Determinants of Rural Household Savings in Ethiopia: The Case of East Hararghe Zone, Oromia Regional State

Abstract

Saving is undeniably considered as a strategic variable in the theory of economic growth determining both individual and national wellbeing. However, saving level in Ethiopia particularly in rural areas is very low and little is known empirically about its patterns and determinants.  Therefore, this study tries to assess the saving behaviors among rural household in East Hararghe Zone, Oromia Regional State, Ethiopia using survey data generated from 700 sample households. The results of this study show that 79.2% of the entire sample households had savings during the survey time. From  the tobit model used for analysis,  nine variables, namely household head education level, livestock holdings, access to credit service, income, investment, training participation, contact with extension contacts, forms of savings and saving motives were found to have significant influence on the amount of households savings. The results of the study shows that rural households do save irrespective of their low income mainly in informal saving institutions showing high request for accessibility potential for formal saving institutions.

Key words: Rural household savings, Patterns of savings, Oromia, East Hararghe Zone