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Savings, Credit, and Insurance: Household Demand for Formal Financial Services in Rural Ghana

Author

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  • Mirko Bendig
  • Lena Giesbert
  • Susan Steiner

Abstract

This paper argues that the study of the demand for financial services in developing countries leaves out part of the story if it looks at only one of the three elements of the so-called finance trinity—that is, savings products, loans and insurance—as is largely done in the literature. In contrast to previous research, this study assumes that households’ choices for any of these services are strongly interconnected. Therefore, the paper simultaneously estimates the determinants of household demand for savings, loans and insurance by applying a multivariate probit model to household survey data from rural Ghana. On the one hand, the estimation results confirm the common finding that poorer households are less likely to participate in the formal financial sector than better-off households. On the other hand, there is empirical evidence that the use of savings products, loans and insurance depends not only on the socioeconomic status of households, but also on various other factors, such as households’ risk assessment and past exposure to shocks. In addition, trust in the providing institution and its products appear to play a key role.

Suggested Citation

  • Mirko Bendig & Lena Giesbert & Susan Steiner, 2009. "Savings, Credit, and Insurance: Household Demand for Formal Financial Services in Rural Ghana," Global Development Institute Working Paper Series 7609, GDI, The University of Manchester.
    • Handle: RePEc:bwp:bwppap:7609
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    6. Kosmas Njanike & Raphael T. Mpofu, 2024. "Factors Influencing Financial Inclusion for Social Inclusion in Selected African Countries," Insight on Africa, , vol. 16(1), pages 93-112, January.
    7. Arun, Thankom Gopinath & Bendig, Mirko, 2010. "Risk Management among the Poor: The Case of Microfinancial Services," IZA Discussion Papers 5174, Institute of Labor Economics (IZA).
    8. Olomola, Aderbigbe & Gyimah-Brempong, Kwabena, 2014. "Loan demand and rationing among small-scale farmers in Nigeria:," IFPRI discussion papers 1403, International Food Policy Research Institute (IFPRI).
    9. Tuan, Truong Anh & Nam, Pham Khanh & Loan, Le Thanh, 2022. "The impact of health insurance on households’ financial choices: Evidence from Vietnam," Research in Economics, Elsevier, vol. 76(3), pages 264-276.
    10. Victoria Wanjiku Wokabi & Olanrewaju Isola Fatoki, 2019. "Determinants of Financial Inclusion In East Africa," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 7(1), pages 125-143, May.
    11. Campero Alejandra & Kaiser Karen, 2013. "Access to Credit: Awareness and Use of Formal and Informal Credit Institutions," Working Papers 2013-07, Banco de México.
    12. Bendig, Mirko & Arun, Thankom Gopinath, 2011. "Enrolment in Micro Life and Health Insurance: Evidences from Sri Lanka," IZA Discussion Papers 5427, Institute of Labor Economics (IZA).
    13. I.K. Balyanda AKMAL & M. Shabri Abd. MAJID & Eddy GUNAWAN, 2020. "Does Zakat Matter For Human Development? An Empirical Evidence From Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 195-208, June.
    14. Chakraborty, Pallabi & Mahanta, Amarjyoti, 2024. "The role of financial and physical assets as substitute or complementary to land as collateral in credit market: Evidence from Indian households," Economic Systems, Elsevier, vol. 48(2).
    15. Yusuf Ibrahim Kofarmata & Shri Dewi Applanaidu & Sallahuddin Hassan, 2016. "Determinants of Demand for Credit: A Conceptual Review," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(1), pages 6-10.
    16. Nurul Syifaa Mohd Shakil & Nur Azirah Zahida Mohamad Azhar & Norashida Othman & Ahmad Zuhairi Zainuddin & Lucky Rachmawati & Tony Seno Aji & Hendry Cahyono, 2023. "Nexus between Government Assistance and Savings: Preliminary Analysis of Households in Malaysia," Information Management and Business Review, AMH International, vol. 15(3), pages 462-469.
    17. Samuel Sekyi, 2017. "Rural Households' Credit Access and Loan Amount in Wa Municipality, Ghana," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 506-514.
    18. Patricia Born & Douglas Bujakowski, 2022. "Economic transition and insurance market development: evidence from post-communist European countries," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(1), pages 201-237, March.
    19. Pamela Katic & Tim Ellis, 2018. "Risk aversion in agricultural water management investments in Northern Ghana: experimental evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 49(5), pages 575-586, September.

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    More about this item

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

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