To Save or Not to Save: Why Do Migrant Domestic Workers Borrow So Much?

HKUST IEMS Thought Leadership Brief No. 45


Sujata Visaria

Many migrant domestic workers (MDWs) in Hong Kong appear to finance foreseen expenditures through high-interest loans rather than through savings, thereby incurring a sizable cost. MDWs who are financially literate are just as likely to borrow as those who are not; those with savings accounts appear more likely to borrow than those without. Borrowing to pay for important expenses is attractive because it provides discipline: the severe penalties for default ensure that the migrant repays the loan rather than spending on “unnecessary” expenses, and help her resist demands from her kin. Well-designed savings commitment products or ”repay-and-save” type loan products can help migrants build their assets and improve their welfare.


About the author

Sujata Visaria is an Associate Professor in the Department of Economics at the Hong Kong University of Science and Technology. She is Associate Director of HKUST IEMS and Associate Director of the Development Economics Action Research Program of HKUST's Center for Economic Policy.  More >> 

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