Effects of financial inclusion on household climate change vulnerability in Ghana

Climate change remains a major threat to livelihood and survival in many developing countries. The study examines the effect of household financial inclusion on climate change vulnerability in Ghana. Using climate series from the Ghana Meteorological Agency and data from the Ghana Living Standard Survey 7, the study used a recursive mixed process model and several other approaches to address endogeneity concerns and to estimate the effect of financial inclusion on climate change vulnerability in northern Ghana. The results show that financial inclusion reduces household climate change vulnerability. Bank account ownership appears less important, while the effect of mobile money account ownership is substantial. The results further show that rather than simple access to loan, it is the amount and purpose of loans that matter in reducing climate change vulnerability. These results are robust to various sensitivity checks. The results highlight the significance of credit purpose by showing that consumption loans increase climate vulnerability while production loans reduce climate vulnerability. The findings suggest the need for financial institutions to add environmental aspects and financing to their sustainability strategies to increase access and use of tailored financial services in areas without physical banking facilities and access to finances.