Believe it or not, but it could be the same culprit in athlete's foot. My dog had the same thing around the same location and when I took her to the vet, he told me to purchase athlete's foot creme. A generic brand works just fine. Use as the directions say, but just make sure you don't put too much on here or else the dog might lick it off.
My dog has some balding on his hind legs. The vet said it's probably allergies, and my Lab is just itching. He recommended a Benadryl spray.