Drivers of multidimensional financial inclusion in Ghana’s informal sector

Financial inclusion is an important contributor to inclusive growth and household resilience, yet substantial disparities persist among informal-sector households in developing economies. This study examines changes in multidimensional financial deprivation among Ghana’s informal-sector households between the Ghana Living Standards Survey (GLSS) 6 (2012/13) and GLSS7 (2016/17) and investigates the factors associated with these changes. Using nationally representative data, we construct a four-pillar Alkire–Foster index covering account ownership, credit access, insurance and remittances. We analyse a binary multidimensional deprivation indicator (FImpi, cutoff k = 0.5) and a continuous deprivation score (FIscore), using survey-weighted regression models, interaction specifications, and Fairlie and Oaxaca–Blinder decompositions. Descriptively, multidimensional financial deprivation declined from 41.4% in GLSS6 to 30.1% in GLSS7, representing an 11.3% point reduction. Female-headed households remained significantly more likely to experience financial deprivation in both rounds, with adjusted average marginal effects of 0.118 in GLSS6 and 0.114 in GLSS7. Larger household size and higher educational attainment were also positively associated with multidimensional deprivation, while the initially higher deprivation observed among households in northern Ghana attenuated and became statistically insignificant by GLSS7. Decomposition results indicate that differences in observed household characteristics explain only a limited proportion of the change. In the Fairlie decomposition, 0.011 of the 0.088 deprivation gaps was explained by differences in characteristics, compared with an unexplained component of 0.077. Similarly, the Oaxaca–Blinder decomposition of FIscore produced a small and statistically insignificant endowment component (0.010) and a significant coefficients component (0.030). The findings suggest that improvements in financial inclusion among informal-sector households were associated primarily with changes beyond observed household composition, consistent with broader changes in Ghana’s financial and institutional environment during the period. However, persistent gender, educational and household-size differences indicate the need for more targeted financial products alongside broad-based financial inclusion reforms.