Determinants of financial vulnerability among credit counseling and debt management agency customers

A growing number of households are facing difficulties in making ends meet and are not resilient to cope with unexpected expenses during financial and economic instabilities. These households are deemed to be financially vulnerable, which might exert undesired impacts on economic growth and societal problems. In order to curb the financial vulnerability issue, this study aims to investigate the factors influencing financial vulnerability among Credit Counseling and Debt Management Agency Customers. Two theories, namely the family resource management model and self-efficacy theory were employed to serve as the basis of the research model. Four factors were proposed as relevant elements in the process of reducing financial vulnerability. This study proposes self-efficacy, financial literacy, and gender as input, financial behaviour as the throughput, and financial vulnerability as the output mechanism. Additionally, this study further examines the moderating effect of self-efficacy in the relationship between financial literacy and financial behaviour. A multi-stage random sampling technique was used to collect 640 usable responses from AKPK branches in Malaysia. After discarding unusable responses, the data were analysed using Partial Least Square Structural Equation Modeling (PLS-SEM). The analysis was conducted according to the highest standard of PLS-SEM guidelines by examining the measurement model before proceeding to the structural model. Resultantly, all the measurements were satisfactory in terms of reliability and validity. The model explained sufficient variance of financial vulnerability (R2 = 0.292). Financial behaviour was significantly influenced by gender (β = -0.07, p< 0.05) and self-efficacy (β = 0.44, p < 0.05), whereas financial vulnerability was negatively influenced by financial behaviour (β = -0.54, p< 0.05). Both mediating effect of financial behaviour in the relationship between self-efficacy and financial vulnerability (β = -0.24, p < 0.05), and the moderating effect of self-efficacy in the relationship between financial literacy and financial behaviour (β = 0.12, p< 0.05) were identified. Overall, the findings revealed that the relationship between financial literacy and financial behaviour is stronger when the self-efficacy of Malaysian households is high.

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