Discriminant Analysis of Demand-Side Roadblocks to Financial Inclusion in Northern Ghana

Abstract

Northern Ghana has been described as the most poverty-stricken spot in Ghana. Given the link between financial inclusion and poverty reduction, this paper aims at estimating a discriminant function model to analyse demand-side roadblocks to financial inclusion in Northern Ghana. The study is mainly based on primary data elicited through survey questionnaires. Even though the minimum sample size was determined to be 385 households, a total of 400 households were selected systematically, out of which 395 households returned their questionnaires for analysis. The estimated discriminant function model was found to be significant at the 1% level of significance. It was also found that, the demand-side roadblocks that are very crucial to financial inclusion in Northern Ghana (in order of importance) are “Culture”, “Cost”, “Capability”, and “Trust”. Overall, 77.2% of the cases were correctly classified by the estimated model. This paper therefore concludes that most vulnerable groups in Northern Ghana still find it difficult to access formal financial services due to barriers such as culture, cost, capability and trust. Government policies should therefore be directed at addressing these barriers so as to enhance financial inclusion in the area which eventually will lead to poverty reduction.