By Isaac FRIMPONG (Ph.D.)
In Ghana, 45 percent of the populace prioritises financial support for relatives and community members over personal savings or debt repayment, according to a 2024 Old Mutual Financial Services Monitor report.
This statistic underscores a critical yet often overlooked driver of economic stability: informal support practices. While state-led welfare programmes such as Ghana’s National Health Insurance Scheme (NHIS) and Livelihood Empowerment Against Poverty (LEAP) struggle with coverage gaps, informal practices, rooted in family ties, cultural obligations, and religious institutions, fill the void.
Ghana’s model offers lessons on how low-income economies leverage their network for social capital to mitigate risks. Similar systems, such as India’s self-help groups (SHGs) or Brazil’s community banks (Banco Palmas), have drawn global attention for their role in poverty alleviation.
Yet Ghana’s blend of chieftaincy governance, collective-family structures, and hybrid religious aid presents a unique case study in balancing tradition with modernity. This article examines why informal support practices remain resilient, explores their economic impact, and argues for their integration into Ghana’s broader social policy framework.
The Reality
Ghana’s informal support practices operate on principles different from Western welfare models. Rather than bureaucracy, they thrive on trust, solidarity, and reciprocity.
At the heart of Ghana’s informal support practices lies what scholar Goran Hyden termed the “economy of affection,” a system where identity, kinship, and mutual obligation drive economic behaviour. In this framework, whom you know often matters more than what you know, and sharing wealth within one’s network is viewed as a long-term investment rather than mere charity.
This deeply rooted cultural contract reinforces the belief that mutual aid today guarantees support in the future. Ghanaians support their networks not purely out of altruism but because communal belonging serves as an essential pillar of long-term security.
The 45 percent of Ghanaians who prioritise financial support for relatives over personal goals exemplify this. Their actions defy conventional economic logic, where rational actors prioritise self-interest. Instead, Ghana’s informal practices thrive because identity and survival are intertwined.
To abandon one’s network is to risk social exclusion, a cost far steeper than short-term financial sacrifice. For instance, community members immediately step in to support one another, demonstrating a bottom-up approach to social protection.
Critically, these practices have evolved. Urbanisation and formal education have not erased communal ties; they have reshaped them. Migrants send remittances to kin via mobile money, while professionals leverage WhatsApp groups to crowdfund medical bills or school fees. Even religious institutions—churches and mosques—have modernised their aid models, blending microloans with traditional charity.
This resilience mirrors trends in other emerging markets. Kenya’s M-Pesa mobile money system succeeded by digitising informal savings groups (chamas), while India’s SHGs formalised community lending.
Ghana’s distinction lies in its integration of chieftaincy: traditional leaders still resolve disputes, allocate land, preserve culture, and drive some local development, roles dismantled in neighbouring Francophone states by colonial legacies.
Economic Impact
While the cultural significance of informal support practices is widely recognised in daily life, their economic impact deserves deeper exploration. Informal support practices function as an alternative safety net, often bridging gaps left by formal institutions. Key areas of economic impact include:
- Healthcare Provision and Financing: Informal healthcare delivery—including herbal treatments, spiritual healing, and community-based support systems—plays a crucial role in bridging gaps left by formal healthcare services. For many low-income households, informal financial contributions and communal support help cover medical expenses, often compensating for the inefficiencies of Ghana’s National Health Insurance Scheme (NHIS). These alternative healthcare practices remain essential due to their accessibility, affordability, and deep cultural relevance.
- Education Provision and Support: Informal apprenticeship schemes serve as a vital pathway for youth to acquire practical skills and vocational training, often filling gaps left by formal education systems. Additionally, extended families play a crucial role in financing education, covering tuition fees, school supplies, and other expenses to ensure continued access to learning; especially in cases where state support is insufficient. These informal mechanisms sustain educational opportunities and reinforce the culture of communal responsibility in Ghana.
- Business Capital: Rotating savings groups (Susu) and informal lending networks serve as essential sources of startup capital for small enterprises. These financial systems enable entrepreneurs to access funds, bypassing the barriers of formal banking. Beyond financing, they foster entrepreneurial skill development, encouraging resourcefulness, financial discipline, and community-driven economic growth.
- Crisis Response: Community welfare groups play a crucial role in crises, mobilising swiftly to support members with financial aid, shelter, and essential resources; often providing relief faster and more efficiently than formal government interventions.
A data-driven approach to measuring these contributions would strengthen the argument that informal support practices are not merely cultural artefacts or anecdotal traditions but vital economic mechanisms that enhance resilience and stability.
Challenges and Shifting Priorities
Despite their flexibility, informal support practices face growing challenges.
- Economic Pressures: Rising living costs and unemployment strain the capacity of extended families to provide consistent support.
- Urbanisation and Family Structure Changes: As nuclear families become more common, intergenerational dependency is weakening, reducing traditional safety nets.
- Changing Priorities: With 60 percent of Ghanaians now ranking income or job security as their top concern, socio-economic values are shifting toward individual financial stability.
- Gender Disparities: Women disproportionately bear the burden of informal caregiving responsibilities, often without compensation or access to social security benefits.
These challenges, compounded by inadequate population management, underscore a need for hybrid solutions that are proactive rather than reactive. A sustainable approach must strengthen informal practices while ensuring their viability in a rapidly modernising society.
A Path Forward
To build sustainable welfare frameworks, Ghana must formalise and enhance rather than replace its informal support practices. Key strategies include:
- Leveraging community savings groups: Scaling up Susu networks and linking them with formal financial institutions can expand financial inclusion, mirroring Kenya’s M-Pesa
- Empowering traditional leaders: Recognising chieftaincy structures as partners in local governance and resource allocation can ensure grassroots policy effectiveness.
- Integrating Informal Carers into National Policies: Acknowledging the role of carers, particularly women, within labour laws and social security frameworks would provide them with legal and financial protections.
- Encouraging public-private partnerships: Businesses should develop financial products that align with communal spending habits, such as group insurance schemes or flexible mobile money savings plans. In Ghana, spending decisions are not purely individualistic; they reflect obligations to family, community, and cultural events like funerals or festivals.
Conclusion
Ghana’s informal support practices are not relics of the past; they are dynamic tools for navigating economic uncertainty. The “economy of affection” reveals that identity and mutual obligation are not at odds with modern economic systems but can enhance and complement them.
For investors, these practices highlight consumer resilience and market potential. For policymakers, they offer blueprints to strengthen universal social protection without straining public budgets. As urbanisation and globalisation reshape Africa, Ghana’s challenge lies in modernising its welfare architecture while preserving the communal ethos that underpins its stability.
A critical next step is to document and quantify these informal support practices, their origins, evolution, and impact on social risks. Sustainable development demands hybrid solutions, where tradition and innovation coexist, ensuring that Ghana’s informal support practices remain resilient in an evolving economic landscape.
The author is a Researcher and Consultant
