Effects of access to credit and income on dietary diversity in Ghana

Abstract

While the relationship between income and food security is well established, a case for the effect of credit on food security remains rather limited. This study examined the relationship between dietary diversity and household income and access to credit. We used the Food Diversity Index and Food Consumption Score to proxy dietary diversity. The fourth and fifth rounds of the Ghana Living Standards Survey, with respective sample sizes of 5779 and 8312 households, were used for the analysis. We applied an instrumental variable estimation technique to address the endogeneity between household nutritional status and income/credit. Results from both surveys showed that access to credit contributes to the consumption of a diversified diet in Ghana. Also, the results corroborated the expected positive relationship between income and dietary diversity. We recommend that, in addition to creating ways to generate income, an effort should be made to make the environment in Ghana and elsewhere more conducive to the activities of micro-credit institutions. This could be done by encouraging microfinance institutions in rural areas through tax exemptions and financial support systems.