Determinants of Saving Behavior of Households in Ethiopia: The Case Benishangul Gumuz Regional State

Abstract

This study examined the factors that affect saving behavior of rural households in Benishangul Gumuz Regional Sate. It employed descriptive statistics and double hurdle model to analyze the data collected from a sample of 325 rural households in the study area. The descriptive result showed that about 83.4 percent of sampled households involved in saving of which 68 percent use formal financial institutions and the remaining opt for alternative saving options. The result of  double hurdle model  provided  empirical evidence on a positive significant effect of age, income and level of education of the head on a decision of households to save; whereas household size, distance to formal financial institutions and employment status have negative influences on household’s decision to save. With regards to the extent of saving; income of household head, level of education, landholding size and involvement in petty trade has a positive significant impact on amount of saving; whereas household size, employment status and distance to formal financial institutions significantly reduced the amount of saving by households. The findings implied the need for designing strategies that could improve the saving behavior, mobilization and diversification of saving by rural households. Moreover, the need for government involvement in building the capacity of rural households in terms of education and information systems with regards to savings as well as encouraging financial institutions to implement door-to-door service provisions so as to enhance saving behavior of households are desirable.

Keywords: Household, Savings, Double hurdle, Assosa