Attitude of Loan Officers in Affordable Housing Finance Companies towards Low-Income Customers in Central India

Author Name(s): Manav Khaire
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The access to finance for the low-income households is severely constrained by the operational and institutional factors of mainstream finance institutions such as banks and large housing finance companies (HFCs) in India. These factors have greater effect on the access of unbanked population to housing finance as it includes large amount of money for a longer tenure thereby increasing the risk associated with the credit. The institutions engaged into dealing with such credit risk face the challenge of information asymmetry which is tackled by these institutions at various levels during the credit underwriting of a particular application. The first level of this screening and underwriting process involves interaction of the field employees of the institutions who act as first level loan officer for an application. The role of first level loan officer gets easier while screening the application of high-income and middle-income borrowers, as these customers possesses the required documents. But, in the case of the low-income households engaged in informal sector, they don’t possess the required documents and have volatile incomes, as a result, the credit assessment becomes challenging. The role of the first level loan officers becomes imperative in these types of cases where the applicants do not fit the regular documentation criterion. In this study, we attempt to investigate the attitudes of the loan Officers of select Affordable HFCs (AHFCs) towards the low-income household customers. The study presents a descriptive analysis of attitudes of the loan officers belonging to select AHFCs in the Nagpur region in Maharashtra. The results of the study indicate that the loan officers carry a positive attitude towards poverty. The result can be seen as a contribution towards research in the area of investigating attitudinal constraints and its effects on the poor.

Keywords:  India, Affordable Housing Finance Companies, Financial Exclusion, Attitude towards Poor


The concept of access to finance is operationalized on the basis of dimensions of financial inclusion and financial exclusion. As per World Bank, financial inclusion is defined as a condition wherein the individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way [1]. There is no universally accepted definition for measurement of financial inclusion which makes it difficult to measure. Hence, in order to measure access to finance, the financial exclusion dimension is measured which has been defined in literature and has a widespread use. Financial exclusion is defined as “those processes that serve to prevent certain social groups and individuals from gaining access to the financial system” [2]. The other definitions of financial exclusion attempt at narrowing the applicability of the concept, Meadows et al. (2004) defines it as “the potential difficulties faced by some segments of population in accessing mainstream financial services such as bank accounts/home insurance” [3]. Rogaly (1999) defines financial exclusion as “exclusion from particular sources of credit and other financial services including insurance, bill-payment services and accessible and appropriate deposit accounts” [4]. While studying the concept of financial exclusion, two studies by Dymski (2005) and Carbo et al. (2007) respectively have found that the financial institutional structure has led to the financial exclusion of poorer sections of the society in the context of European countries [5] [6]. In Indian context, the financial inclusion is defined as by Dev (2006) as “delivery of banking services at an afford-able cost to the vast sections of disadvantaged and low-income group” [7]. Pal & Pal studied the income-related inequality in financial inclusion in India within the framework of role of banks. The paper concluded that even though the financial exclusion problem is present across all the households, the poor households are at a greater risk of getting excluded [8].


The purpose of this research study was to explore the attitudes and beliefs that the loan officers of AHFCs hold towards poverty and individuals living in poverty. Attitude towards poverty (ATP) scale developed by Yun and Weaver (2010) was used to investigate into the topic, a significant finding indicated that loan officers held positive attitude towards poor. This result can be considered as a positive indicator which shows that the loan officers have an empathetic attitude towards poor which is an enabler within the context of financial inclusion paradigm. However, the replication of the ATP scale in Indian context may report incorrect results as the questions of the ATP scale are designed in the context of the welfare state of developed nations. A detailed study with a larger sample suitable for Indian context can be undertaken to investigate the attitudinal phenomenon amongst loan officers with respect to poor customers. This may throw up some conclusions which may be used for developing a training manual dedicated towards addressing the financial exclusion challenge for India.

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