Why households borrow money? Socio-economic factors affecting households debts : a model approach

Abstract

Purpose: This research aims to identify and assess the socio-economic determinants of Central Pomerania household indebtedness (at the household level) using non-parametric statistical tests and multiple correspondence analysis. Design/Methodology/Approach: The source of data was a survey conducted among 1,000 households of Central Pomerania (Poland). First, it was determined whether there exists a statistically significant relationship between having debt and the socio-economic characteristics of the households analyzed (using the chi-square test or the Fisher test). Next, a multiple correspondence analysis was used to identify and assess relationships between the categories of features that characterize the surveyed households' indebtedness. Findings: Using non-parametric statistical tests, it was established that there is a statistically significant relationship between debt and the following household characteristics: development phase, size and composition of the household, socio-economic type, location of the household, a form of residential unit ownership, age of the household head, having economic education by the head of the household, and the level of average monthly income per person in the household. The most often indebted households were those whose main source of income was self-employment, with the number of members exceeding 3 persons and households with dependent children. Practical Implications: The results obtained in this research may be sources of information for credit institutions interested in adjusting the product offer to households' needs because these households - as our research results show - differ in several socio-economic characteristics. Originality/Value: Our study complements the results of previous research on household debt determinants, confirming the important role of socio-economic factors in the process of making financial decisions regarding debt.