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

GIGA Working Paper No. 94

32 Pages Posted: 12 Feb 2009 Last revised: 18 Aug 2012

Susan Steiner

Institut für Iberoamerika-Kunde

Lena Giesbert

German Institute of Global and Area Studies (GIGA)

Mirko Bendig

German Institute of Global and Area Studies (GIGA)

Date Written: January 12, 2009

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, i.e. savings products, loans, or insurances, as is largely done in the literature. In contrast to previous research, it is assumed that households' choice for any of these services is strongly interconnected. Therefore, the paper simultaneously estimates the determinants of household demand for savings, loans and insurances by applying a multivariate probit model on 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 usage of savings products, loans and insurances does not only depend on the socio-economic status of households, but also on various other factors, such as households' risk assessment and the past exposure to shocks. In addition, trust in the providing institution and its products appear to play a key role.

Keywords: rural financial markets, financial services, Sub-Saharan Africa, Ghana

JEL Classification: G20, O16, R22

Suggested Citation

Steiner, Susan and Giesbert, Lena and Bendig, Mirko, Savings, Credit and Insurance: Household Demand for Formal Financial Services in Rural Ghana (January 12, 2009). GIGA Working Paper No. 94. Available at SSRN: https://ssrn.com/abstract=1341550 or http://dx.doi.org/10.2139/ssrn.1341550

Susan Steiner (Contact Author)

Institut für Iberoamerika-Kunde ( email )

Prol. Paseo de la Reforma, #880
Lomas de Santa Fe
Mexico, Distrito Federal 01210
Mexico

Lena Giesbert

German Institute of Global and Area Studies (GIGA) ( email )

Neuer Jungfernstieg 21
Hamburg, DE D-20354
Germany

HOME PAGE: http://www.giga-hamburg.de

Mirko Bendig

German Institute of Global and Area Studies (GIGA) ( email )

Neuer Jungfernstieg 21
Hamburg, DE D-20354
Germany

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