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

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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 fnancial services again. Our study explores the possible explanations of why a household becomes fnancially excluded in an underdeveloped area of Northern Hungary. By using a questionnaire (n=502) in the spring of 2019, we conducted a covariancebased SEM analysis for detecting the key reasons. We fnd that the low level of income, high ratio of fnancial problems and high intensity of short-term borrowings equally and directly contribute to the fnancial exclusion of the households. Furthermore, we could not confrm any direct efects of the banking service availability, although bank services signifcantly infuence 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.