Investigating the socio-psychological effects of household debt burden

Abstract

High indebtedness is one of the main earnest issues that has befallen households in Nigeria. This has been a great concern to numerous researchers, policymakers, and the government at large. Thence, calls for concern and initiative that should be taken to surmount this challenge. This current study tries to empirically address the gap in the literature of social and behavioral factors which predicts the propelling indices that triggerdness. The findings suggest that socio-psychological factors are key reasons that cause indebtedness. The results revealed that the majority of the households experienced a debt-servicing burden related to stress and stigma via bankruptcy. Also, the study unveils that depression and social norms impact positively on household debt burden. Hence, pointing out that, self-control is crucial to avoid being over-indebted due to the statistical significance of the coefficient of subjective norms. Furthermore, it was discovered from the study that, age group does not significantly impact on debt servicing burden of majority of the households in the study area. Based on the above findings, the study concludes that socio-psychological factors are key reasons that cause indebtedness. Consequently, the study recommends that households should improve their financial planning and management strategies. Furthermore, financial institutions should build a stronger model of credit offerings. Besides, they should also evaluate the household's level of income and materialism before approving loan applications due to the direct link it has with indebtedness, because, over-indebted households are prone to suffer from psychological defects.