Saving patterns of rural households in east hararghe zone of Oromia National Regional State, Ethiopia

Abstract

This study examined the patterns of rural household savings in East Hararghe zone of Oromia National Regional State in Ethiopia. The major objective of the study was to assess the patterns and its determinants of household savings in the study area. Data were collected from a total of 700 sample households which were also analyzed using descriptive statistics and multinomial logit model. The result of the study signified that 38.5, 23.4, and 38.1% of the sample households have saved in physical assets only, financial form only, and both in physical assets and financial forms, respectively. The result from the econometric model used indicated that, credit access, contact with development agents, leadership role of household heads in the community, information access and membership in microfinance institutions have a significant impact on savings in financial forms only. Whereas, livestock holdings of household in TLU, annual farm income in Birr and leadership role of household heads in the community have a significant effect on the choice of both financial savings and physical saving forms, as compared to saving in physical form only. This study indicated that, the rural households in the study area mainly use the physical forms for savings. However, this savings in physical forms in the study area was not accessed by the formal financial system of the country. Therefore, the study recommends the physical savings of the rural households should be accessed and encouraged to augment gross domestic saving of the country.