Understanding the determination of loan demand in Ghana: Do individuals’ socio-demographic and economic characteristics matter?
The importance of credit demand cannot be overemphasised given its potential positive influence on individuals’ livelihood and economic growth of countries. In spite of the financial sector liberalisation in Ghana, some individuals still face financial constraints which make it difficult to cover up their spending gap. This paper investigates whether individuals’ socio-demographic and economic characteristics are important in loan demand. A simple random sampling technique was used to select 700 respondents. Using binary probit regression, the study shows that individuals’ socio-demographic and economic characteristics matter in loan demand. Individuals who have attained tertiary education and those who earn substantial income are more likely to demand loan. It is also revealed that financially literate individuals are more likely to demand loan whereas private sector employees are less likely to demand loan. Given the findings and the fact that loan demand is vital in eliminating poverty, financial institutions should identify and adopt different types of loans that are suitable for the marginalised and less privileged individuals.
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