EXTENDING THE HOUSEHOLD FINANCIAL VULERABILITY INDEX: INTEGRATING MORTGAGE LENDING AND CULTURAL DETERMINANTS IN CENTRAL ASIA

This research note extends the Household Financial Vulnerability Index (HFVI) by integrating a cultural block and mortgage risk. In international practice (IMF, ECB/ESRB, Bank of France, Bank of Italy), household vulnerability is usually assessed using debt-service-to-income (DSTI), loan-to-value (LTV), or solvency ratios. These approaches treat mortgage risk as an isolated variable, without incorporating it into a composite system. The proposed HFVI corrects this methodological limitation by integrating mortgage risk as a central transmission channel and adding a fourth dimension—culture—reflecting trust in financial institutions, financial literacy, reliance on informal borrowing, and debt attitudes. This reconfiguration conceptualizes vulnerability as both a financial and institutional phenomenon: even households with similar DSTI or LTV ratios may exhibit divergent resilience depending on cultural norms and regulatory mediation. The framework is particularly relevant for Central Asia, where shared cultural roots coexist with divergent institutional environments. For example, Uzbekistan restricts wedding expenditures to mitigate debt accumulation, while in Kazakhstan such practices remain unregulated, amplifying social borrowing pressure. Applied to Central Asia, the extended HFVI reveals that wedding-related borrowing contributes up to one-third of household debt among middle-income families, underscoring its diagnostic and policy relevance for macroprudential regulation.