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Highways to Hell? Paths Towards the Formal Financial Exclusion: Empirical Lessons of the Households from Northern Hungary

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  • Márton Gosztonyi

    (Budapest Business School University of Applied Sciences)

  • Dániel Havran

    (Corvinus University of Budapest)

Abstract

Whenever a household faces lack of banking payment services and access to funding, it often constraints their everyday activities and the chance to avail the financial services again. Our study explores the possible explanations of why a household becomes financially excluded in an underdeveloped area of Northern Hungary. By using a questionnaire (n = 502) in the spring of 2019, we conducted a covariance-based SEM analysis for detecting the key reasons. We find that the low level of income, high ratio of financial problems and high intensity of short-term borrowings equally and directly contribute to the financial exclusion of the households. Furthermore, we could not confirm any direct effects of the banking service availability, although bank services significantly influence an intermediary factor, which is the increasing repayment problem in the social environment. Our results verify the responsibility of the regulation in lending and debt collection to achieve a better social policy.

Suggested Citation

  • Márton Gosztonyi & Dániel Havran, 2022. "Highways to Hell? Paths Towards the Formal Financial Exclusion: Empirical Lessons of the Households from Northern Hungary," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1573-1606, June.
    • Handle: RePEc:pal:eurjdr:v:34:y:2022:i:3:d:10.1057_s41287-021-00434-9
    DOI: 10.1057/s41287-021-00434-9
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