The role of human emotion in decisions about credit: policy and practice considerations

The emotional and moral context of high cost, small loan lending has an important bearing on how low-income people engage in the mixed economy of credit, which is a term used to describe the different sectors involved in providing credit, from informal transactions between family and friends to formal fringe financial lenders and multinational banks. Decisions about accessing credit are constrained by more than material circumstances or access to information about the financial cost of such transactions. How individuals perceive different credit options is also influenced by emotions such as shame, guilt or anger. The emotional dimension is critical for understanding how, where and when individuals access credit. The policy field needs to give more attention to these neglected dimensions of decision-making, particularly since 'financial literacy' programs targeted at low-income households assume that lack of financial and budgetary knowledge is the key issue. Here, we argue, drawing on an empirical study, that a wider range of cultural and emotional factors needs to be taken into account in making sense of the social relations of money, credit and debt.