Credit is good, but not good when too much. Analysis of indebtedness and over-indebtedness in the SADC region using FinScope Surveys

A third of adults in SADC are indebted and with access to credit from either a formal or informal lender, while a quarter of adults exhibit signs of over-indebtedness which implies that three quarters of those that borrow fall into the trap of over-indebtedness. However, studies on over-indebtedness in the sub-region are scant. Therefore, this paper aims at casting light on indebtedness and over-indebtedness of adults in the region through cross-country comparisons. It also examines factors affecting indebtedness and over-indebtedness, and assesses the link between over-indebtedness and poverty. The authors find that over-indebtedness is mainly driven by lack of credit literacy and borrowing from multiple sources. Interestingly, lack of income is not the main cause of over-indebtedness suggesting that behavioural rather than economic reasons explain over-indebtedness in many countries in the region.