DefinePK

Research Objective

To analyze the financial risk management strategies adopted at the household level in Faisalabad, Pakistan, by identifying how risks are perceived, what coping strategies are employed, and what factors influence the adoption of these strategies.

Methodology

A multistage sampling technique was used to select 130 households from Faisalabad district, Punjab, Pakistan. Data was collected through face-to-face interviews using a questionnaire. A logit model was employed to assess the impact of socio-economic attributes, risk perceptions, and risk attitudes on the adoption of financial risk management tools.

Methodology Flowchart

                        graph TD
    A[Purposive Selection of Punjab Province] --> B[Purposive Selection of Faisalabad District]
    B --> C[Stratified Random Sampling of Union Councils - Rural/Urban]
    C --> D[Random Selection of Villages]
    D --> E[Random Selection of Households - 65 per UC]
    E --> F[Data Collection via Face-to-Face Interviews Jan-May 2018]
    F --> G[Data Analysis using Logit Model]
    G --> H[Assessment of Factors Influencing Risk Management Strategy Adoption]
    H --> I[Conclusion and Recommendations]                    

Discussion

The study highlights that households utilize various financial risk management tools to mitigate the impact of financial shocks. Socio-economic factors play a crucial role in shaping these decisions. The findings suggest that educated individuals are more likely to make rational risk management decisions. The government and NGOs are recommended to educate residents on effective use of risk management tools.

Key Findings

Socio-economic attributes such as age, education, and income significantly influenced the adoption of both ex-ante and ex-post risk coping strategies. Perceptions of loss in business and illness of the primary breadwinner also affected decisions to adopt risk management strategies. Income diversification was the most common ex-ante strategy, while using household savings was the dominant ex-post strategy.

Conclusion

Households in Faisalabad employ both ex-ante and ex-post financial risk management strategies. Socio-economic attributes, risk perceptions, and risk attitudes are key determinants of strategy adoption. The findings provide guidance for policymakers and stakeholders in designing effective risk management policies, particularly emphasizing education and awareness campaigns.

Fact Check

1. A dataset of 130 households was used for the study. (Confirmed in Abstract and Methodology)
2. The field survey for data collection was carried out between January and May 2018. (Confirmed in Methodology)
3. Faisalabad is the second most populated district in Punjab and the third most populated district in Pakistan. (Confirmed in Methodology)

Mind Map