Effects of Credit ‘Plus’ on Poverty Reduction in Ghana

This study examined the relative and joint effects of credit, savings, remittances and micro-insurance on household poverty. Data on 30,527 households obtained from the Ghana Living Standards Survey rounds six (GLSS6) and seven (GLSS 7) were used. Analytical approaches employed were the ordinary least squares, two-stage least squares (2SLS), probit, ordered probit, simultaneous quantile regression (SQR) and the dominance analysis. Results show that, while in general financial products independently contribute to reduction in household poverty, their complementarities (credit, micro-insurance and savings (CIS) have the greatest effects. Remarkably, the SQR and ordered probit estimates show that, while the effect of credit is strongest among those in middle-income households, savings have the greatest poverty reduction effect among those in the lowest quantile and the very poor. This finding is further corroborated by the dominance analysis estimates. Policy wise, if the key objective for policy makers is to reduce poverty, then the greatest impact is through innovative practices such as offering financial products in bundles/packages, while identifying lagging households and promoting financial outreach to these households should be an integral part of Ghana’s anti-poverty programmes.