MENTAL ACCOUNTING AND REMITTANCE DEPENDENCY AMONG AFGHAN HOUSEHOLDS: A BEHAVIOURAL FINANCE PERSPECTIVE
DOI:
https://doi.org/10.69980/5vaja283Keywords:
Mental Accounting, Remittance, Households, Financial Decision-Making, Behavioural Finance, AfghanistanAbstract
This study investigated the influence of the dimensions of mental accounting on remittance dependency among Afghan households. Mental accounting was conceptualized as a multidimensional construct comprising mental accounting labelling (MAL), mental budgeting (MB), and Fungibility bias (FB). Using a quantitative research design, data were collected from 317 households through a structured 4-points Likert-scale questionnaire. The data were analyzed using structural equation modelling (SEM) to examine the relationship between dimensions of mental accounting and remittance dependency (RD). The findings indicated that only mental accounting labelling exhibited a significant positive relationship with remittance dependency (β = 0.537, p < 0.001), whereas Fungibility Bias (β = 0.096, p < 0.05) and Mental Budgeting (β = -0.029, p = 0.708) did not illustrate statistically significant association. These findings indicate that the dimensions of mental accounting do not contribute equally to explaining remittance dependency behavior among the sampled Afghan households. The study also found that remittances are primarily allocated to the consumption category of the households, particularly for daily needs, healthcare and urgent financial needs, while only a limited proportion was allocated toward productive categories such as investment and trade. Overall, the findings suggest that household’s mentally categorize and manage remittance income differently from their ordinary sources of income, consistent with core theory of mental accounting. The study emphasizes the importance of understanding behavioral biases, particularly mental accounting and its dimensions, as well as remittance use when designing financial literacy initiatives and remittance management policies for similar households' populations.
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