has been this: if people keep repaying at such high rates as are reported, year after year after year, and if their main incentive to do so is to maintain access to credit, then doesn't that mean that most people are doing reasonably OK with credit? If debt traps were common, wouldn't repayment rates fall at some point? Sure, repayments rates can look good for a few years even when things are bad (as in a bubble) but at some point if things keep not crashing, doesn't it become reasonably probable that most people are doing OK?That was before the India crisis. Inevitably, that colors the conversation now.