The paper primarily investigates the interrelationship between financial sector
development and poverty reduction in Ghana. This is done using time-series data from
the World Development Indicators from 1970-2001. The main findings are, first, that
even though financial sector development does not Granger-cause savings mobilization
in Ghana, it induces poverty reduction; and second, that savings do Granger-cause
poverty reduction in Ghana. Also, the effect of financial sector development on poverty
reduction is positive but insignificant. This is due to the fact that financial
intermediaries in Ghana have not adequately channelled savings to the pro-poor sectors
of the economy because of government deficit financing, high default rate, lack of
collateral and lack of proper business proposals. Another interesting finding is that there
is a long-run cointegration relationship between financial sector development and
poverty reduction.