Effect of credit on social spending in Ghana

Abstract

The increased spending of household on occasions has become both social and economic issue today and it is being discussed by many scholars. Financial deepening has made it easier and possible for household to have access to credit to spend on needs of household that on the other way wouldn’t have been possible. This study sought to estimate the effect of the amount of credit on social spending and also to estimate the effect of social spending on households’ health expenditure in Ghana using the sixth round of Ghana Living Standard Survey data (GLSS 6). The study employed Ordinary Least Square estimation. It was found that an amount of credit has positive and significant effect on social spending in Ghana. That is, household perceive social spending as investment hence an increase in amount of credit extended to the household has the tendency of increasing household spending on funerals, weddings and parties. It was also found that spending on social occasions results in an increase in household’s health expenditure. It is recommended that Household heads should pay crucial attention to the cost on credit (interest rates) as the amount of loan granted to them has the cost burden imbedded in it. That’s, despite the fact that social spending not depriving household from health needs, the high cost on loans wouldn’t allow the household head from retrieving the entire principal amount and the interest within the time frame within which the spending is done.