- Title
- The dynamics of household debt in South Africa
- Creator
- Mabitle, Mope
- Subject
- Debt
- Subject
- Finance, Personal
- Date Issued
- 2021-07
- Date
- 2021-07
- Type
- Doctoral theses
- Type
- text
- Identifier
- http://hdl.handle.net/10353/21781
- Identifier
- vital:51751
- Description
- Household debt as a proportion of South African household disposable income remain alarmingly above 70 percent. Impliedly, the majority of households are spending the bulk of their income on servicing debt. This not only puts a strain on household welfare but also on economic growth as household spending is the major contributor to economic activity in the country. Based on this background, the study examines the dynamics of the South African household debt. The analysis was done both at the macro and individual/household level (micro). The macro-level data covered the period from 1994 to 2018 utilizing the Autoregressive Distributed Lag model. The empirical results indicated that there is both a long-term and short-term relationship between the variables of interest. The results further show that the majority of low-income households in South Africa borrow more, as a way to smoothen their consumption. Interest rate as the official instrument to counter borrowing was found to have a positive relationship with household debt, indicating that households borrow to settle the existing debt as interest rates increases. The dummy variable used to capture the credit regulations enactment/amendments was found to be insignificant in the long run. This suggests that credit regulations implemented in South Africa have not reduced the propensity to borrow. At a micro level, the National Income Dynamics Study (NIDS) data was used. Five waves of data were collected on the same individuals every 2 years. Panel regressions were employed in the analysis and the empirical results revealed that employment and income at the micro-level are found to be strong determinants of household debt. The results further showed that being a male and a white individual was positively associated with the likelihood of taking up more debt in general. On the other hand, the results indicated that being a black African is associated with a high likelihood of using services from most of the informal non-banking institutions. The results also revealed that the greater the education level of the head of the household, the higher the probability of taking more debt. One of the telltale signs of over-indebtedness is the persistence of debt, households respond to increased debt and their inability to repay it by increasing their borrowing. The study also investigated the transmission matrices of households in and out of debt. The results indicate a higher transition frequency in and out of debt on informal loans from the non-banking sector that is normally accessed by the poorer households, this could indicate debt entrapment and the persistence of debt at lower-income levels. Based on empirical results, the study recommended policies that would support consumption without necessarily increasing the credit appetite of household debt. Additional recommendations are those that support selective lending and the strengthening of the risk management of lending institutions. Furthermore, to combat the rising levels of household debt, several measures are proposed in the study.
- Description
- Thesis (PhD) -- Faculty of Management and Commerce, 2021
- Format
- computer
- Format
- online resource
- Format
- application/pdf
- Format
- 1 online resource (226 leaves)
- Format
- Publisher
- University of Fort Hare
- Publisher
- Faculty of Management and Commerce
- Language
- English
- Rights
- University of Fort Hare
- Rights
- All Rights Reserved
- Rights
- Open Access
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UFH Department of Economics
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | SOURCE1 | MABITLE. M 200431196 PhD.pdf | 3 MB | Adobe Acrobat PDF | View Details Download |