Abstract
Overtime, the policy to enhance financial inclusion at the national and household or individual levels has coincided with the increasing need for non-farm enterprises in addition to mainstream farming due to climate change and as an income diversification strategy. Using data from the sixth round of the Ghana Living Standards Survey, this chapter examines the influence of financial inclusion on growth of non-farm enterprises. We construct a multi-dimensional measure (index) of financial inclusion relying on 14 indicators while employing an instrumental variable approach in examining financial inclusion–firm growth nexus. Our evidence suggests that improvement in non-farm entrepreneurs’ level of financial inclusion is growth enhancing with higher probability in the urban relative to rural areas. At the policy level, strategies targeted at boosting financial inclusion will not only spur firms’ growth but also expand these enterprises and hence improve tax revenue for the economy as a whole.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Abbott, P., Murenzi, I., & Musana, S. (2012). The Role of Non-farm Household Enterprises in Poverty Reduction, Employment Creation and Economic Growth in Rwanda. Rwanda Journal, 26(1), 68–92.
Abor, J., & Quartey, P. (2010). Issues in SME Development in Ghana and South Africa. International Research Journal of Finance and Economics, 39(6), 215–228.
AFI. (2015). 2015 Maya Declaration Report: Commitments into Action. Alliance for Financial Inclusion. Retrieved from http://www.afi-global.org/sites/default/files/publications/maya_report_2015-final.pdf.
Ahiawodzi, A. K., & Adade, T. C. (2012). Access to Credit and Growth of Small and Medium Scale Enterprises in the Ho Municipality of Ghana. British Journal of Economics, Finance and Management Sciences, 6(2), 34–51.
Aker, J. C., & Mbiti, I. M. (2010). Mobile Phones and Economic Development in Africa. The Journal of Economic Perspectives, 24(3), 207–232.
Akudugu, M. A. (2013). The Determinants of Financial Inclusion in Western Africa: Insights from Ghana. Research Journal of Finance and Accounting, 4(8), 1–9.
Amu, N. J. (2005). The Role of Women in Ghana’s Economy. Friedrich Ebert Foundation. Retrieved from http://library.fes.de/pdf-files/bueros/ghana/02990.pdf.
Ardishvili, A., Cardozo, S., Harmon, S., & Vadakath, S. (1998). Towards a Theory of New Venture Growth. In Babson Entrepreneurship Research Conference (pp. 21–23). Ghent, Belgium.
Basmann, R. L. (1960). On Finite Sample Distributions of Generalized Classical Linear Identifiability Test Statistics. Journal of the American Statistical Association, 55(292), 650–659.
Calvo, J. L. (2006). Testing Gibrat’s Law for Small, Young and Innovating Firms. Small Business Economics, 26(2), 117–123.
Cameron, A. C., & Trivedi, P. K. (2010). Microeconometrics Using Stata. Retrieved from http://www.stata.com/stata-news/statanews.23.4.pdf.
Chauvet, L., & Jacolin, L. (2017). Financial Inclusion, Bank Concentration, and Firm Performance. World Development. Retrieved from http://www.sciencedirect.com/science/article/pii/S0305750X17300803.
Daunfeldt, S.-O., Elert, N., & Lang, A. (2012). Does Gibrat’s Law Hold for Retailing? Evidence from Sweden. Journal of Retailing and Consumer Services, 19(5), 464–469.
Davidsson, P. (1991). Continued Entrepreneurship: Ability, Need, and Opportunity as Determinants of Small Firm Growth. Journal of Business Venturing, 6(6), 405–429.
Delmar, F. (2006). Measuring Growth: Methodological Considerations and Empirical Results. Entrepreneurship and the Growth of Firms, 1(1), 62–84.
Delmar, F., Davidsson, P., & Gartner, W. B. (2003). Arriving at the High-Growth Firm. Journal of Business Venturing, 18(2), 189–216.
Delmar, F., & Shane, S. (2006). Does Experience Matter? The Effect of Founding Team Experience on the Survival and Sales of Newly Founded Ventures. Strategic Organization, 4(3), 215–247.
Demirguc-Kunt, A., & Klapper, L. (2012). Measuring Financial Inclusion: The Global Findex Database. Retrieved from https://openknowledge.worldbank.org/handle/10986/6042.
Demirgüç-Kunt, A., Klapper, L. F., Singer, D., & Van Oudheusden, P. (2015). The Global Findex Database 2014: Measuring Financial Inclusion Around the World. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2594973.
Donovan, K. (2012). Mobile Money for Financial Inclusion. Retrieved from http://elibrary.worldbank.org/doi/abs/10.1596/9780821389911_ch04.
Fanta, A. B., & Mutsonziwa, K. (2016). Gender and Financial Inclusion: Analysis of Financial Inclusion of Women in the SADC Region (Policy Research Paper No. 01/2016). Retrieved from http://www.finmark.org.za/wp-content/uploads/2016/12/gender-and-financial-inclusion.pdf.
Field, A. (2005). Factor Analysis Using SPSS. University of Sussex, 17, 2009.
Fitzpatrick, K. (2015). The Effect of Bank Account Ownership on Credit and Consumption: Evidence from the UK. Southern Economic Journal, 82(1), 55–80.
Geroski, P., & Gugler, K. (2004). Corporate Growth Convergence in Europe. Oxford Economic Papers, 56(4), 597–620.
GSS. (2008). Ghana Living Standards Survey, Report of the Fifth Round (GLSS 5). Accra: Ghana Statistical Service.
GSS. (2014). Ghana Living Standards Survey: Main Report. Ghana Statistical Service, Accra. Retrieved from http://www.statsghana.gov.gh/docfiles/glss6/GLSS6_Main%20Report.pdf.
Hamilton, L. C. (2012). Statistics with Stata: Version 12. Cengage Learning. Retrieved from https://books.google.com.au/books?hl=en&lr=&id=pUELAAAAQBAJ&oi=fnd&pg=PP1&dq=Statistics+with+Stata+version+12&ots=F2uyT2GWbz&sig=fXJNROTHiqn80B74rDvpzoaJJtM.
Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica: Journal of the Econometric Society, 46, 1251–1271.
Hermelo, F. D., & Vassolo, R. (2007). The Determinants of Firm’s Growth: An Empirical Examination. Revista Abante, 10(1), 3–20.
Horst, H. A. (2006). The Blessings and Burdens of Communication: Cell Phones in Jamaican Transnational Social Fields. Global Networks, 6(2), 143–159.
Insurance Europe. (2012). How Insurance Works: The Basics. Insurance Europe aisbl, Belgium. Retrieved from https://www.insuranceeurope.eu/sites/default/files/attachments/How%20insurance%20works.pdf.
Jack, W., & Suri, T. (2011). Mobile Money: The Economics of M-PESA. National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w16721.
Jha, M., Amerasinghe, S., & Calverley, J. (2014). Financial Inclusion: Reaching the Unbanked. Standard Chartered Bank, Canada. Retrieved from https://www.sc.com/en/resources/globalen/pdf/Research/Financial_Inclusion__Reaching_the_unbanked_04_09_14.pdf.
Kaiser, H. F. (1960). The Application of Electronic Computers to Factor Analysis. Educational and Psychological Measurement, 20(1), 141–151.
Klapper, L., El-Zoghbi, M., & Hess, J. (2016). Achieving the Sustainable Development Goals: The Role of Financial Inclusion. Washington, DC: CGAP.
Koomson, I., Afful, B., Jr., & Villano, R. A. (2017). Relationship Between Financial Stress, Moonlighting and Teacher Attrition. Network for Socioeconomic Research and Advancement (nesra/wp/17/005).
Koomson, I., Annim, S. K., & Peprah, J. A. (2016). Loan Refusal, Household Income and Savings in Ghana: A Dominance Analysis Approach. African Journal of Economic and Sustainable Development, 5(2), 172–191.
Korir, L. K., Lagat, J. K., & Njehia, B. K. (2012). Farm Households’ Livelihood Diversification and Its Implications for Young People’s Engagement in Agriculture, the Case of Uasin Gishu County, Kenya. In Young People, Farming & Food Conference. Future Agricultures. Accra, Ghana.
Kunreuther, H. (2015). The Role of Insurance in Reducing Losses from Extreme Events: The Need for Public–Private Partnerships. The Geneva Papers on Risk and Insurance Issues and Practice, 40(4), 741–762.
Leyshon, A., & Thrift, N. (1996). Financial Exclusion and the Shifting Boundaries of the Financial System. Environment and Planning A, 28(7), 1150–1156.
Mensah, M. M. (2009). The Role and Challenges of Savings and Loans Companies in Ghana. Kwame Nkrumah University of Science and Technology. Retrieved from http://dspace.knust.edu.gh:8080/xmlui/bitstream/handle/123456789/686/Mercy%20Muriel%20Mensah.pdf?sequence=1.
Musah, A., Ibrahim, M., & Adam, O. (2016). Poverty, Income Diversification and Welfare in Northern Ghana. Journal of African Political Economy and Development, 1(1), 76–102.
Nandram, S. S., & Samson, K. J. (2000). Successful Entrepreneurship: More a Matter of Character Than of Knowledge (p. 242). Breukelen, the Netherlands: Nyenrode Centre for Entrepreneurship.
Nunoo, J., Darfor, K. N., Koomson, I., & Arthur, A. (2016). Employment Security and Workers’ Moonlighting Behaviour in Ghana (AGDI Working Paper). Retrieved from https://www.econstor.eu/bitstream/10419/149930/1/agdi-wp16-006.pdf.
Oeconomiae, D. (2011). Top Management Team Age Structure and Firm Performance. University of St. Gallen. Retrieved from http://www1.unisg.ch/www/edis.nsf/wwwDisplayIdentifier/3834/$FILE/dis3834.pdf.
Pagano, P., & Schivardi, F. (2003). Firm Size Distribution and Growth. The Scandinavian Journal of Economics, 105(2), 255–274.
Pencavel, J. (2015). The Productivity of Working Hours. The Economic Journal, 125(589), 2052–2076.
Pentland, J. (2006). Can Financial Counsellors Add Value to Financial Literacy Initiatives? In Financial Literacy, Banking and Identity Conference (pp. 25–26). RMIT. Retrieved from http://mams.rmit.edu.au/kwt8y7hkx9ybz.pdf.
Peprah, J. A., & Koomson, I. (2015). Capital and Credit Sources and Household Non-farm Income in Ghana. Journal of Arts and Social Sciences, 3(1). Retrieved from https://journal.ucc.edu.gh/index.php?journal=jass&page=article&op=view&path%5B%5D=65.
Peprah, J. A., Afoakwah, C., & Koomson, I. (2015). Savings, Entrepreneurial Trait and Self-Employment: Evidence from Selected Ghanaian Universities. Journal of Global Entrepreneurship Research, 3(1), 1.
Petrunia, R. (2008). Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms. Small Business Economics, 30(2), 201–214.
PHC. (2012). 2010 Population and Housing Census: Final Results. Accra: Ghana Statistical Service.
PricewaterhouseCoopers, Ghana. (2013). 2013 Ghana Banking Survey: Harnessing the SME Potential. Retrieved from https://www.pwc.com/gh/en/pdf/ghana-banking-survey-2013-pwc.pdf.
Quaye, I., Abrokwah, E., Sarbah, A., & Osei, J. Y. (2014). Bridging the SME Financing Gap in Ghana: The Role of Microfinance Institutions. Open Journal of Business and Management, 2(04), 339.
Rae, A., & Rea, W. (2016). How Many Components Should Be Retained from a Multivariate Time Series PCA? arXiv Preprint: arXiv:1610.03588. Retrieved from https://arxiv.org/abs/1610.03588.
Sargan, J. D. (1958). The Estimation of Economic Relationships Using Instrumental Variables. Econometrica: Journal of the Econometric Society, 26(3), 393–415.
Schmidt-Traub, G., & Sachs, J. (2015). Financing Sustainable Development: Implementing the SDGs Through Effective Investment Strategies and Partnerships. Sustainable Development Solution Network Working Paper, June. Available at: http://Unsdsn.Org/Wp-Content/Uploads/2015/04/150619-SDSN-Financing-Sustainable-Development-Paper-FINAL-02.Pdf.
Shadish, W. R., Cook, T. D., & Campbell, D. T. (2002). Experimental and Quasi-Experimental Designs for Generalized Causal Inference. Wadsworth Cengage Learning. Retrieved from https://pdfs.semanticscholar.org/f141/aeffd3afcb0e76d5126bec9ee860336bee13.pdf.
Shylendra, H. S. (2006). Microfinance Institutions in Andhra Pradesh: Crisis and Diagnosis. Economic and Political Weekly, 41(20), 1959–1963.
Staiger, D. O., & Stock, J. H. (1994). Instrumental Variables Regression with Weak Instruments. National Bureau of Economic Research Cambridge, MA, USA. Retrieved from http://www.nber.org/papers/t0151.
Weinzimmer, L. G., Nystrom, P. C., & Freeman, S. J. (1998). Measuring Organizational Growth: Issues, Consequences and Guidelines. Journal of Management, 24(2), 235–262.
Welter, F. (2001). Who Wants to Grow Up? Growth Intentions and Growth Profiles of (Nascent) Entrepreneurs in Germany. Retrieved from https://www.researchgate.net/profile/Friederike_Welter/publication/38173322_Who_wants_to_grow_growth_intentions_and_growth_profiles_of_(nascent)_entrepreneurs_in_Germany/links/54f48a950cf2f28c1361dbf0.pdf.
White, H., & Sabarwal, S. (2014). Quasi-Experimental Design and Methods. Methodological Briefs: Impact Evaluation, 8. Retrieved from https://beamexchange.org/uploads/filer_public/63/94/639467e9-9bc1-45f6-bc3b-7c3e296e418b/quasi-experimental_design_methods.pdf.
Wooldridge, J. M. (1995). Score Diagnostics for Linear Models Estimated by Two Stage Least Squares. In G. S. Maddala, P. C. B. Phillips, & T. N. Srinivasan (Eds.). Advances in Econometrics and Quantitative Economics: Essays in Honor of Professor CR Rao (pp. 66–87). Oxford: Blackwell.
Wu, D.-M. (1974). Alternative Tests of Independence Between Stochastic Regressors and Disturbances: Finite Sample Results. Econometrica: Journal of the Econometric Society, 42(3), 529–546.
Yasuda, T. (2005). Firm Growth, Size, Age and Behaviour in Japanese Manufacturing. Small Business Economics, 24(1), 1–15.
Zhou, H., & de Wit, G. (2009). Determinants and Dimensions of Firm Growth. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1443897.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Koomson, I., Ibrahim, M. (2018). Financial Inclusion and Growth of Non-farm Enterprises in Ghana. In: Efobi, U., Asongu, S. (eds) Financing Sustainable Development in Africa. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-78843-2_14
Download citation
DOI: https://doi.org/10.1007/978-3-319-78843-2_14
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-78842-5
Online ISBN: 978-3-319-78843-2
eBook Packages: Economics and FinanceEconomics and Finance (R0)