Committee for the Abolition of Illegitimate Debt

 1. Introduction

Household debt has expanded dramatically worldwide. While borrowing can help households manage temporary income volatility (Collins et al., 2009), growing evidence shows that chronic reliance on debt generates significant macroeconomic and social risks (Guérin, Venkatasubramanian, & Kumar, 2023; Mian & Suffi, 2017).

Yet a central question remains largely unanswered: how many people worldwide rely on debt simply to make ends meet? This includes borrowing to pay for food, housing, healthcare, utilities, or to service previous debts, rather than to invest or accumulate assets.

This form of borrowing, referred to here as everyday debt, is embedded in routine household financial management. However, it remains largely invisible in official statistics, which focus on aggregate household debt or formal credit markets. Available data are highly fragmented and tend to overlook informal borrowing, as well as arrears, overdrafts, and revolving credit. As a result, chronic everyday indebtedness is not directly estimated, either at the national or the global level, contributing to a persistent blind spot in public debate and policy responses.

This policy brief is based on recent research we conducted (Natal & Guérin, 2026), which provides the first global estimate of the population relying on borrowing to meet basic needs. Because no harmonised global data exist on everyday indebtedness, we use an indirect and deliberately conservative approach based on three complementary proxy indicators: poverty rates, social protection coverage, and informal/unsecured/non-asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). -building forms of borrowing. Each proxy has limitations, but together they provide a converging picture of the minimum scale of everyday indebtedness.

 2. Poverty rate as a first proxy

Poverty provides a first approximation of exposure to everyday indebtedness. When income is too low to cover essential consumption, households are likely to borrow as a survival strategy.

Using national poverty rates covering around 73% of the world’s population, 24% of the global population lives below national poverty lines. In absolute terms, this suggests that around 1.44 billion people worldwide officially live below national poverty lines and are therefore highly likely to depend on borrowing to cover essential consumption needs. [1]

However, poverty rates exclude a large group of households living just above the poverty line who nonetheless face chronic financial strain. Research on income volatility shows that “near-poor” households frequently rely on borrowing to cope with irregular incomes and unexpected expenses (Morduch & Schneider, 2017). Poverty-based estimates therefore generate substantial errors of exclusion and should be interpreted as a lower bound.

 3. Social protection coverage as a second proxy

A second proxy focuses on social protection coverage. Where safety nets are weak or absent, households are more likely to rely on borrowing to cope with unemployment, illness, or income shocks.

According to recent International Labour Organization data, 43% of the world’s population lacks effective social protection (ILO, 2023). This proportion is substantially higher than global poverty rates and captures a broader segment of the population facing financial vulnerability. Regional disparities are stark: while 11% of the population lacks adequate social protection in the Global North, the share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. rises to 48% in the Global South.
This proxy captures a much broader population at risk than poverty alone. At the same time, it remains imperfect: some households without formal protection may rely on informal support networks, while others formally covered by social protection may still incur debt due to benefit delays or uncovered expenses.

Despite these caveats, gaps in social protection are a strong indicator of structural exposure to everyday indebtedness. Combined with poverty estimates, they suggest that between one quarter and nearly half of the world’s population is at risk of relying on debt to meet basic needs.

 4. Informal or unsecured debt Unsecured debt In the case of a company or bank going into liquidation there are several levels of debt guarantee: secured, preferential and unsecured. The unsecured debts are last in line to be paid after the others have been paid in full, or as fully as possible. Depending on the assets remaining the unsecured creditors may receive a small percentage of what they are owed or even nothing at all; this justifies a higher interest-rate when the companies borrow from unsecured and/or non-preferential creditors. as a third proxy

The third proxy uses observed borrowing behaviour, focusing on informal, unsecured, and non-asset-building forms of borrowing. Given the scarcity of comparable international data, for each country, we prioritise direct measures of non-asset-building forms of loans, fall back where necessary on national indicators that most closely approximate unsecured or unmortgaged household debt, and use World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

Findex data (Demirgüç-Kunt et al., 2020) on informal borrowing and credit card borrowing (i.e., those who are unable to pay off their credit card debt within a year) as a last resort when no other information is available.

Using this stepwise approach and covering roughly 97% of the world’s population, we estimate that around 33% of the world’s population regularly rely on unsecured or informal forms of debt. While such borrowing may in some cases finance economic activities or business operations, available international datasets primarily capture small-scale, short-term, and unsecured borrowing, which is predominantly used for consumption smoothing and everyday expenses. As a result, classifying these forms of debt as a proxy for everyday indebtedness is justified at the global level, despite known heterogeneity at the micro level. This estimate lies between the poverty-based (24%) and social-protection-based (43%) figures. Its position is informative: reliance on debt extends well beyond populations officially classified as poor, but not all individuals lacking formal protection necessarily borrow. The convergence of these three imperfect but complementary indicators strengthens confidence in the central finding that around one third of the world’s population relies on borrowing to meet everyday needs.

Importantly, this figure remains a conservative lower bound, in both the Global North and the Global South, [2] for two main reasons. On the one hand, in many countries informal debt is underreported (Guérin, Natal, & Venkatasubramanian, 2024). On the other hand, significant components of everyday indebtedness embedded into formal financial instruments Financial instruments Financial instruments include financial securities and financial contracts. (e.g., arrears, overdrafts, credit cards, revolving credit) are poorly captured in datasets (Zinman, 2009).

 5. Recommendations

Expanding meaningful social protection coverage is essential. Extending access to unemployment insurance, health coverage, and adequate cash transfers, including for households just above poverty thresholds, can substantially reduce reliance on debt as a substitute for public protection.

Targeted poverty alleviation and income support policies can reduce the structural need to borrow for daily expenses. This includes programmes such as conditional cash transfers, food subsidies, and public employment schemes.

Everyday indebtedness should be treated as a systemic issue rather than an individual failing. A growing body of research and policy-oriented work emphasises that debt traps cannot be addressed through financial literacy interventions alone, but must be understood in relation to labour market precarity, welfare retrenchment, gendered and racialised inequalities, and asymmetric credit relations. Framing debt as a collective and structural problem is a prerequisite for designing effective and equitable interventions.

Improving data systems is a necessary complement to these policy responses. Current official statistics fail to capture informal, unsecured, non-asset-building, and recurrent borrowing, and this policy brief has not been able to address another major limitation: the lack of systematic disaggregation by gender, race, caste, ethnicity, or migration status, despite strong evidence that the burden and consequences of debt are highly uneven across social groups. Strengthening household-level data is essential for designing policies that effectively target those most exposed to chronic indebtedness.

 6. Conclusion

At least one third of the world’s population (i.e., over 2.59 billion people) relies on borrowing to meet basic needs. This estimate should be understood as a conservative lower bound. Across very different contexts, existing indicators systematically underestimate everyday indebtedness by overlooking informal borrowing, recurrent debt rollovers, arrears, overdrafts, and revolving credit (Natal & Guérin, 2026). Everyday indebtedness is therefore not a marginal or exceptional phenomenon, nor primarily the result of individual financial mismanagement. It has become a structural feature of contemporary economic systems, reflecting low and unstable incomes, rising living costs, and gaps in social protection. Treating debt mainly as a matter of financial literacy risks misdiagnosing the problem and designing ineffective policy responses.

 7. References

Collins, D., Morduch, J., Rutherford, S., & Ruthven, O. (2009). Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton: Princeton University Press.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2020). The Global Findex Database 2017: Measuring Financial Inclusion and Opportunities to Expand Access to and Use of Financial Services. The World Bank Economic Review, 34(Supplement_1), S2–S8. https://doi.org/10.1093/wber/lhz013
Guérin, I., Natal, A., & Venkatasubramanian, G. (2024). Why and how to measure household debt in informal economies? (ODRIIS Policy Brief No. 1). Pondicherry: ODRIIS. https://hal.science/hal-04622836 [Accessed on March 15, 2026]
Guérin, I., Venkatasubramanian, G., & Kumar, S. (2023). The Indebted Woman. Kinship, Sexuality and Capitalism. Stanford: Stanford University Press.
ILO (2023). ILOSTAT: Statistics on social protection. Geneva: ILO. https://ilostat.ilo.org/topics/social-protection/ [Accessed on March 15, 2026]
Mian, A., Sufi, A., & Verner, E. (2017). Household Debt and Business Cycles Worldwide. The Quarterly Journal of Economics, 132(4), 1755–1817. https://doi.org/10.1093/qje/qjx017
Morduch, J., & Schneider, R. (2017). The Financial Diaries: How American Families Cope in a World of Uncertainty? Princeton: Princeton University Press.
Natal, A., & Guérin, I. (2026). How Many Indebted Households Worldwide? A Global Estimate of Everyday Household Debt. https://hal.science/hal-05547460 [Accessed on March 15, 2026]
Zinman, J. (2009). Where is the missing credit card debt? Clues and implications. Review of Income and Wealth, 55(2), 249–265. https://doi.org/10.1111/j.1475-4991.2009.00321.x