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

  • Mirko Bendig


    (GIGA German Institute of Global and Area Studies)

  • Lena Giesbert


    (GIGA Institute of African Affairs)

  • Susan Steiner


    (GIGA Institute of Latin American Studies)

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.

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Paper provided by GIGA German Institute of Global and Area Studies in its series GIGA Working Paper Series with number 94.

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Length: 31 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:gig:wpaper:94
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