The Discouraged Borrower Syndrome and Rural Household Food Insecurity: Examining the Mediating Role of Financial Inclusion

Abstract

<p>Considering the high rate of credit constraints and the worsening levels of food insecurity, especially in rural communities worldwide, an assessment of the role of borrower discouragement in driving rural household food insecurity cannot be overemphasized. We empirically examine this relationship in rural Ghana, and further explore the potential mediating role of financial inclusion. We use comprehensive rural household data extracted from round seven of the Ghana Living Standards Survey. Several quasi-experimental econometric approaches are employed to resolve potential endogeneity problems. We find that rural household heads who are discouraged from borrowing end up being financially excluded and hence have little financial resources to escape food insecurity. We also find that the discouraged borrower syndrome significantly affects food insecurity in male-headed rural households but not in those headed by women.</p>