Drivers and dynamics of financial inclusion in Ghana

Abstract

The significance of financial sector development, encompassing capital markets and the banking sector, in emerging economies has been substantiated by a plethora of evidence. Nevertheless, access to financial services tends to be biased towards affluent individuals and those already financially stable while overlooking the impoverished and those residing in remote areas. By utilising data from the Ghana Living Standards Survey (GLSS) 7, this research employed an explanatory research design and applied the probit model to analyse the drivers and dynamics of financial inclusion in Ghana. The findings revealed that religious affiliation, educational attainment, age, marital status, gender, and hours worked substantially drove financial inclusion in Ghana. The study identified that most individuals excluded from the financial sector were marginalised due to poverty or financial constraints, with less than 2 per cent being involuntarily excluded from formal financial services. Furthermore, the study disclosed that most respondents access credit for entrepreneurial ventures, personal consumption, education, and agricultural activities. Additionally, many credit applications were turned down due to the inability to provide collateral, absence of a guarantor, low income, and inappropriate loan purposes. The study recommends that the Ministry of Finance should strive to promote the ownership of formal bank accounts by addressing issues related to gender, education, and income disparities. Finally, it is recommended that financial institutions should engage in community outreach programs to equip individuals with the requisite knowledge to enhance their comprehension of banking procedures.