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Secure property right as a determinant of SME’s access to formal credit in Ghana: dynamics between Micro-finance Institutions and Universal Banks

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  • Daniel Domeher
  • Raymond Abdulai
  • Eric Yeboah

Abstract

Does registered land title help to improve tenure security and enhance one’s chances of securing a loan from formal financial institutions? This question continues to sharply divide opinions among academics, policy-makers and international development partners. The long running debate on the subject of ‘Property in the Commons’, which serves as the ideological origin of what has become known as ‘Washington Consensus’ in contemporary times claims that there is positive correlation between the possession of registered land title and access to credit. However, this has often received considerable rebuttals. Even if the ‘Washington Consensus’ is accepted, the argument is still laced with some fundamental difficulty because it inherently assumes and treats financial institutions as a homogenous class of business. Yet financial institutions exhibit greater diversity in their operations and decision-making process. This paper attempts to contribute towards developing improved understanding between the ‘secure land title and access to credit relationship’ by disaggregating financial institutions into Micro-finance and Universal Banks (UBs) and examining what role secure land title play in granting credit from the perspectives of these two categories of financial institutions. To achieve this, field level investigations were conducted amongst officials of both Micro-finance Institutions (MFIs) and UBs in Ghana using structured questionnaires. A total of 200 questionnaires – 100 each to MFI and Universal Banks were administered of which a response rate of 51 and 57 was, respectively, achieved. The data were analysed using various non-parametric statistics. The study amongst other things established that UBs and MFIs differ in their opinions on how important secure titles are in the lending process and the nature of the influence they can exert on the final lending decision. It was established that both categories of lenders do regard secure titles as important but whether or not it will influence their decision to accept a given landed property as collateral varies across lender types.

Suggested Citation

  • Daniel Domeher & Raymond Abdulai & Eric Yeboah, 2016. "Secure property right as a determinant of SME’s access to formal credit in Ghana: dynamics between Micro-finance Institutions and Universal Banks," Journal of Property Research, Taylor & Francis Journals, vol. 33(2), pages 162-188, April.
  • Handle: RePEc:taf:jpropr:v:33:y:2016:i:2:p:162-188
    DOI: 10.1080/09599916.2016.1160948
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    References listed on IDEAS

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    1. Klaus Deininger, 2003. "Land Policies for Growth and Poverty Reduction," World Bank Publications - Books, The World Bank Group, number 15125.
    2. Boucher, Stephen R. & Guirkinger, Catherine & Trivelli, Carolina, 2005. "Direct elicitation of credit constraints: Conceptual and practical issues with an empirical application," 2005 Annual meeting, July 24-27, Providence, RI 19272, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    4. Dower, Paul & Potamites, Elizabeth, 2005. "Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia," 2005 Annual meeting, July 24-27, Providence, RI 19120, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Abdul-Hanan Abdallah & Michael Ayamga & Joseph Agebase Awuni, 2023. "Large-Scale Land Acquisition and Household Farm Investment in Northern Ghana," Land, MDPI, vol. 12(4), pages 1-36, March.

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