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The Borrowing Puzzle: Why Do Filipino Domestic Workers in Hong Kong, China Borrow Rather than Dissave?

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  • Wooyoung Lim

    () (Department of Economics, Lee Shau Kee Business Building, Hong Kong University of Science and Technology (HKUST), Clear Water Bay, Hong Kong, China. E-mail:)

  • Sujata Visaria

    () (Department of Economics, HKUST, Clear Water Bay, Hong Kong, China. E-mail:)

Abstract

Despite their predictable and regular incomes, Filipino domestic workers in Hong Kong, China commonly finance large expenses through interest-bearing loans rather than savings. Our analysis of survey data and records of a credit cooperative for migrant workers suggests that this cannot be explained by their inability to save, financial illiteracy, short time horizon, or limited liability. Instead, we speculate that the strict schedules and high interest rates of these loans create a disciplining effect that these individuals find desirable. This may help them avoid unnecessary consumption or demands from their social network. However, interventions should also consider that these workers often receive nonmonetary reciprocal benefits from members of their social network.

Suggested Citation

  • Wooyoung Lim & Sujata Visaria, 2020. "The Borrowing Puzzle: Why Do Filipino Domestic Workers in Hong Kong, China Borrow Rather than Dissave?," Asian Development Review, MIT Press, vol. 37(2), pages 77-99, September.
  • Handle: RePEc:tpr:adbadr:v:37:y:2020:i:2:p:77-99
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    Keywords

    coholding; loans; migrants; savings;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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