The Stress of Financial Exclusion

> Posted by Jeffrey Riecke, Communications Assistant, CFI

The new year is welcomed the world over by resolutions from those yearning to be healthier, wealthier, and wiser. The connection between wealth and financial inclusion may be obvious. And being financially included may even make you wiser, if we consider the cognitive benefits described in Sendhil Mullainathan and Eldar Shafir’s recent book Scarcity. But it’s the link between health and inclusion that I want to talk about. According to a study of individuals in the U.S. with outstanding debt, about half of those with financial problems experience negative health effects as a result. Of the affected, about half cite stress as one of their ailments. Stress is associated with significant health problems, including increased blood pressure, gastrointestinal issues, obesity, depression, and anxiety.

Rural Thanjavur, India

Financial problems might be among the most common causes of stress in our day and age. But if you’re one of the 2.5 billion people around the world excluded from financial services, the sources of your financial stresses are likely a bit different from borrowers in the U.S., and the stakes possibly higher.

As part of a larger study, a team of researchers is collecting hair samples from residents of rural Thanjavur and its neighboring districts in India to examine the effects of financial services access on cortisol levels – a hormone secreted by the body during times of stress. Measuring cortisol levels using hair is a relatively new research method. In total, hair from over 3,000 individuals will be collected. Similar to other hair-based tests, information on cortisol levels over time will be gleaned for those with longer hair. The study, Impact of Access to Finance in Rural Tamil Nadu: Evidence from a Randomized Control Trial, uses a randomized control trial approach to evaluate the impact of rural bank branch expansion at both the household and village level. The provision of financial services – which include loans, savings, insurance, and investment services – is based on the Kshetriya Gramin Financial Services (KGFS) community financial institution model.

The study’s first surveys were completed in January 2013, with the baseline surveys for the remaining groups completed in October. We look forward to the hairy results.

Image credit: Sonja Pieper

Have you read?

Scarcity: When Having Too Little Means So Much

Designing Microfinance for the Borrower’s Well-Being

When Access to Finance Means the Difference Between Life and Death