Implications for Poverty Reduction in Rural Households in Ghana: Results of OLS estimation and Probit estimation

Table 2 shows the results of OLS estimate of equation. The dependent variable is lwkexpend2 which is the natural log of wkexpend. Thus lwkexpend2 measures the percentage of weekly expenditure on basic needs due to the independent variable(s). From the Table kasena, bwest, depend, oldsav, amtprof, age, Primary, JSS/Middle, Post secondary, numacty and acesmf all are statistically different from zero and each of them has a positive relationship with the percentage of weekly expenditure (proxy for poverty).
The coefficient of acesmf (0.2122) implies that beneficiaries of MFIs loans on the average spend 21.2% weekly on basic needs more than non-beneficiaries of MFIs loan. However, due to the issues of selection bias and endogeneity OLS estimate of the coefficient of acesmf (0.2122) is bias and for that matter does not provide an accurate measure of the impact of access to MF. In the light of this, the treatment effect model is estimated which controls for sample selection bias. Bank-customer

Tables 3a and 3b show the results of the treatment effect model, which have been simultaneously estimated using the access to MF (acesmf) and the outcome (weekly consumption expenditure (wkexpend2)). Table 3a shows the results of access to MF equation with acesmf as the dependent variable. While Table 3b shows the results of the weekly expenditure equation: with the natural log of weekly expenditure on basic needs, a proxy for poverty (lwkexpend2) as the dependent variable. The results of access to MF using a probit estimation method showed that Bwest, oldsav, assets and frnsours are all statistically different from zero at 1% significance level while kasena and amtprof are also statistically different from zero at 5% significance level. However, lonsours is also different from zero at 10% significance level.
The coefficients of kasena and Bwest are -0.490 and -0.979 respectively. These suggest that respondents from the Kasena Nankani and Bawku West Districts have less probability of accessing or taking loans from MFIs than their counterparts from the Talensi-Nabdan, Bongo and Builsa Districts. Both Kasena Nankani and Bawku West Districts have very vibrant market centres and good number of MFIs. It stands to reason therefore that people from these two Districts could have over the years become more financially self reliant and would therefore be less likely to borrow from a MFI than their counterparts in the reference Districts. The result also shows that respondents from Kasena Nankani District have higher probability of accessing MFIs loans than those from the Bawku West District. The coefficient of oldsav is -0.00213, this means that an increase in old or initial savings reduces the probability of accessing or taking an MFI loans. This could be so because those who have substantial amount of saving may not have to borrow again from an MFI. Though initial saving is usually a criterion for grant of loans, the results suggests that individual who are able to raise the initial amount required as a start-up capital for their agro-processing business have less probability of borrowing from an MFI.

Table 2: Results of OLS estimation of impact of access to MF (dependent variable: weekly consumption expenditure)

Variables Coefficient Robust Std. error P-Value
Kasena Nankana District (1/0) 0.341*** 0.072 0.000
Bawku west District (1/0) 0.548*** 0.063 0.000
Age in years 0.052*** 0.016 0.001
Age-squared -0.001*** 0.000 0.001
Number of dependants in household 0.033** 0.014 0.017
Number of people in household -0.006 0.008 0.477
Has received MFI loan(1/0) 0.212*** 0.050 0.000
Number of borrowing sources -0.009 0.051 0.855
Amount of profit 0.002*** 0.001 0.003
No. of i ncome generating activities 0.045** 0.019 0.019
Initial savings 0.000* 0.000 0.092
Value of physical assets 0.000 0.000 0.537
Primary school(1/0) 0.187*** 0.057 0.001
JSS/Middle school(1/0) 0.182** 0.083 0.030
SSS/Secondary school(1/0) -0.082 0.138 0.554
Post Secondary school(1/0) 0.336* 0.179 0.061
Constant 1.335*** 0.349 0.000
Number of obs. 437
R-squared 0.345
Root MSE 0.498

Table 3a: Results of Probit estimation of determinants of access to MF(dependent variable: access to MF)

Variables Coefficient Std. error P-Value
Kasena Nankana District (1/0) -0.490** 0.218 0.025
Bawku west District (1/0) 0 979*** 0.235 0.000
Age in years 0.017 0.042 0.688
Age-squared -0.000 0.001 0.944
Dependants in household 0.046 0.039 0.227
Number of people in household 0.024 0.025 0.345
Number of borrowing sources -0.331* 0.198 0.095
Number of friends with loans 0.298*** 0.037 0.000
Amount of profit 0.004** 0.002 0.024
No. of income generating activities -0.069 0.072 0.338
Initial savings -0.002*** 0.001 0.001
Value of physical assets 0.001 0.000 0.537
Primary school(1/0) 0.118 0.185 0.521
JSS/Middle school(1/0) 0.149 0.214 0.485
SSS/Secondary school(1/0) -0.292 0.309 0.345
Post Secondary school(1/0) 8.274 7.395 0.999
constant -1.206 0.906 0.183
Number of obs. 437

Table 3b: Results of the treatment effect model (dependent variable: weekly consumption expenditure)

Variable Coefficient Std. error P-Value
Kasena Nankana District (1/0) 0.342*** 0.070 0.000
Bawku west District (1/0) 0.548*** 0.066 0.000
Age in years 0.048*** 0.014 0.001
Age-squared -0.001*** 0.000 0.000
Dependants in household 0.029** 0.013 0.022
Number of people in household -0.009 0.009 0.318
Number of borrowing sources 0.004 0.067 0.957
Amount of profit 0.001** 0.006 0.025
No. of income generating activities 0.048** 0.021 0.025
Initial savings 0.000* 0.000 0.064
Value of physical assets 0.000 0.000 0.593
Has received MFI loan(1/0) 0.397*** 0.093 0.000
Primary school(1/0) 0.170*** 0.064 0.008
JSS/Middle school(1/0) 0.173** 0.074 0.020
SSS/Secondary school(1/0) -0.122 0.110 0.267
Post Secondary school(1/0) 0.202 0.308 0.511
Constant 1.395 0.295 0.183
Observations. 437
rho(P) -0.298** 0.120
sigma( o ) 0.496*** 0.018
Lambda( A) -0.148** 0.062
Wald chi2 223.23***
Log likelihood -518.74472
Wald test of indep. eqns. (rho = 0): chi2 4.39**

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