Assessment of Saving Culture among Households in Ethiopia

Abstract

The saving rate of Ethiopia to GDP is 9.5% which is, the worst saving rate in the world as compared to China, Bangladesh and South Africa which have a better saving rate in the world. Ethiopia is characterized by poor saving cultures which result in very small domestic savings available for investment. The government knowing this fact has planned in the 5 year Growth & Transformation Plan of the country (2003 -2007 E.C) to increase saving rate from 9.5% to 20% of the GDP. To achieve the plan, there is therefore a need for investigating the root cause of poor saving habit. In order to achieve the objectives, a survey study using qualitative and quantitative approaches was conducted. Herein, 544 households were selected from three major cities namely Addis Ababa, Hawassa, and Mekelle on basis of non proportional quota sampling technique. The questionnaire accomplished by household was the research instruments used for the data-gathering. The study employed chi-square test and other descriptive statistics to analyse the data and results of the survey was processed using SPSS. The result of the study indicates that saving culture of the society is poor despite the performance improvement of saving rate. The cause of the poor saving identified in this study includes  lack of appropriate saving products, lack of incentive to save, low income level, high level of debt, low interest rate, high inflation and others. Based on the investigation the study suggest that government and other sectors must work in creating awareness of saving in the society, stabilization of inflation, implementing forced saving, modernization and accessible the saving institution, stabilization of the income level of the society, reviewing the saving interest rate and others.

Key word: saving culture, income, inflation, interest rate, saving product.