Iddrisu, A. M.2021-04-232021-04-232018-12http://ugspace.ug.edu.gh/handle/123456789/36212PhD. Development EconomicsThis thesis consists of three stand-alone empirical papers on the drivers and welfare effects of financial inclusion in Ghana. The first empirical paper (Paper I), presented in Chapter two of the thesis, examines the effect of access to credit on household welfare using a pseudo panel data set spanning the period 1991/92 – 2012/13. In addressing the welfare effects of access to credit, Paper I examine, specifically, the effect of access to credit on several measures of household welfare including total household consumption expenditure per adult equivalent and household food expenditure per adult equivalent. Also, the study examines the potential variations in the effect of access to credit on the welfare of households at different levels of welfare. Finally, the study investigates the mediating role of the gender of the household head in the effect of access to credit on household welfare. Empirical estimation techniques employed in this paper include the errors-in-variables, the weighted least squares and the dynamic generalised method of moments estimators. The main empirical results of the paper suggest that access to credit has a beneficial effect on household welfare; this is true regardless of the measure of household welfare used. Specifically, the alleviation of households’ credit constraints does not only enhance household consumption, more importantly, it reduces their likelihood of falling into poverty as well as the extent of poverty and the degree of inequality among the poor. The positive effect of access to credit on household welfare is however heterogeneous across gender and levels of household welfare. In this vein, the study finds that the welfare effect of access to credit is higher for female-headed households than for male-headed households. As well, access to credit benefits the poor more than the rich, indicating that access to credit could be a source of convergence in welfare across households. The results of this paper are robust to the measure of household welfare, the control for endogeneity and changes in the data structure. Chapter three presents the second empirical paper of the thesis (Paper II). The study examines the effect of financial inclusion on household welfare using a cross-sectional household survey data set drawn from the sixth round of the Ghana Living Standards Survey (GLSS). Specifically, the paper first computes a multidimensional index of financial inclusion and then examine the effect of financial inclusion on household welfare. Robust estimation approaches including the Ordinary Least Squares, the Binary Probit and the Propensity Score Matching estimation techniques are utilised in this paper. The main findings of the study are as follows: first, the study’s empirical results suggest strongly that financially deprived households have lower levels of welfare compared to their financially included counterparts; this finding is robust to the use of different measures of household welfare. Second, we observe that poor households experience much larger welfare effects of financial inclusion relative to non-poor households. This indicates that financial inclusion does not only improve household welfare, but it may also help to reduce income inequality. Finally, on the possible channels through which financial inclusion might influence household welfare, we show that financial inclusion influences household welfare via its effect on households’ farm and non-farm enterprise incomes. The results of the study are robust to alternative measurements of the financial inclusion index, to the use of different cut-off points and to the control for endogeneity and self-selection bias. Chapter four presents the third empirical paper of the thesis (Paper III). Paper III examines, specifically, the role of banking system penetration on financial inclusion in Ghana using a three-period district-level panel data set over the period 1999 – 2013 whilst exploiting the change in the policy which guides banking operations in Ghana. Both the ordinary least squares and the instrumental variables estimators are used in this paper. The study elicits the following findings: first, we show that the switch from the compartmentalised system of banking to the universal banking system in Ghana has resulted in an expansion of banks’ branch network which has benefited hitherto financially less developed districts, although branch expansion into financially more developed districts continues unabated. Second, our instrumental variable evidence suggests that banking system penetration promotes financial inclusion in terms of access to bank and formal credit. The empirical results of the thesis point to the fact that improving the level of financial inclusion is a plausible tool that can be deployed towards the realisation of the Sustainable Development Goals, notably, the reduction in the incidence of poverty and vulnerability as well as inequality. Consequently, we recommend that policies that seek to promote meaningful access to financial services by all (especially, those that seek to deepen the extent of bank branch penetration and the roll-out of innovative financial products/services) must be strengthened. Keywords: Financial Sector Development, Financial Institutions, Formal Banks, Bank Branch Expansion, Banking System Penetration, Financial Inclusion, Financial Exclusion, Financial Deprivation, Household Welfare, Poverty, Inequality, Pseudo Panel, Access to Credit, Credit Constraint, Difference-in-Differences, Instrumental Variables, Propensity Score Matching, Errors-in-Variables, Ghana.enFinancial Sector DevelopmentFinancial InstitutionsBanksFinancial InclusionThesis