Determinants of rural household saving: the case of Kachabira Woreda Kembata Tembaro Zone, SNNPR Ethiopia.

Abstract

Saving is considered as an important variable in the theory of economic growth determining, both personal and national welfare. However, saving in Ethiopia in rural areas is low and little as known empirically about its behavior and factors affecting. This study aims at investigating the determinants and behavior of rural households’ saving in Kachabira Woreda Kembata Tembaro Zone. Data of 123 respondents are drawn through the field survey in 2019 by adopting multistage random sampling techniques. Question are asked directly from head of household about their education level, household size, age, average monthly savings in birr, property, income etc. Sample contains information concerning rural households. Tobit regression model was used to analysis. Tobit regression shows that income, education, and use of planning for consumption status were significant and have a positive influence on the probability of household heads to save. However, people in the old age have a negative influence on probability of household heads to save. This study also supports presence of Life cycle hypothesis. Descriptive statistics percentages and frequency were also employed to designate the forms in which household heads in a Kachabira Woreda save. The effect shows that household heads save in either financial or non-financial forms. Financial form of saving identified includes depositing cash with financial institutions as well as fixed deposits and keeping money at home. The non-financial form identified includes coffee, livestock, ginger, maize and teff, other farmland and houses. Kendall’s coefficient of concordance (W) was also used to assesshow much agreement among household heads regarding the benefits household heads derive from savings. Eight issues were identified as benefits that household heads in study area derive from savings, among which buy asset, paying of school fees, meet unforeseen emergencies, improving and upgrading homes, interest on savings, accumulation of capital for investment, pay off debt and enjoy at retirement age were their major benefits in order of importance. The result of W designates that there is agreement among household heads regarding the benefits household heads derive from savings. Therefore, it is recommended that the government and other concerned bodies could deliver training for households so as to raise their level, culture and attitude of saving.