Prevalence and determinants of nonbank borrowing in CESEE: evidence from the OeNB Euro Survey

Katharina Allinger (katharina.allinger@oenb.at) and Elisabeth Beckmann

Focus on European Economic Integration, 2021, issue Q1/21, 7-35

Abstract: Household vulnerabilities related to debt are often assessed by using information on bank loans, which, in terms of volume, certainly account for the most important form of indebtedness. Households can, however, also take on nonbank debt that potentially exposes them to greater risks. Drawing on the OeNB Euro Survey that is conducted regularly in Central, Eastern and Southeastern European (CESEE) countries, we present new and unique evidence on a dozen forms of debt for ten countries of this region. Specifically, we analyze which factors determine whether households hold bank debt versus what we refer to as secondary formal debt, i.e. debt from nonbank financial companies such as payday lenders. Policymakers in many jurisdictions have had a watchful eye on this kind of debt given that nonbank financial companies often target financially excluded or poor individuals by offering small, high-cost loans. In bivariate probit regressions, we show that individuals with characteristics that suggest increased vulner¬ability – e.g. lower income, unemployment, exclusion from banking services – are more likely to have secondary formal debt. We further find that the relationship with bank concentration is U-shaped. Finally, we provide some preliminary evidence that secondary formal debt is associated with a higher probability of arrears.

Keywords: household debt; nonbank borrowing (search for similar items in EconPapers)
JEL-codes: D12 D18 G21 G23 G51 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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