An Assessment of Factors Affecting Rural Households Savings Habit: The Case of Jimma Zone Mana District

Abstract

This study was initiated with the objective of identifying major factors affecting rural households’ savings habit in Mana district, Jimma Zone of Oromia regional state, Ethiopia. It was selected purposively due to its potential for commercial area, access to form financial institutions, socio-economic infrastructure, access to information, and the location advantage. For the purpose of the study data were collected from 149 samples of rural household’s heads by using primary data. For data analysis, descriptive statistics and econometric model were used. The descriptive results of the study showed that 46 (30.9%) of the sampled households head had savings in formal financial institutions where as 103 (69.1%) of the sampled households had no saving in formal financial institutions. Among 15 explanatory variables, five, namely sex, age, family size, marital status, religion are not statistically significant while, the remaining ten were; education level, average of annual income, average of annual expenditure, distance from market center, distance from formal financial institutions, access to credit services, access to information, transaction cost, saving interest rate and access to training were found to have significantly effect on rural households’ saving habit. During a binary logistic regression variables significant at less than p-value <0.2 was shifted to multiple variable logistic regressions to avoid the role of cofounder and adjusted odds ratio is estimated and factors affecting household’s saving habit was identified at the cut point of p-value less than 0.05. However, multi-variable regression model were identified four the most risk variables influence on households saving habit. These variables were namely: educational levels of households Distance from market center, Access to training and annual expenditures. Based on the study results the researcher recommended that it is better to design strategies and policies that promote formal and informal educational opportunities, create awareness and motivation through training in order to improve saving the culture of rural households and as well as develop strategies to take a measure to minimize their unplanned expenditures