Disentangling Vulnerability through Consumer Behavior: The Role of Financial Health

Disentangling Vulnerability through Consumer Behavior: The Role of Financial Health


This paper analyzes the effect of financial participation on consumer's financial vulnerability, which is pervasive in countries in the developing world.

We suggest the need to observe the financial behavior of consumers, through financial health, to analyze the effects of such participation rather than taking into account only the narrower concept of financial inclusion. Our hypothesis is that welfare gains are not directly derived from the standalone ownership of bank accounts (i.e. financial inclusion) or having access to credit, but from their appropriate and responsible use. Firstly, we developed a stylized general framework to study the mechanisms and develop a measure to monitor financial health. Secondly, evidence on how participation in the financial system affects vulnerability is shown for five Latin American countries (Bolivia, Chile, Colombia, Ecuador, and Peru). We find that financial health has a higher impact on financial vulnerability than does financial inclusion. Human capital and financial literacy also affect financial vulnerability. The higher the level of these variables, the higher (lower) the probability of being financially safe (vulnerable). The structure of income and the environment in which individuals live affects financial vulnerability as well.

Full content of the publication


bienestar de los consumidores consumers’ welfare Financial Health financial health Financial inclusion Financial Inclusion Financial Inclusion Financial Vulnerability financial vulnerability resilience resiliencia


Alfonso Arellano

Senior Economist of the Financial System Unit at BBVA Research

Noelia Cámara

Principal Economist, Financial Systems Unit, BBVA Research

Diana Mejía

Senior Specialist, Public Policy and Competitiveness, CAF

Additional Information

Date published


Document Type

Working paper








BBVA Research

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