Financial Stress Impact of Covid-19 Pandemic: Lessons Learned from Strategies Adopted by Low-Income Households

Abstract

This research examined the impact of the Covid-19 pandemic on financial stress of households and strategies adopted by low-income households to deal with such financial stress. A survey on 577 respondents was carried out using a simple random sampling technique to acquire data. Binary logit model and probit model were applied to achieve the research objectives. Findings demonstrate that during Covid-19 pandemic low-income people had escalated financial stress and that respondents' age, income volatility, family financial efficiency, medication cost, and creditors’ pressure all have substantial influences on financial stress. Findings of gender based analysis indicate that male respondents had experienced more financial stress compared to female respondents. Results of robustness check confirm the main findings of the study. This study also discovered that low-income households had adopted several strategies, mostly changing eating habits, taking loans and selling personal properties to deal with financial stress caused by Covid-19 pandemic. Based on the findings, this study offers policy recommendations that may alleviate financial stress by reducing the financial constraints of extreme poor individuals.