Does household welfare change with finance access? The case of women and the youth in The Gambia

Abstract

Poor access to finance remains one of the key challenges faced by households and businesses in The Gambia in the face of an underdeveloped financial market. Yet, women and the youth are further disadvantaged as they are reported to face peculiar challenges in finance access, in spite of efforts taken by different stakeholders, including the government. Therefore, this study examines the impacts of various forms of finance on welfare for these marginalized groups by supporting quantitative analyses of the Integrated Household Survey data with some qualitative information. Adopting Lokshin and Sajaia's (2004) endogenous regime switching estimator, due to the nonrandomness of access to finance, the study finds that women households significantly benefit from informal finance through improved food consumption expenditure, and from formal finance through improved income amidst a growing business culture. For the youth, estimates of treatment effects show that informal finance is significantly welfare-degrading, but formal finance improves almost all measures of welfare. The results reveal, among other things, variations in efficiency and risk attitudes in the use of various forms of finance by the different subpopulations, calling for interventions that increase the level of knowledge and consumer protection.