A guest blog by Arnaud Natal (University of Bordeaux, France) and Isabelle Guérin (IRD, France)
The global household debt crisis
Jessica is in her early thirties and lives in northern England with her young son. Although she works, her income simply doesn’t cover everyday expenses. She has fallen behind on rent, council tax, and utility bill, and frequently has to borrow money from friends and family to make ends meet.
Thousands of kilometres away, in rural Tamil Nadu, India, families borrow to cope with emergencies and pay for food, healthcare, and their children’s education.
On the surface, these situations may appear very different. In the UK, debt often takes the form of arrears, overdrafts, or credit cards. The other unfolds in a lower income country, where households rely heavily on informal lenders and microcredit. Yet they share a fundamental reality: debt has become an inescapable part of everyday life.
Most research on household debt doesn’t distinguish between borrowing to invest, such as buying a home or starting a business, and borrowing to cover the essentials such as food, healthcare, school fees, and rent. Our recent study set out to measure this everyday debt for the first time globally.
What we found is staggering: at least 2.59 billion people—roughly one in three people worldwide—regularly borrow simply to make ends meet.
How it all adds up
Everyday debt is difficult to estimate because no global statistics measure it directly. Available data often misses the reality of overdrafts, arrears, reliance on credit or informal borrowing. To get a clearer picture, we’ve cross-referenced three key factors: poverty rates, gaps in benefits and public support, and borrowing used to cover day-to-day costs.
We estimate that around 2.5 billion people go into debt to cover everyday costs. Everyday debt is not limited to the poorest families. Many of those affected live above official poverty lines. They are often employed and may have a stable income, but that income still doesn’t stretch far enough when prices rise or unexpected costs arise.
Everyday debt around the world
Everyday debt takes different forms across countries, but serves a similar purpose.
In the UK, the cost-of-living crisis has deepened households’ dependence on debt, as more and more people struggle to cover essentials and rising energy bills. Researchers show that this reliance on debt disproportionately affects women and racialised groups, reflecting broader inequalities in housing, employment and access to welfare.
In India, households are more likely to borrow from relatives, neighbours, informal moneylenders or microfinance institutions. Long term research conducted in rural Tamil Nadu, shows that borrowing isn’t an occasional response to emergencies. It is recurring way of managing chronic shortfalls in household income.
In a survey we co-conducted in 2020 in rural Tamil Nadu, 91% of households reported borrowing to cover everyday expenses, repay previous loans or support relatives. Almost half of this debt came from informal sources.
Whether people borrow from high-street banks in Britain or informal financial and social networks in India, debt serves the same purpose: filling the gap between household income and the rising costs of everyday essentials. It can also have similar consequences. Repayments further squeeze limited budgets, forcing households to cut back on food, healthcare, education, and other essentials, while pressure from lenders or debt collectors can cause additional stress and insecurity.
What does this tell us about the economy?
These findings go well beyond just measuring household debt. Borrowing can help people invest in their future, whether by buying a home, continuing their education, or starting a business. It can also help them manage temporary emergencies. But it takes on a very different meaning when it becomes a permanent way of paying for basic necessities.
Across many countries, housing costs are soaring, work has become more insecure, and wages have struggled to keep up with the cost of living. At the same time, governments have rolled back or failed to provide the social safety nets meant to protect people from unemployment, illness or other income shocks. As public support falls short, households increasingly turn to private debt to bridge the gap.
Economists call this financialisation: the growing influence of banks, lenders, and other financial firms in driving the economy. Viewed from this perspective, everyday debt is not the result of poor budgeting or the lack of financial literacy. It is a glaring reflection of how contemporary economies distribute income, organise work, provide public support, and increasingly rely on credit to sustain everyday life.
What next?
If everyday debt is now a central feature of our economies, we need big solutions to fix it.
The first step is to make the problem visible. Current statistics often overlook how households manage their daily lives, meaning everyday debt is consistently underestimated. Better measurement is essential if we are to recognise the scale of the problem and work out how to address it.
We must also strengthen wages and worker’s rights, and expand social safety nets. This is particularly important for households that are not officially classified as being in poverty, but remain highly vulnerable to a loss of income or other financial shocks.
We also need stricter credit regulation. Small liabilities such as overdrafts, ongoing credit and payment arrears, often grow into long-term debt, while abusive lending practices continue to flourish in many parts of the world. Better legislation, stronger enforcement, and more effective consumer protection are crucial.
But regulation alone will not solve the problem.
Everyday debt is not just the result of people earning too little or receiving too little support. It has become part of how modern economies function. That is why everyday debt is not just a personal financial issue—it is a political one. When debt fills the gaps left by low wages, reduced public services, and rising inequality, it allows governments and businesses to avoid addressing the deeper problems that created those gaps in the first place.
Why have our economies come to depend on millions of people, like Jessica and the families in Tamil Nadu, taking on debt simply to afford everyday life? Until we face that question, debt will remain central to how the system works.