Does trust in financial institutions drive formal saving? Empirical evidence from Ghana

Abstract

Policies aimed at enhancing domestic savings mobilisation to facilitate economic growth have been implemented in both developed and developing countries; yet the level of savings remains low, especially in most of the developing world, due to the predominant use of informal savings methods. Several individuals’ characteristics have been identified as factors that influence individuals’ decision to use formal ways of saving with virtually no emphasis on the role of trust, which is envisaged as essential in making economic decisions. This paper investigates the effect of trust on individuals’ decision to save at financial institutions. We use primary data and employ binary probit regression for our analysis. The results show among others that boosting individuals’ trust is key to formal ways of saving. Based on the findings, we provide vital policy implications that seek to restore individuals’ trust in financial institutions.