Demand for financial services by households in Ghana

Purpose - The purpose of this paper is to investigate household financial choice and the determinants of financial services in rural and urban households in Ghana. Design/methodology/approach - Data from the Ghana Living Standard Survey 5 (GLSS 5) are used to estimate the participation of a household in a particular financial sector and what determines this choice. Findings - The results from Tobit and conditional logit models account for households' demographic characteristics and their financial decisions. The Tobit estimates show that household size, age, sex, marital status, occupation, income, remittances and shocks determine households' participation in the financial markets. Conditional logit model results suggest that locational characteristics are important in obtaining financial services from particular sectors of the financial market. The results also suggest that when the alternatives of financial services are available, rural households are more likely than urban households to obtain their financial services from the informal financial sector. Originality/value - This current study contributes to the existing literature from the Ghanaian perspective.