Unveiling Saving and Credit Dynamics: Insights from Financial Diaries and Surveys among Low-Income Households in Unauthorized Colonies in Delhi

Abstract: The paper presents findings from a comprehensive study examining the saving and credit behaviors of low-income households residing in unauthorized colonies within a metropolitan area. Utilizing a dual approach, the study engaged in prolonged fieldwork, including repeated fortnightly interviews with selected households and a one-time primary survey with a larger sample size. The research meticulously analyzed the financial lives of these households, focusing on their saving and credit behaviors and assessing the accessibility and intensity of usage of financial instruments available to them. Through suitable regression models, the study identified key factors influencing the usage of financial instruments among low-income households. Transaction costs, convenience, and financial knowledge emerged as significant determinants impacting both usage decisions and the intensity of usage. The research underscores the importance of addressing demand side factors to ensure widespread financial services usage among low-income groups. Efforts to reduce time costs, enhance product accessibility and liquidity, and augment financial literacy are essential for fostering financial inclusion in unauthorized colonies. The findings highlight the imperative of moving beyond mere financial access towards promoting universal usage to realize the full benefits of financial inclusion.