The role of human emotion in decisions about credit: policy and practice considerations

ABSTRACT

The emotional and moral context of high cost, small loan lending has an important bearing on how low-income people engage in the mixed economy of credit, which is a term used to describe the different sectors involved in providing credit, from informal transactions between family and friends to formal fringe financial lenders and multinational banks. Decisions about accessing credit are constrained by more than material circumstances or access to information about the financial cost of such transactions. How individuals perceive different credit options is also influenced by emotions such as shame, guilt or anger. The emotional dimension is critical for understanding how, where and when individuals access credit. The policy field needs to give more attention to these neglected dimensions of decision-making, particularly since ‘financial literacy’ programs targeted at low-income households assume that lack of financial and budgetary knowledge is the key issue. Here, we argue, drawing on an empirical study, that a wider range of cultural and emotional factors needs to be taken into account in making sense of the social relations of money, credit and debt.

KEYWORDS:

• Credit
• debt
• financial literacy programs
• governance
• payday lending

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Australian Research Council [LP0011234].

Notes on contributors

Greg Marston

Greg Marston is Professor and Head of School at the School of Social Science of the University of Queensland, Australia. His main research interests include social policy and the politics of policy development. He has published on topics such as evidence-based policy, street-level bureaucracy and poverty and unemployment. He is currently researching climate change and the potential for policy synergy and the policy transfer dimensions of a universal basic income.

Marcus Banks

Marcus Banks is an economic sociologist whose research interests encompass how labor, welfare and finance market risks are experienced in low-income households. He has published articles on welfare and finance market risks, consumer credit and welfare, gender segmented labor markets and the sociology of money.

Juan Zhang

Juan Zhang is a postdoctoral fellow at the School of Social Science of the University of Queensland, Australia. Her research interests include cross-border mobilities, gender and migration and casinos in Asia. She has published in journals including Current Sociology, Environment & Planning D, Environment & Planning A, Gender Place and Culture, International Development Planning Review and the China Journal.