Factors Affecting the Formal and Informal Debt of Households

Abstract

This article aimed to study the factors influencing households to incur debt from both formal and informal sectors concurrently. The data used for analysis are secondary data from the 2023 Survey of the Economic and Social Conditions of Households by the National Statistical Office, which consists of 22,861 households, divided into 650 households that incur debt both in the formal system and outside the system at the same time and 22,211 households that incur debt only in the system. The statistical tool used for data analysis is a probit model. The result of the study found that male household heads, older household heads, higher educational attainment are negatively associated with holding both formal and informal debt. In contrast, economic class, being self-employed or working as employees or clerks, and borrowing for educational or business purposes, and greater financial assets positively associated with dual borrowing behavior. Regarding marginal effects, households borrowing for business purposes exhibit the highest likelihood of holding both formal and informal debt. This is followed by households borrowing for educational purposes.