There’s a big shift in borrowing patterns of lower-middle-class consumers -- from survival-driven borrowing to one fuelled by aspirations, entrepreneurship, and long-term investments.

A new consumer study titled ‘How India Borrows’ by Home Credit India showed consumers are increasingly focused on improving their quality of life, empowered by greater access to credit and the growth of digital platforms. This is the sixth edition of Home Credit India’s annual consumer study.

Ashish Tiwari, Chief Marketing Officer, Home Credit India said “Our latest How India Borrows 2024 study highlights a transformational shift in the borrowing behaviour among the lower-middle-class borrowers”.

It shows an increasing preference towards borrowing for consumer durables and small business ventures and consumer’s growing comfort with app-based banking, chatbots for customer service, WhatsApp payments, and digital literacy, according to Tiwari.

This reflects not only the evolving financial aspirations of borrowers to enhance their lifestyle and income opportunities, but also the growing role of digital platforms in making credit more accessible, he added.

The study also points out the strong affinity towards embedded finance and EMI-based financing and the importance of raising awareness around data privacy.

The ‘How India Borrows 2024’ study was conducted across 17 cities including Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Lucknow, Jaipur, Bhopal, Patna, Ranchi, Chandigarh, Ludhiana, Kochi, and Dehradun.  The sample size consisted of about 2,500 borrowers in the 18-55 age group, with an average monthly income of ₹31,000.

What Borrowers Said

Vikas, an auto driver, explained that he had borrowed to purchase a smartphone. 

“My borrowing behaviour has shifted significantly when it comes to mobile phones. Initially, I borrowed to purchase basic phone models that met my essential communication needs, was affordable and functional. However, as I gained access to more flexible credit options over time, I borrowed to purchase a smartphone not just out of necessity, but as part of my aspirations to improve my income,” he said 

For example, my new smartphone helps me to use apps to get customers for a ride and also captures beautiful memories of time spent with my family. This shift in borrowing reflects a transition from meeting basic needs to achieving both personal and professional goals”, Vikas said. 

Rahul Singh, a delivery agent with a food delivery app, said that he had taken credit for home renovation.

“My borrowing behaviour has changed recently only. Initially, I relied on loans primarily for covering essential expenses, such as rent, medical bills and any other unforeseen expenses, which were critical for survival. However, as my income stabilised and I became more aware of the credit options available in the market, I began to view borrowing as a tool for fulfilling my aspirations. One of them being the renovation of my house”, Singh said. 

“Today, when I reflect on my borrowing journey, I see a big transformation in both me and my family’s mindset – from borrowing for making ends meet to borrowing for building a brighter future for us all”.

Pooja, a Healthcare staff, said she had taken credit for purchase of consumer durables. 

“In the beginning, I had borrowed to purchase essential household appliances like a refrigerator and washing machine, which were necessary for day-to-day living. However, as I became familiar with the ease and flexibility of financing, particularly through Home Credit India’s ‘Paise ki Pathshala’ videos, my outlook of borrowing has shifted. Now, I look forward to acquiring premium products, like smart electronics or high-end home appliances, for enhanced convenience, improved efficiency, and a more elevated lifestyle”, Pooja said. 

Published on October 18, 2024