Financial inclusion and household consumption behaviour in Ghana
Abstract
Purpose
This study aims to investigate the relationship between financial inclusion and household expenditure behaviour among Ghanaian households, by taking into account both formal and informal financial inclusion channels.
Design/methodology/approach
Propensity score matching as well as instrumental variable techniques are applied to data from the Ghana Living Standard Survey to investigate the effect of financial inclusion on the share of total expenditure devoted to different categories, including food, health, education, housing, durables, temptation goods and other goods.
Findings
Informal financial inclusion seems to have no substantial effect on households’ consumption behaviour, whereas formal financial inclusion significantly affects it. The study finds that formal financial inclusion is inversely related to the budget share devoted to short-term expenditure (food, temptation goods and other goods such as transport and recreation). Conversely, financially included households spend more on long-term expenditure such as education, housing and consumer durables, thus, suggesting a diversion effect towards investment in long-term physical and human capital.
Practical implications
The investigation of the heterogeneous impact across households (male vs female headed, rural vs urban) has essential policy implications on how financial inclusion can be improved among the disadvantaged groups, and with what effects.
Originality/value
The study focuses on the importance of financial inclusion in Ghana, considering both formal and informal financial inclusion channels. Previous studies only examined the overall effects on household welfare, overlooking the impact on household expenditure composition and consumption shares. The analysis also considers the heterogeneous impact of financial inclusion on households based on the gender of the household head and the location where households reside (rural, urban).
Keywords
Acknowledgements
The authors are very grateful to Massimo Tamberi, Giorgia Barboni and Andrea Presbitero for fruitful exchanges and discussion during the preparation of this manuscript. The authors also thank Matteo Picchio, Francesca Scaturro and the participants at the seminars at the Department of Economics and Social Sciences (Ancona, Italy) for useful comments and suggestions. All errors are our own.
Funding: We declare that no funds, grants or other support were received during the preparation of this manuscript and that we have no relevant financial or non-financial interests to disclose.
Data availability statement: The data underlying this article were provided by the Ghana Statistical Service (GSS) by permission. Ghana Statistical Service (GSS) requires all users to keep data strictly confidential. Data obtained from GSS are protected by copyright law and, therefore, not for redistribution. Data will be shared on request to the corresponding author with permission of GSS.
Citation
Abokyi, E. and Bettin, G. (2024), "Financial inclusion and household consumption behaviour in Ghana", Journal of Financial Economic Policy, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFEP-02-2024-0048
Publisher
:Emerald Publishing Limited
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