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Choice and Determinants of Saving in Rural Households of Bale Zone: The Case of Agarfa District, Oromia, South East Ethiopia

DOI: 10.4236/oalib.1107167, PP. 1-20

Subject Areas: Economics

Keywords: Rural Household’s Savings, Financial Institutions, Tobit Model, Ethiopia

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Abstract

Saving is the important variable in achieving financial security and growth affecting both individual and national wellbeing. However, saving level in Ethiopia specifically in rural areas is limited and less is known empirically about its factors. The general objective of this study was to characterize choice and determinants of saving in rural households’ of the study area. To examine this general objective, the study employed descriptive statistics and Econometric model. Both primary and secondary data sources were used for the study. For the purpose of this study primary data collected from 327 sample households. Secondary data were also obtained from concerned financial formal and Informal financial Institution. Descriptive statistics and chi-square were applied to characterize choices of financial institution to save by the sample households. The finding of the survey result indicates that about 52.60% of the sampled households had saved their money at formal financial institutions; whereas the remaining 47.40% of the sampled households had saved at informal financial institutions. This result indicates that most of the household heads still used informal financial institution to save their money due to lack of capacity to develop and implement good savings mobilization strategies within financial institution. Econometric models of Tobit model applied to investigate determinants of rural household’s savings. The Econometric model result indicated that sex of the household head’s, education level, family size, average annual income, average annual expenditure, livestock ownership and access to credit service were found to have significant effect on rural households’ savings. The result of this study indicated that attention should be given towards strengthening capacity building on saving mobilization strategies and expansion of financial institution to reach grassroots level rural households to improve their savings and develop culture of using formal financial institution.


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Feyissa, G. F. and Gebbisa, M. B. (2021). Choice and Determinants of Saving in Rural Households of Bale Zone: The Case of Agarfa District, Oromia, South East Ethiopia. Open Access Library Journal, 8, e7167. doi: http://dx.doi.org/10.4236/oalib.1107167.

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