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

Wooyoung Lim () and Sujata Visaria

Asian Development Review, 2020, vol. 37, issue 2, 77-99

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.

Keywords: coholding; loans; migrants; savings (search for similar items in EconPapers)
JEL-codes: O15 O16 (search for similar items in EconPapers)
Date: 2020
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