Investigating factors that influence individual’s demand for loans in Ghana: a case of Kwahu West Municipality

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Following the liberalization of the financial sector in Ghana, individual’s demand for loan has increased. However, banks are reporting high rate of loan defaults and nonperforming loans (NPLs). Much is not known regarding the factors influencing individual’s demand for loans in Ghana. The purpose of this study is to investigate the factors that influence individual’s loan demand in Ghana. A sample of 600 individuals was selected from Kwahu West Municipality using simple random sampling technique. Logistic regression model was applied to the data. The study showed that age, education level, employment status, marital status, individual wealth, health status, remittance, income, savings and financial literacy are the major demographic and socio-economic factors that influence individual’s loan demand. Again, the study revealed that 54.5% of the 400 individuals who indicated that they have ever demanded loan are between the ages of 18-39 years. Majority of these individuals might be furthering their education and might also not be well established to repay loans demanded. It is therefore recommended that, banks should conduct a thorough check on the individuals who demand loans and those with no properties to ascertain their credit history to ensure loan repayment. Banks should also identify and adopt a type of loans that will be suitable for less wealthy and low income individuals.
A thesis submitted to The Department of Economics in partial fulfilment of the requirement for the award of the degree of Master of Philosophy in Economics,