Financial Exclusion: What Drives Supply and Demand for Basic Financial Services in Ghana

Abstract

The majority of people in Sub-Saharan Africa does not have a basic bank account and are financially excluded from main stream financial services. This paper examines factors that drive geographic exclusion of banking services to rural communities and households’ demand for a basic bank account in Ghana. Using rural community based and household survey datasets, the study finds that banks’ decision to place a branch in a community are positively influenced by the market size, the level of infrastructure such as energy and communication facilities in the area, market activeness etc. but are negatively influenced by the general level of insecurity associated with crime, conflicts, natural disasters etc. Conversely, households’ demand for a bank account appears to be strongly driven by both market and non-market factors such as price, illiteracy, ethno-religion, dependency ratio, employment and wealth status as well as proximity to a bank.