Segmentation of Household Financial Vulnerability and Credit Risk Mitigation Strategies
DOI:
https://doi.org/10.31603/conference.17383Kata Kunci:
household vulnerability, risk coping; credit risk, mitigation strategiesAbstrak
Households are a sector with significant aggregate financial implications. Financially vulnerable households can have adverse effects on the economy. Accordingly, borrowers highlight issues worthy of further investigation. This study aims to segment the levels of household financial vulnerability and the strategies chosen to alleviate financial distress. The objective of the research is to determine the level of household financial vulnerability and the mitigation strategies adopted to overcome financial stress. The Financial Margin Approach (FMA) was used to assess household vulnerability issues. The financial margin is a method of calculating a household's residual income after deducting basic expenses, debt repayments, and interest payments. The respondents in this study were financially vulnerable households, defined as borrowers with negative financial margins. Segmentation was performed using the K-Means algorithm. K-Means is a data science algorithm in unsupervised learning, primarily for clustering problems. The K-Means clustering results with three clusters showed that the main differences were in economic capacity (expenditure and socio-economic status) and financial adjustment responses. Cluster 2 showed a greater willingness to face financial pressures with more diverse resources and strategies compared to cluster 1 and cluster 0.
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