Title: Loan refusal, household income and savings in Ghana: a dominance analysis approach

Authors: Isaac Koomson; Samuel Kobina Annim; James Atta Peprah

Addresses: Department of Economics, Faculty of Social Sciences, College of Humanities and Legal Studies, University of Cape Coast, Ghana ' Department of Economics, Faculty of Social Sciences, College of Humanities and Legal Studies, University of Cape Coast, Ghana ' Department of Economics, Faculty of Social Sciences, College of Humanities and Legal Studies, University of Cape Coast, Ghana

Abstract: Many loan applicants and households face the problem of loan refusal but researchers passively discuss it and do not consider discussing its intensity. This paper uses the fifth round of the Ghana Living Standards Survey data, employing the logit and Poisson regression models on loan refusal as binary and count variables respectively. The econometric analysis of 1,600 and 1,591 households for the loan refusal and intensity of loan refusal respectively shows that income and savings inversely relate to loan refusal and the intensity of loan refusal. The dominance analysis also showed that in Ghana, household savings causes loan refusal and intensity of loan refusal more than household income. We call on financial institutions to widen their coverage, in general, and more in the rural areas so as to increase the stock of loanable funds readily available to prospective applicants, with more flexibility for rural dwellers.

Keywords: loan refusals; credit rationing; discouraged borrowers; household savings; household income; Ghana; dominance analysis; econometrics; rural areas; loanable funds.

DOI: 10.1504/AJESD.2016.076095

African Journal of Economic and Sustainable Development, 2016 Vol.5 No.2, pp.172 - 191

Received: 08 Mar 2015
Accepted: 08 Mar 2015
Published online: 23 Apr 2016 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article