Salary Delays and Overdrafts in Rural Ghana
AbstractChecking overdrafts are an expensive yet common way for bank account holders to obtain short-term credit when faced with unexpected shocks. In developing countries, one common shock that many salaried workers face is late or erratic payment from their employer. We use administrative data from a rural bank in Ghana to show that receiving a late salary payment increases the likelihood of taking an overdraft by 10 percent. Past overdrafts are also associated with future overdrafts, suggesting that late payment exacerbates the risk of trapping workers in a costly debt cycle.
CitationBuehren, Niklas, Virginia Ceretti, Ervin Dervisevic, Markus Goldstein, Leora Klapper, Tricia Koroknay-Palicz, and Simone Schaner. 2018. "Salary Delays and Overdrafts in Rural Ghana." AEA Papers and Proceedings, 108: 449-52. DOI: 10.1257/pandp.20181014
- D14 Household Saving; Personal Finance
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- J31 Wage Level and Structure; Wage Differentials
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance