LOAN STACKING AND DEBT STRESS: HOW HOUSEHOLD CHARACTERISTICS SHAPE REPAYMENT BEHAVIOR IN UGANDA
Abstract
This study examined the relationship between loan stacking and household debt repayment outcomes and financial stress in Uganda, with particular emphasis on structural and behavioral vulnerability in low-income settings. Using nationally representative household panel data covering 3,173 households, the analysis employs probit regression models to estimate the marginal effects of holding multiple concurrent loans on two binary outcomes: loan default and repayment-related worry. The empirical specifications control for key socioeconomic characteristics, including employment type, housing quality, demographic factors, and exposure to adverse economic shocks. Robustness is assessed through alternative model specifications and subsample analyses. The results indicate that each additional loan significantly increases the probability of default and intensifies repayment-related stress, suggesting that loan stacking amplifies household financial vulnerability. These effects are observed across income groups and are particularly pronounced among households reliant on farm wage labor, those residing in poor-quality housing, and those exposed to recent negative shocks. The findings underscore the importance of income volatility, limited asset buffers, and exposure to risk in shaping repayment capacity. The consistency of the estimates across specifications strengthens confidence in the empirical patterns. Although the observational nature of the data limits causal interpretation and does not fully capture unobserved behavioral traits such as risk preferences or time inconsistency, the panel structure improves empirical inference relative to cross-sectional analyses. The study yields important policy implications, highlighting the need for credit expansion strategies that account for household vulnerability rather than focusing solely on access. In particular, the results point to the role of credit information systems in limiting excessive multiple borrowing and the importance of flexible repayment structures that accommodate income volatility.
Keywords: Loan Stacking, Debt Default, Debt stress
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