Determinants of Urban Household Saving in Sebeta Town of Oromia, Ethiopia

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Date

2021-09

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Addis Ababa University

Abstract

The saving, a process of keeping money/asset aside, has been shown to have a positive impact on economic growth at the macroeconomic and micro-levels-it is one of the key components in any development that is believed to be the surest way of increasing income and reducing poverty. But, the micro-level (Household saving level) analysis of determinants of households’ saving is limited in Sub-Saharan African economies. Understanding determinants of saving at household level helps to visualize appropriate response strategies in terms of targeted saving packages. This study therefore investigates determinant of households in Sebeta town of Oromia region, Ethiopia. The study’s objectives include analyses of forms of saving used by urban households, to assess main motives of saving by households and to investigate the major determinants (constraints, opportunities and factors) of household saving. The research has involved both qualitative-focus group discussions and quantitative (household survey) method. Purposive and random sampling techniques were employed in order to select the sample within Sebeta town and study respondents, respectively. The data of 392 households and FGD have been collected from urban households by using interview and open discussion schedules. To collect the required primary source of data, instruments of data collection which include questionnaire was used. This study used both descriptive and econometric (two-part model) analyses. The result of the descriptive analysis showed that almost more than half of the sample households experienced saving and the reasons for households unable to save were inflations, very low income, investing in another assets and high expenditure on consumer goods specifically on Alcohols. The econometric analyses showed that income, expenditure, number of earners in the household member, house ownership, inflations, and availability of remittances and family size are significant determinants of household saving in study area. Based on the findings it is concluded that the determinants of the household heads saving are influenced by demographic and economic factors based largely on family size and number of earners in the households i.e they are the most crucial factor of the household saving in the this study. In the households, holding all other variables constant at their mean values, when household family size and number of earners increase by one individual, the expected amount of saving by households would increases by 32,339.51 birr and 84,218.74 birr yearly, respectively. The marital status had increased by one leads to 6.5 birr decrease the households saving. Holding other variables constant, change in house ownership of households head from “not owned to owned” and accessibility of remittances from ‘not access to access’, the probability of saving increase at about 34.5 percent and 22%, respectively. Based on the results, it is recommended that concerned institutions should emphasise on livelihood interventions targeted to improve the household income which have a round effect on saving and income growth, socio economic saving barriers, housing, on the importance of saving and saving modalities, planning and expenditure controlling habit, investment and the economic growth. Creating employment opportunity strategies for women to decrease fertilities and conducting practical awareness creations for households on importance of saving as well as adverse impact of extravagancy.

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Keywords

Household saving, Determinants of saving, two-part model, GLM model, urban, Sebeta town, Oromia, Ethiopia.

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