Exploring the Triggers of Bank Runs in Ghana: Evidence from Consumers

Abstract

The study aims to explore the factors that drive panic withdrawal, the reasons for withdrawals and the further actions that bank clients take after withdrawing their deposits during the collapse of banks from an individual customer perspective. A cross-sectional data set was collected from 80 customers of banks in Ghana using a survey instrument. In total, 44 percent of respondents have accounts with at last one of the failed or collapsed banks. Overall, half of the respondents withdrew their funds after the collapse of their banks while the other half did not. Also 31.3 percent of the respondents withdraw their funds before their banks collapsed. Customers withdraw their funds because they follow other depositors, and because of their bank’s performance. Most of the respondents deposited with public banks after withdrawing their funds followed by depositing with foreign banks. The result indicated that the majority of those under the age of 39 years had accounts with the collapsed banks and majority of these people are those with at least a degree qualification. Most of the customers did not withdraw their funds from their banks and some were able to act earlier before the banks collapsed. The result also suggests that withdrawals were made by depositors who are youthful (below the age of 39 years) mostly because of their lack of trust for their bank, or the banks' performance. Highly educated customers ended up keeping their funds away from the formal financial sector after they made their withdrawals. Keywords: Bank run; Ghana; customers; deposits; panic withdrawals; risk.