Bank Competition and Financial Inclusion: Evidence from Ghana
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Date
2021-10-04
Authors
Dako, Agyapomaa Gyeke-
Fiador, Vera
Agbloyor, Elikplimi Komla
Abor, Joshua Yindenaba
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
This paper investigates how banking sector competition, measured from the
consumer’s perspective as well as from financial intermediary pricing behaviour,
affects financial inclusion in a developing country like Ghana. Financial inclusion in
Ghana has remained low, leading us to examine if competition within banks (who
happen to be the largest financial institutions) promotes financial inclusion. This
paper measures competition using two indicators: the consumer-level measure
of competition relating to the proliferation of bank branches, and a measure for
banking sector competition using the funding-adjusted Lerner index at the financial
intermediary level. Using data from the 2013 Ghana Living Standards Survey, district level data on bank branches and bank-level financials from 23 banks spanning the
period 2008–2015, we found in almost all cases that competition, whether measured
by bank branch proliferation or at the financial intermediary level, improves financial
inclusion. These findings suggest that policies aimed at improving competition in the
banking sector can yield larger societal benefits by increasing the proportion of the
population included in the financial sector. We recommend that the Bank of Ghana, in
consultation with the Ghana Association of Bankers, should draft a competition policy
for banks in Ghana. Key areas to examine include the trend towards “open banking”,
and the integration of mobile money and technology into the financial sector.