Debt and vulnerability: indebtedness, institutions and smallholder agriculture in South India

Expanding access to credit remains a key central government strategy for promoting agricultural development and livelihood diversification in south India and more widely. Smallholders borrowing from multiple credit sources are faced with obligations in addition to financial repayment. Available evidence on the consequences of indebtedness extending beyond monetary debt and its influence on vulnerability is incomplete in important ways. This paper presents an integrated vulnerability framework and illustrates the framework through case studies of three pairs of smallholder clients and credit sources. Using process-tracing and progressive contextualization methods, this paper shows the diversity of feedbacks that shape indebtedness and provides examples of social-ecological consequences. Unpacking these consequences in individual cases demonstrates indebtedness as an important root cause of vulnerability, which is in contrast to an examination of proximate causes, such as credit policy or temperature, that is the focus of a large share of scholarship. The paper shows that different credit sources are associated with different sets of obligations, leading to varied livelihood and agricultural consequences. Suggesting ‘credit stacking’ as an important adaptation strategy and research agenda item, the paper makes a plea for careful analysis of the conditions when credit is a factor in adaptive capacity and indebtedness of vulnerability.