Abstract
This paper examines the major socioeconomic and demographic determinants of rural households’ saving behavior in Sinana district, Ethiopia. A random sample of 267 rural households was selected from four rural kebeles of the district. The study used both descriptive statistics and econometric model for the analysis of primary data. The result of descriptive statistics demonstrates that 47.2% of the sampled households preferred formal saving, 33.3% preferred informal saving and 19.5% preferred both formal and informal saving behaviors, respectively. Econometric result confirms that the probability of preferring informal saving increases with increase in access to credit and distance from formal financial institution, and decreases with increase in square root of annual total income as compared to preferring formal saving behavior. Similarly, the probability of preferring both formal and informal saving behaviors increases with increase in the tropical livestock holding, and decreases with increase in land size as compared to preferring formal saving behavior. Therefore, these variables need special attention in addition to the intervention of concerned authority if the saving behavior of rural households is to be improved. Key words: Multinomial logistic model, households, saving behavior, Sinana district.
Highlights
Saving is the portion of disposable income not spent on consumption and it is recognized as an important factor in economic development as it enables the conversion of resources into capital
Income and expenditure are among the important variables that highly determine the saving behavior of rural households in any country since the level of household saving is basically reliant on the level of their income
The annual expenditure of the sampled households was calculated in Ethiopian Birr (ETB) and found to be 18,090 ETB with standard deviation of 14,890 (Table 2)
Summary
Saving is the portion of disposable income not spent on consumption and it is recognized as an important factor in economic development as it enables the conversion of resources into capital. For economic development of any country, growth is achieved by investment or capital accumulation and saving (Mankiw, 2001). Income is generated at a higher rate which encourages people to have more savings and push to more investment. In a developing country like Ethiopia, the income standard is almost uncertain and leads to more consumption rather than saving (World Bank, 2012). The continent of Africa has been identified as having an unsatisfactory growth in saving rates, which slows down capital accumulation.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
