Walking a Tightrope: Using Financial Diaries to Investigate Day-to-Day Financial Decisions and the Social Safety Net of the Financially Excluded. (May 2020)

• Record Type: Journal Article
• Authors: Biosca, Olga; McHugh, Neil; Ibrahim, Fatma; Baker, Rachel; Laxton, Tim; Donaldson, Cam
• Other Names: Lubbers Miranda J. guest-editor.; García Hugo Valenzuela guest-editor.; Small Mario Luis guest-editor.
• Is Part Of: Annals of the American Academy of Political and Social Science. Volume 689:issue 1(2020)
• Page Start: 46
• Page End: 64
• Publication Date: 2020-05
• Subjects: financial exclusion -- poverty -- social networks -- financial diaries -- microcredit -- RoSCAs -- informal finance; Social sciences -- Periodicals; Social sciences -- United States -- Periodicals; Political science -- Periodicals; United States -- Politics and government -- Periodicals; 300
• DOI: 10.1177/0002716220921154
• Languages: English
• ISSNs: 0002-7162

Abstract

Financially vulnerable, low-income individuals are more likely to experience financial exclusion as they are unable to access financial services that meet their needs. How do they cope with economic instability, and what is the role of social networks in their coping strategies? Using financial diaries, we explore the day-to-day monetary transactions (n = 16, 889) of forty-five low-to-moderate income individuals with restricted access to mainstream lending in Glasgow, UK, over a six-month period. Our sample includes users of microcredit and financial advice, as well as nonusers of these services. Findings reveal that informal lending to avoid the pernicious effects of short-term illiquidity was pervasive among these individuals. However, taking informal loans often strains valuable social capital and keeps people from building up a formal credit footprint. Our findings suggest that financially vulnerable populations would benefit from policies that focus on alternative financial mechanisms to help stabilize income-insecure individuals in the short-term.