5 key reasons why people in our country fall into debt

Alongside personal needs, many families in the country resort to borrowing in order to cope with emergencies and unexpected circumstances.

Individual needs vary. Some borrow to cover household expenses when in difficulty, others to build or repair houses. Borrowing is also common for children’s education or business investment.

According to a research published on Monday by the private research organisation Power and Participation Research Centre (PPRC), the main purposes of which people in the country incur debt.

The survey was conducted among 8,067 households, though not all were indebted. Findings show that 52 per cent of families had taken loans for one reason or another. The largest proportion borrowed to cover household expenses.

The most common reason for borrowing is to meet household costs. With income falling short of daily needs, many families depend on loans. They borrow from relatives, friends or neighbours to sustain their livelihoods. PPRC’s findings reveal that 29 per cent of indebted families borrowed primarily to cover household expenditure.

Major illnesses often compel families to borrow, as treatment costs are beyond their means. Daily wage earners, in particular, are forced to borrow whenever illness arises. Research shows that 10.75 per cent of indebted families borrowed specifically to meet medical expenses.

Building or repairing a home involves significant expense, often exceeding personal savings. Many families therefore resort to loans to cover construction or repair costs. According to PPRC, 10.13 per cent of households borrowed for this purpose.

Purchasing goods on credit from local shops has become routine, particularly among low-income households who are unable to pay in cash throughout the month. They typically repay once they receive their wages.

In many cases, families also take loans to settle outstanding shop credit. Research identifies this as the fourth most common reason, with 9.23 per cent of indebted households falling into this category.

Many people borrow to invest in small businesses, while wealthier families borrow for industrial ventures. PPRC’s study shows that 8.96 per cent of families incurred debt for business-related purposes.

Additional factors include agricultural costs, repayment of previous loans, education expenses, costs of going abroad, purchase of immovable property, agricultural machinery rental, house rent, dowry payments, purchase of mobile phones, bribery for employment, electricity connection charges and payment of extortion or forced contributions.