Three essays on access to finance and household welfare

Access to finance (financial access) is the ability to use financial services without any obstruction. The importance of access to finance for countries and households cannot be overemphasized because it is a priority and a catalyst for development and growth. However, there can be too much of a good thing, especially when not used conscientiously. Household debt in most countries has increased over the past few decades, especially after the 2007-2009 financial crisis and economic recession. The following three essays examine the impact of access to finance on household welfare. The first essay examines the impact of access to finance on household debt in OECD countries. In addition, the study analyzes the interaction term between access to finance and credit market regulation and its impact on household debt. Data for this essay is from the International Financial Statistics, World Bank Development indicators, and OECD databases. The second essay explores the nexus between household debt and non-retirement investments among U.S. households using data from the 2018 National Financial Capability Survey (NFCS). The third essay uses the 2018 NFCS to examine the relationships between income shock and financial literacy and the number of credit card holdings. Households aim to have a uniform level of consumption throughout their lives. However, a high household debt burden may affect household savings negatively. Consequently, this can affect the financial well-being of households. The objective of this research is to help policymakers and practitioners in ensuring an effective combination of access to finance and credit market regulation to reduce the downside risk of access to finance. Hence, this can help contain household indebtedness and enable households not only to think about liquidity (access to finance) but also solvency as they maximize their utility.

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