THE IMPACTS OF SOCIOECONOMIC FACTORS ON THE SAVING CULTURE IN

MURANG’A COUNTY.

FAITH MUTHEU KIOKO

K24/4118/2016

A Research Project submitted in partial fulfillment of the requirements for the award of

Bachelor’s Degree in Economics and Statistics, in the School of Economics, Kenyatta

University.

December, 2023

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1
Declaration.

This project is my original work and has not been presented for a degree in any other University

or any other award

Signature: F.K Date:7/12/2023

Name: Faith Mutheu Kioko

Reg. Number: K24/4118/2016

SUPERVISOR

This is to declare that this research project has been submitted for examination with my approval

as the University Supervisor.

Signature: ………………………… Date: ……………….

DKT: Margaret Wanjiku Mukundi

SCHOOL OF ECONOMICS

KENYATTA UNIVERSITY.

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Dedication

This project is dedicated to my family for being so loving and the people of Murang’a County as

a true patriot.

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Acknowledgement.

My sincere gratitude to the Almighty God who has been with me through my course and stay in

the University. I also take it as an honor to be a student in Kenyatta University and taking my

degree in the School of Economics where I have gained much knowledge that will be very

important in my entire life. I would like to thank the entire University fraternity particularly the

lecturers, student leaders, my class reps and my fellow students. Special thanks go to my family

who have supported me in all endeavors. Also, to my supervisor who has guided me accordingly

in taking this project.

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Table of Contents

CHAPTER ONE: INTRODUCTION......................................................................................................1

1.1 Background.......................................................................................................................................1
1.2 Problem Statement.............................................................................................................................5
1.3 Research Questions............................................................................................................................6
1.4 Research Objectives..........................................................................................................................6
1.5 Significance of the Study...................................................................................................................6
1.6 Scope of the Study.............................................................................................................................7
CHAPTER TWO: LITERATURE REVIEW.........................................................................................8
2.1 Introduction.......................................................................................................................................8
2.2 Theoretical Literature Review...........................................................................................................8
2.3 Empirical Literature.........................................................................................................................12
2.4 Overview of Literature....................................................................................................................15
CHAPTER 3: METHODOLOGY..........................................................................................................16
3.1 Introduction.....................................................................................................................................16
3.2 Research Design..............................................................................................................................16
3.3 Estimating Model............................................................................................................................16
3.4 Definition and Measurement of Variables.......................................................................................16
3.5 Study Area.......................................................................................................................................17
3.6 Target Population............................................................................................................................18
3.7 Research Instruments.......................................................................................................................19
3.8 Data Collection Procedure...............................................................................................................20
3.9 Data Processing and Analysis..........................................................................................................20
CHAPTER 4: EMPIRICAL FINDINGS...............................................................................................20
4.1 Introduction.....................................................................................................................................20
4.2 Response rate...................................................................................................................................21
4.3 Overall Findings..............................................................................................................................21
4.4 Main Findings..................................................................................................................................25
4.5 Regression Analysis........................................................................................................................30
CHAPTER 5: SUMMARY, CONCLUSION AND POLICY IMPLICATIONS................................33
5.1 Introduction.....................................................................................................................................33
5.2 Summary of the Study.....................................................................................................................33
5.3 Conclusions.....................................................................................................................................33
5.4 Policy Implications..........................................................................................................................34

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 5.5 Areas for Further Research..............................................................................................................35
REFERENCES........................................................................................................................................35

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List of Abbreviation

KPHC: Kenya Population and Housing Census

NCPD: National Council for Population Development

NSSF: National Social Security Fund.

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Definition of Terms

Savings: the difference between income and consumption (regular spending) after taxation.

Saving culture: The attitude, behavior or intent to set aside a percentage of one’s income towards

future consumption.

Household: A person or group of persons who normally reside together in the same compound

under one or several roofs, or answerable to the same head and share common cooking

arrangement.

Enumeration Area: Smallest geographical unit created during the cartographic mapping that

precedes a Population and Housing Census.

Socioeconomic factors: Society related factors that have close relationship and influence each

other which include gender, age, income, education, family attributes.

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List of Tables

Table 3.1: Murang’a County Population Distribution................................................................................18

Table 4.1: Response rate...........................................................................................................................21
Table 4.2: Household Size..........................................................................................................................22
Table 4.3: Age of respondents...................................................................................................................23
Table 4.4: Respondents Education level reached......................................................................................23
Table 4.5 Household level of Income.........................................................................................................24
Table 4.6: Household Debt........................................................................................................................25
Table 4.7: Household size and extent of saving.........................................................................................26
Table 4.8: Education level reached and Extent of Saving..........................................................................27
Table 4.9: Age group and the extent of saving..........................................................................................27
Table 4.10: Household Income level and the extent of saving..................................................................28
Table 4.11 Household debt Burden and the extent of saving....................................................................29
Table 4.12: Desire to save..........................................................................................................................30
Table 4.13: Regression Model...................................................................................................................30
Table 4.14: Regression coefficients...........................................................................................................31

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List of Figures

Fig 1.1: Gross Domestic Savings rate in Kenya.............................................................................................2

Fig 2.1: Life cycle hypothesis life span, Savings and Consumption..............................................................9
Fig 3.1: Kenya and Murang’a County Maps...............................................................................................17
Fig 4.1 Saving culture (Extent of Saving)....................................................................................................21

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Abstract

Do socioeconomic factors influence the saving culture of the people of Murang’a County? This
study uses data collected from the NCPD Status of family study in Kenya conducted in
Murang’a County in 2022 to answer this empirical question. Saving culture is dependent on the
household size, education level reached, income, debt burden and desire to save and age. The
main findings from the data is that Murang’a County has a Poor Saving Culture. More educated
people tend to save more, households with higher numbers of members struggle saving, people
earning high income levels save more. Most of the people in the county do not have high levels
of education indicating that the financial literacy is also low. The residents of Murang’a are also
earning little income with many earning less than Ksh10,000 each month. They are in debt are
burdened into paying them, little is left to save and savings are also directed into paying the
debts. Age is found to be insignificant since people from all age group tend not to save especially
those at their early and late years.

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 CHAPTER ONE: INTRODUCTION

1.1 Background
1.1.1 Introduction

Savings are a crucial component of any country’s economy. A country with significant national

savings accrues enormous benefits and generates both domestic and foreign investments and

suffers no overreliance on foreign debt. Studies have shown a significant correlation between

savings and economic growth. Countries whose national savings rate is high are not dependent

on foreign direct investment; consequently, the risk arising from volatile foreign direct

investment decreases significantly (Ribaj, and Mexhuani, 2021). Governments aim to have

increased economic growth, increase national incomes and reduce poverty through implementing

policies that will increase savings and encourage increased investments in the domestic financial

capital. Therefore, many developing countries aim at expanding the size of deposits in form of

savings in their commercial banks. It includes both the private and public savings share. The

ideology is based on neoclassical views that savings play vital role in pushing up investment

rates and capital accumulation. Countries with greater savings rates have had a faster economic

growth rate compared to those with lower saving rates. Capital accumulation provides wider

production and the productivity opportunities for a country through additional income streams.

Savings stimulate investment, production and employment leading to greater sustainable

economic growth (Fagereng, et al., 2019).

Household saving is part of the disposable income that is not spent or not under consumption

thus referred to as deferred spending. It is the major component of private saving category. The

ability of a household to save is indicated by their savings ratio that measures the amount of

money available and they are willing to save as a percentage of their total disposable income. In

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Africa as of 2022, Algeria had the highest savings as percent of GDP at 42.43% with the least

being Namibia at 3.38% while Kenya stands at 12.12% compared to 13.27% in 2021.The

financial sector in every economy is responsible to put these savings back into the income and

expenditure flow, through investments. Africa has seen a slow growth rate in personal savings

leading to reduced rate of capital accumulation with less developed countries having little or no

for savings.

Fig 1.1: Gross Domestic Savings rate in Kenya.

Source: WWW.CEICDATA.COM | CEIC Data

Over the years, there have been many ways people save their income particularly through

accounts in banks and mobile banking, building societies, pension or retirement plans and buying

of stocks. In November 2012, a savings virtual account referred to as M-Shwari was Launched in

Kenya. The developments in virtual savings and credit have since replicated across Africa since

then with many countries adopting the idea. This has transformed the savings and credit supply

process in Africa’s financial market (Ndung’u, and Oguso, 2021). There has been a rise in the

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digital saving scheme whereby people take up digital savings account especially with the most

popular platform being M-Shwari which is paperless, mobile-based service provided by the

Commercial Bank of Africa in cooperation with Safaricom and Vodafone allowing the

subscribers to save and borrow using their phones. Digital savings aim to broaden the savings

base to not only the previous notion of the savings done by the elites to getting to the remote

areas and the low income earners who are commonly known as the Jua kali in Kenya. The Jua

Kali use savings facility to set aside money for large purchases or to save for emergency

expenses. However, some felt that the interest generated by the savings was too low, while others

reported that they were unable to set aside savings in the first place (Kiiti, and Hennink, 2016).

1.1.2 Saving culture

Saving culture varies among different countries, individual attitudes and behavioral intends. It is

seen as the ability for an individual to set aside a portion of their current income towards future

consumption. An intuitive ideology would be the role of relative income levels as a determinant

of savings. However, many high income countries have seen a decrease savings rate over the

years particularly in the USA whereby high inflation is weighing on consumer spending, while

devaluing savings held in low return positions such as cash. Most developed countries are

experiencing high levels of inflation, economic wide instability and interest rates. However,

China has a steadily high saving ratio of 45.9% as of 2021 unlike in the USA at 5% with their

focus lying heavily on consumption. China therefore has a good saving culture compared to

other countries. Various studies have noted the poor saving culture in Kenya. For years, Kenya

has struggled with poor savings rates and high levels of reliance on foreign aid and debt

borrowing leading to significant social and economic challenges. Economic players such as

households, government, regulators, the central bank, financial institutions and other firms play

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an integral role in enhancing the national savings. A poor saving culture have undesirable effects

including reduced investments and stalling of future gains in productivity. The overall impact is

on reduced standards of living, reduced wealth creation and financial constraints that would

hinder attaining of the Kenya Vision 2030.

1.1.3 Social-economic factors and motives to save.

Social-economic factors influence the saving culture of an individual particularly demographics.

These factors include household or family size, employment status, income level, age, level of

education among other factors. Socioeconomic factors tend to influence how people regard

saving and can be associated with socioeconomic and financial distress. This research based the

household size as the number of dependents in a household, employment status as the kind of

unemployment one is it and the level of education as a way to indicate their financial literacy.

Other factors may include the inflation and interests rates, labor costs and taxes. These factors

also affect the choice of savings institutions or mode that a household selects depending on how

they view the saving scheme hence influencing their decision making process.

Kenya has a potential for increased personal savings given that savings are significant in

improving the lives of the citizens. However, there is little information on the determinants of

savings across societies (communities) in Kenya. Understanding these determinants at the

society level could help in understanding why people save, dissave, accrue debt and come up

with ways to induce savings.

There are many motivations to save which may include saving for emergencies or unexpected

expenses, for future consumption, purchase of assets, job insecurity and rising unemployment

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and to earn interest. People also save from the need to pay back debt and if they have trust in the

saving institutions.

1.2 Problem Statement.

Savings have an integral part in a country’s economic growth. Kenya in particular needs to have

an outstanding saving culture to help achieve her goals particularly attaining the Vision 2030

especially in solving financial distress. The national and county governments need to take

initiatives to promote the saving culture particularly in the rural counties including Murang’a

County which heavily depends on Agriculture as the main income stream. Studies have been

conducted in Kenya on the determinants of savings but many have focused on the urban counties

or areas or the entire country with few focusing on the grassroots level which is a rural county.

Furthermore most of the studies laid their focus on the credit availability, financial transactions,

interest rates and banking services with few having a wider focus on the socio-economic factors

that would impact savings. These studies were not conclusive of the relationship of the

socioeconomic factors on saving culture whereby some found a positive, negative and others no

relationship creating a research gap.

Savings rate depends on various determinants and saving patterns which significantly defer given

geographical disparities for example rural and urban areas. The marginal propensity to save

(MPS) in rural areas is lower than marginal propensity to consume (MPC) and vice versa in

urban areas where the marginal propensity to consume is lower than the marginal propensity to

save. People in urban areas tend to save more compared to those in rural areas. This research was

undertaken to head down to the county level and particularly the rural areas to investigate the

impact of socioeconomic factors on the saving culture of the people in Murang’a County. Low

saving rate may have negative impact on Murang’a County economic growth and the overall

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Kenya Vision 2030 achievements. There is need to induce savings and have policies that will

ensure high saving rate

1.3 Research Questions

This research addresses the following questions

I. What is the effect of household size on the saving culture of Murang’a County?

II. What is the effect of educational level on the savings culture of Murang’a County?

III. What is the effect of age on the saving culture of Murang’a County?

IV. What is the effect of income on the saving culture of Murang’a County?

1.4 Research Objectives

This research seeks to study the following objectives:

General Objective

To determine the impact of socioeconomic factors on the saving culture of the people of

Murang’a county.

Specific Objectives:

I. To examine the effect of household size on the saving culture of Murang’a County.

II. To investigate the effect of educational level on the savings culture of Murang’a County.

III. To examine the effect of age on the saving culture of Murang’a County?

IV. To find out the effect of income on the saving culture of Murang’a County?

1.5 Significance of the Study

This research will help address the issue on poor saving culture in Murang’a County. It will also

be a reference in providing insights on how socioeconomic factors impact the saving culture and

help raise the saving rate in the county. It will inform what factors influence the savings level of

people of Murang’a County. The research can be used to draw insights for other counties or
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move into studying other counties especially those that rural areas. From the research integral

policies can be formulated to induce savings and increase capital accumulation which will have

an overall impact on increased investments and improved economic growth. The information in

the study can be used by the Murang’a County government to promote the people to improve

their living standards, employment opportunities and ensure a strategic development plan. The

study will also be an integral focal point for many financial institutions to improve their

competitiveness in ensuring customers have increased deposits through their accounts

particularly banks and SACCOs. This could particularly be on financial literacy. Generally, the

government will benefit from the inferences in understanding the best strategy to encourage

savings especially on effective taxation to ensure there is enough to save after consumption.

1.6 Scope of the Study

The research aimed at establishing the saving rate among the people in Murang’a County

indicating their saving culture; it views the current financial situation of households in Murang’a

County. The focus is on the household’s economic and financial status, their literacy level based

on their level of education, the number of dependents for each household based on the family

size and their demographic characteristics. It takes residents from all parts of the county as a

representative of each sub-county including Murang’a town center. Many sub-counties in

Murang’a County have a rural setup and are yet to get into peri-urban areas. The county is a

perfect choice since it captures the saving culture in rural areas whereby it could be a true

representation of other counties around the country that could have close similarly to Murang’a

County particularly those that have high dependence on Agriculture as their main income stream

and are yet to have significant economic growth.

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 CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
This chapter reviews the empirical and literature review under the saving discipline. The first

part of the chapter will review the empirical evidence from the field and reference to literature

that provide the socioeconomic factors that are determinants of saving. The research

acknowledges the key insights the existing studies provide on the impacts socioeconomic factors

have on people’s saving culture and identifies areas that need deeper insights and elaboration.

2.2 Theoretical Literature Review

2.2.1 LIFE CYCLE HYPOTHESIS

The theory was formulated by Ando and Modigliani. According to this hypothesis, the typical

individual has an income stream that is relatively low at the beginning and end of their life.

Individuals spread consumption over their lifetime and this is through gathering or accumulating

savings during the period when they are earning and maintaining their levels of consumption

when they retire. Socioeconomic factors play a key role in determining the amount of income

that is taken into consumption and savings. Consumer’s age and the demographic structure of the

society or community highly dictates the level of savings and consumption way beyond their

income level. The amount of money one needs to consume every day is unequal to the need to

save for many people to save in the society through their lifespan. During the early stages of life,

the consumer is a net borrower since their income level is usually lower than their consumption

level. They tend to consume from what they have not earned themselves and are highly

dependent on other people’s income. As they grow older, the consumer gets involved in

economic activities like employment or investing thus start to accumulate and maintain a more or

less constant, or perhaps slightly increasing level of consumption.

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The model suggests that in the early years of a person’s life, the first part, the person is a net

borrower saving very little and may be accruing debts. Young people tend to have a low

propensity to save and willingness as they mostly have to consume a bigger portion of their

income on education, rent and other necessities or wants leaving little to save or ending up to

over consumption and accruing debts. In the middle years, she saves to repay debt and provide

for retirement. In the late years, the third part, she dissaves.

Fig 2.1: Life cycle hypothesis life span, Savings and Consumption

MORE/ DISS
YES AVIN
SAVING G
Dollar

LESS/
NO C
SAVIN
G
Y

Time (AGE)/LIFE SPAN

(Y – Income and C – Consumption)

The middle part of life where an individual works and generates income exceeding their

consumption is the saving period of life. They then meet the debts accumulated in their early

stages of life and saves what remains for consumption in the future assuming that they will

eventually retire. The last part of life is where the individual is growing old and cannot raise a

substantial amount of income to maintain their consumption hence dissaves or could also be

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borrowing and accruing debt. Savings are hence beneficial to enable an individual plan for their

retirement where they can meet their needs when they become aged.

The life cycle hypothesis captures one important reason as to why people save, that is, people

want to have smooth income and consumption over their lifetime. They also want to invest in

tangible assets for example housing and are not allowed to borrow the full amount of money

needed thus the only option is to save to buy them. Again, they save out of precautionary

motives for the uncertain future where they will have money they need to streamline their

consumption especially upon retirement. The theory indicates the age structure of a society

whereby the population age impacts the savings rate and the ratio of dependency negatively

impacts the savings level. The implication is that an aging population especially with a lengthy

retirement period would influence the ratio of wealth to income and the savings rate.

2.2.2 SOCIAL CLASS THEORY

The theory was proposed by Karl Marx with the focus indicating the two social classes in the

society. The stratification into the two groups is determined by an individual’s income, education

and social prestige or status thus making their socioeconomic status index into either the upper or

lower class within the social structure. The working class disposing only of its labor-power and

the capitalist class, which has a monopoly of the social means of production and money. An

individual’s social class dictates their social life in that those in a higher class live in abundance

while those in lower class tend to have low living standards with hardship in poverty as they

struggle up the class. The high class society is described with high income levels with adequate

financial literacy unlike the lower class who are the opposite thus carry a poor saving culture.

The wealthy have the bequest motive to save as they harbor intergenerational altruism toward

their children and thus leave a bequest to their children which will be compensatory for future

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consumption needs. As of the capitalists, they will be saving rather than consuming, out of a

desire to accumulate wealth.

The capitalists have control of the factors of production and produce what people need to

survive. They accumulate and control wealth with ease to access money, land and production

thus owning property such as factories and industries. The lower working class have no option

but to get employment from the capitalists’ lands and factories and earn hourly wages with the

amounts they earn going into consuming what the capitalist offer. Money flows back to

capitalists and stands ready to be advanced again in the next cycle. The theory identifies the

differential savings rates – in which higher income earners save proportionately more than lower

income earners (or, equally, where there are lower propensities to consume from capital than

from income) thus the owners of capital accumulate even more capital (Jackson, and Victor,

2021). Monetary wealth holders’ savings propensity is positive but below one from the profits or

retained earnings. Workers do not save or remain with very little to save after consuming on the

goods provided by the wealthy.

2.2.3 PERMANENT INCOME HYPOTHESIS

The theory was proposed by Milton Friedman. Just like Modigliani, Friedman assumes that an

individual wants to smooth their actual income stream into a more or less flat consumption

pattern. According to Friedman, a household’s current income measured annually can either be

greater or less than a household permanent income. Each household looks ahead as best as it can

and derives estimates of the streams of income to be received from human and non-human

capital which is divided into permanent and transitory components. Transitory income results

from all those factors that the household consider pure chance or unexpected whereby Friedman

assumes that they save it all and if they have negative transitory income they consider desaving.

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The transitory income could be negative, zero or positive and really represents the current

income deviations from permanent income. It could be assumed that families with transitory high

income in Friedman’s analysis could be households in the middle years in the Ando-Modigliani

life-cycle, and those with negative transitory income as those in the ends of the life-cycle thus

indicating the deviations in the distribution of the transitory incomes.

Income, employment, capital and occupation are a major part of economic factors that impact on

the savings and consumption. The higher the income level the more the savings after the

individual’s budget is sorted and vice versa. Therefore, the low income earners will have little to

save thus a poor saving culture. Unemployment leads to low income and high expenditures

financed by debt thus no saving hence a poor saving culture. Furthermore, with little capital

accumulation, there are no means to create income hence the overall result is a poor saving

culture. Household with huge family sizes or many dependents will have zero or negative

transitory incomes thus no savings is made as the study tends to bring out with the help of these

independent variables under the permanent income hypothesis ideology.

2.3 Empirical Literature.

2.3.1 Education and Financial literacy on saving culture

According to Cebi, Oktay, and Alkan, (2022), the education level of the household head affected

the tendency to save. The study was carried out to detect demographics and economic factors the

factors related to residential properties and social-environmental indicators affecting household

savings in Turkey. The study used cross-sectional data obtained from the Household Budget

Survey conducted by the Turkish Statistical Institute between 2015 and 2017. The study

determined that the secondary school graduates’ household heads had the highest saving

probability. The relation between educational status and the possibility of saving was also

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associated with financial literacy. Widjaja, Arifin, and Setini, (2020), conducted a study on the

effects of financial literacy and subjective norms on saving behavior whereby the research

subjects were primary data from 469 young workers who worked in the DKI Jakarta area in

2018. The study collected data online by distributing questionnaires using Google Docs and were

analyzed using SEM-PLS. the finding were financial literacy affects saving behavior, both

directly and indirectly through the variables of saving intention and attitude to saving mediation.

2.3.2 Household size on saving culture

Abate (2020) examined household behavior and determinant of saving in financial institution in

Derra Oromia region. The logit model had the results of the study indicate that variables such as

age of household head and the family size were significant determinants of saving status of the

household. The main occupation of the household and knowledge of interest rates of financial

system and the income level also affect the saving culture of the household. According to Zhang,

et al (2018), from the late 1970s on, savings have increased dramatically amid massive structural

transformations. The paper employs both model simulations and empirical analyses based on the

household-/firm-level microdata as well as city-level macro data to analyze the drivers of

household, corporate, and government saving behaviors. The surge in household savings saw the

first phase in 1980s following the introduction of the one-child policy and de-collectivization of

agriculture in rural areas. The savings rate rose from 5 to 20% of disposable income.

2.3.3Age and saving culture

The growing retired population is the most important factor for explaining the decline in Japan’s

household saving rate. According to Horioka and Niimi (2017), the study analyzed the saving

behavior of elderly households in Japan to shed light on the impact of population aging on the

13
household saving rate. The study analyzed data from the “Family Income and Expenditure

Survey”, conducted by the Statistics Bureau of the Ministry of Internal Affairs and

Communications and the “Survey on Households and Savings.” The main findings were, In

Japan, the saving rate of the working elderly is positive but lower than of younger households.

The saving rate of the retired elderly is negative and high in absolute magnitude. The wealth

decumulation rate of the retired elderly has shown a moderate increase over time, and this is due

primarily to reductions in social security benefits. The retired elderly decumulate their wealth but

not as rapidly as predicted by the life cycle model, due primarily to the presence of precautionary

savings and bequest motives.

The study by Maki-Franti (2022), was carried out to examine how age and birth cohort affect the

saving behavior of the Finish households. It used a synthetic panel data to estimate an empirical

age-cohort-period model of income, consumption and saving rate of the household and the

findings suggested that the Finnish households continue saving even in the old age and younger

cohorts tend to have more than the older ones. In Kenya’s case, a study by Van Hove and Dubus

(2019) which used three-step probit analysis to identify the socio-demographic characteristics of

respondents who did not have a SIM card, have a SIM card but do not have an M-PESA account

and finally have an account but do not have on it. The study indicate that the life cycle

hypothesis is not a realistic assumption in Kenyan context. The study indicates that only a

minority of the adult population hold a regular job and there is evidence that in order to prepare

retirement Kenyans prefer to invest rather than save on an account that yields a negative real

return. The basis was on the age having a possible association with motivations to save.

2.3.4 Income (employment) and saving culture

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According to Makori et al., (2022), the study aimed at analyzing the effects of fiscal and

monetary policy on the gross domestic savings in Kenya. It applied explanatory research design

using annual data from World Bank reports, Statistics abstracts and Economic survey reports.

The study found that unemployment rate had a negative effect on gross domestic savings. A unit

change in unemployment caused approximately 4.37% negative change in gross domestic

savings. The conclusion was that unemployment rates depletes household incomes leading to

less savings with similar effect on the national savings. Another study on the saving and

employment effects of higher job loss risk by Juelsrud, and Wold, (2019) found out that a unit

increase in the job loss rate increases liquid savings by roughly 1.3-1.7%. The study used a

difference analysis to estimate the impact of job loss risk on savings from the Norwegian Tax

data and a novel natural experiment. The results are consistent with a household demand channel

of recessions, implying that an increase in household savings due to higher job loss risk from

economic downturns. Higher job loss risk increases the volatility of unexpected future income

while at the same time lowering the level inducing people to consume less and save more.

2.4 Overview of Literature

The empirical and theoretical literature review provide that different socioeconomic factors

influence households’ saving culture. The theories have been primarily tested in relation to

retirement saving and long-term asset accumulation but could also apply in emergency saving

such as dissaving to cope with financial shocks and smooth consumption and short-term cycles

of saving. The main findings was that the reduction in family size is an important factor for

explaining the increased saving rates in China. The study indicated that a growing working age

population with smaller family sizes maintains high household saving rates. Many studies tend to

examine the determinants of saving at a national level. Most of them are also carried out outside

Kenya especially in developed countries while those carried out in Kenya had the main focus on

15
macro variables such as Per Capita GDP, interest rates, Inflation and indicated mixed results.

Few studies tend to look at the educational level of the household to indicate their financial

literacy, age and household size to have major impacts on saving culture in the households.

There is no study conducted on the impact of socioeconomic factors on the saving culture in

Murang’a County, therefore this paper attempts to objectively identify this factors and indicate

the households saving rate and behavior.

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 CHAPTER 3: METHODOLOGY
3.1 Introduction
This chapter contains the research methodology which a scientific and systematic way to

articulate the research problems in order to discover facts and generate new knowledge and

solutions.

3.2 Research Design

This study employs correlational research design. According to Seeram (2019), correlational

research is a type of nonexperimental research that facilitates prediction and explanation of the

relationship among variables. Researchers use this design to measure 2 or more variables to

investigate the extent to which the variables are related. This study explores the relationship

between saving culture and the socioeconomic factors (age, education level, income and

household size). This will be achieved through a qualitative research approach to find the

patterns and make predictions while testing causal relationships. The study will be designed

under the pragmatic paradigm placing the research problem at the central point with various

approaches to understand the problem. Explanatory correlational research design is relied on

heavily in the study to determine the effect of each independent variable on the dependent

variable as the study tends to examine.

3.3 Estimating Model.

The study will employ the Ordinary Least squares (OLS) to estimate the coefficients in the liner

regression model that will describe the relationship between the independent and independent

variables. OLS is the most commonly used procedure in regression analysis as it minimizes the

sum of square residuals. Once the assumptions of the OLS regression framework have been met,

a researcher can interpret their results with confidence (Burton, 2021). The rationale for its use in

this study is because of its simplicity and ease of use and interpretation.

17
3.4 Definition and Measurement of Variables.
The dependent variable in the study is saving culture. It is indicated by the extent of family

savings for the future. The variable is measured on a Likert scale to get the respondents attitudes

and opinions. The range is on a 4 point Likert scale indicated as Saving a lot, Moderate Saving,

A little Saving and Not Saving at All. The independent variables include age, household size,

income and the education level which is distributed as below 18 years, 18-34, 35-59 and 60 and

above. The household size is measured as the number of dependents in the family, income in

Kenya shillings and the educational level on Likert scale of Primary, Secondary, College,

University and None as those who did not attend school. The study sort for the main source of

income for families, and the total combined monthly family income. The study also sort for the

extent of family in debt as a Likert of Not at all Burdened, Burdened a Little, Moderately

burdened, Heavily burned and Very heavily Burdened. The debt variable is linked to dissaving

whereby the respondent consumes beyond their income level or saves to repay debt.

3.5 Study Area

The research was conducted in Murang’a County with the code 021 in all the sub counties. The

county has 8 sub-counties that is Gatanga, Kangema, Murang’a East, Murang’a South, Mathioya,

Kandara, Kigumo, and Kahuro. It is situated in the Central region of Kenya bordered by Nyeri,

Kiambu, Nyandarua and Kirinyaga Counties. It lies between latitudes 0o 34’ South and 107’

South and Longitudes 36o East and 37o 27’

Fig 3.1: Kenya and Murang’a County Maps.

18
3.6 Target Population
The study used a quantitative secondary data approach to undertake the study targeting

individuals who were 15 years and above at the time of the survey and living within conventional

households in Murang’a County from the Status of family study conducted in 2022. The age

group was selected on the basis of the life cycle hypothesis to indicate the three stages of life.

The 2019 Kenya Population and Housing Census (KPHC) indicated that the total population of

Murang’a was 1,056,609 persons consisting of 523,940 males and 532,669 females with a

growth rate of 0.4%p.a. The county population is relatively youthful with approximately 63% of

the total population below 34 years. However a relatively high proportion of the population

accounts for elderly people aged go and above years close to 11%. The child dependency ratio is

at 54.8 with the total dependency ratio at 69.2. The working age population constitute 59% of the

total population.

Table 3.1: Murang’a County Population Distribution

Murang’a County Population size

19
 Age MALE FEMAL TOTAL
group E
0-4 55,695 54,819 110,514
5-9 57,564 56,687 114,251
10-14 59,951 57,807 117,758
15-19 55,307 50,160 105,467
20-24 38,214 37,212 75,426
25-29 31,823 32,975 64,798
30-34 35,380 36,354 71,734
35-39 34,374 34,523 68,897
40-44 31,951 31,021 62,972
45-49 28,548 28,255 56,803
50-54 22,188 23,528 45,716
55-59 20,187 22,035 42,222
60+ 52,750 67,287 120,037
TOTAL 523,932 532,663 1,056,595
Source: 2019 KPHC data

3.7 Research Instruments.

Data used in this study was from secondary sources. Secondary data that was previously

collected in the 2022 Study on Status of the family in Kenya– Murang’a County by the National

Council for Population Development (NCPD). It was a cross-sectional study that employed

mixed approaches of data collection. A multi-stage stratified cluster sampling was employed to

select three sets of sampling units randomly whereby 27 Enumeration Areas (EAs) were the

primary sampling units secondly a fixed number of 30 households per EA were selected

systematically from the list of households enumerated during the 2019 KPHC. The household

questionnaire was administered to collect information at the household level and individuals

aged 15 years and above were randomly selected from the household for responses. Relevant

data from the study was used in this.

20
Given the time and resource constraint, there was need to use the secondary data in this study.

The study also noted that the household questionnaire administered by the Status of the family in

Kenya –Murang’a County had relevant questions related to this study including to what extent is

your family saving for the future? What is your highest level of education completed? What

would you say is the total combined monthly family income? What is the size of your family?

3.8 Data Collection Procedure

This study was conducted in Murang’a County using data collected from all regions within the

county, rural and urban areas. Secondary data that was previously collected in the 2022 Study on

Status of the family in Kenya– Murang’a County by the National Council for Population

Development (NCPD). This study takes data from that study which include the age of the

respondents, their highest education attained, among other socioeconomic aspects that were

asked from the questionnaire administered in the study by the NCPD. This study sorts out the

data collected in the previous study and picks out the relevant information to make up the

variables under study.

3.9 Data Processing and Analysis.

Each household is provided with a unique number for example “00001” to represent it.

Responses that are words in the Likert scale are provided a binary number to represent them for

example for education level, 1=Primary 2=Secondary 3=College 4=University 0=None 99=No

response. Data is then analyzed using SPSS and Excel Power Query and PowerPivot to get the

key insights, correlation analysis and the regression model.

21
 CHAPTER 4: EMPIRICAL FINDINGS.
4.1 Introduction
This chapter provides the findings of the study in relation to the research questions. The purpose

of the study was to investigate the impact of socioeconomic factors on the saving culture of the

people of Murang’a. Factors like education level, income, age, household size were examined to

seek for their impact on the saving culture indicated by their extent of saving. The chapter

provides a clear presentation through tables based on the methodology indicated in chapter three.

4.2 Response rate.

The study aimed for 678 respondents of which there were 542 responses with only 136 not

responding. The response rate is at 80% indicating that the responses could be a clear

representation of the true population. The response rate of this study is acceptable and very good

for the purpose of meeting the study objectives.

Table 4.1: Response rate

RESPONSE TO THE Count of RESPONSE

QUESTIONNAIRE Response RATE
no 136 20.06%
yes 542 79.94%
Total 678 100.00%

4.3 Overall Findings.

4.3.1 Extent of saving

The extent of saving indicates the saving culture in Murang’a County. The data indicated that

only 1% of the households save a lot with 56% not saving at all. 32% have a little saving and

11% with moderate saving. It is worth noting that the country is facing hard economic times and

challenges thus the households find it hard to save and have enough to meet their basic needs.

22
Fig 4.1 Saving culture (Extent of Saving)

saving Culture (extent of saving)

1%
32%

A little saving
Moderate saving
not saving at all
Saving a lot
56%

11%

4.3.2 Household size

From the respondents, approximately 37% of the households in Murang’a had a household size

of two or three members, 27% living as a single person, and 32% with 4-6 members and only

close to 4% with large families of more than 7 members.

Table 4.2: Household Size

household size
Frequency Percent Valid Cumulative
Percent Percent
Valid 1 145 26.8 26.8 26.8
2 83 15.3 15.3 42.1
3 120 22.1 22.1 64.2
4 72 13.3 13.3 77.5
5 56 10.3 10.3 87.8
6 46 8.5 8.5 96.3

23
 7 10 1.8 1.8 98.2
8 5 .9 .9 99.1
9 3 .6 .6 99.6
10 2 .4 .4 100.0
Total 542 100.0 100.0

4.3.3 Age of respondents.

The study had age as a major factor and took into consideration all age levels accepting

respondents above 15 years. 6.5% of the respondents were aged 15-17, 37.8% aged 18-34, and

38.6% aged 35-59 and 17.2% at 60 and above. Majority of the respondents were household

heads.

Table 4.3: Age of respondents

AGE
Frequency Percent Valid Cumulative
Percent Percent
15.00 35 6.5 6.5 6.5
18.00 205 37.8 37.8 44.3
Valid 35.00 209 38.6 38.6 82.8
60.00 93 17.2 17.2 100.0
Total 542 100.0 100.0

4.3.4 Highest level of education reached

The respondents had their level of education reached as, 25.8% had not attended school (none),

33.6% reached primary school, 29.3% did secondary school, 9.2% attended College and 11%

attended University.

24
Table 4.4: Respondents Education level reached

education
Frequency Percent Valid Cumulative
Percent Percent
College 50 9.2 9.2 9.2
none 140 25.8 25.8 35.1
Primary school 182 33.6 33.6 68.6
Valid secondary
159 29.3 29.3 98.0
school
University 11 2.0 2.0 100.0
Total 542 100.0 100.0

4.3.5 Household level of Income

Most of the households earn income less than Ksh5000 at 31%, 29.7% earn between Ksh5000

and 10,000, 12.5% either did not give responses on their income earnings or did not know, with

only 6.5% earning above Ksh30,000.

Table 4.5 Household level of Income

INCOME LEVEL
Frequency Percent Valid Cumulative
Percent Percent
Valid .00 68 12.5 12.5 12.5
4999.00 168 31.0 31.0 43.5
5000.00 161 29.7 29.7 73.2
10001.00 84 15.5 15.5 88.7

25
 20001.00 25 4.6 4.6 93.4
30001.00 12 2.2 2.2 95.6
40001.00 7 1.3 1.3 96.9
50001.00 17 3.1 3.1 100.0
Total 542 100.0 100.0

4.3.6 Extent of Household debt burden

The findings from the study illustrates that 15.1% and 4.8% of the households are either heavily

burdened with debts or very heavily burdened. Only 35.1% are not burdened by debts at all. This

may indicate that most of the families rely on debt to cover their needs and therefore a part of

their present income is channeled in paying this debts.

Table 4.6: Household Debt

HHDEBT
Frequency Percent Valid Cumulative
Percent Percent
Burdened a little 129 23.8 23.8 23.8
Heavily burdened 82 15.1 15.1 38.9
Moderately
115 21.2 21.2 60.1
burdened
Valid
not at all burdened 190 35.1 35.1 95.2
Very heavily
26 4.8 4.8 100.0
burdened
Total 542 100.0 100.0

4.4 Main Findings

4.4.1 Household size and the saving culture.

26
The data indicates that with a small household size, then the household is able to save hence a

good saving Culture. For example, 80 households with only a single person can save a little.

However, as the family grows the number of dependents increase hence the ability to save

reduces. For example 94 households that have 3 household members re not saving at all and 45

households with 6 members are also not saving at all. The finding is that saving culture decreases

as the household size increase thus an inverse relationship as will be provided in the correlation

and regression analysis.

Table 4.7: Household size and extent of saving

Household
Saving culture size
1
Extent of Saving 1 2 3 4 5 6 7 8 9 0 Total
4 1
A little saving 80 8 24 3 5 1 171
1
Moderate saving 47 0 2 3 62
2 5 5 4 1
not saving at all 12 5 94 6 1 5 0 5 3 2 303
Saving a lot 6 6
8 12 7 5 4 1
Total 145 3 0 2 6 6 0 5 3 2 542

4.4.2 Education level and the Saving Culture

The data indicates that Household heads who have attained high levels of education tend to have

a better saving Culture. It reflects that they have financial literacy and the urge to save compared

to those with low levels of education or no education. For example 7 household heads of those

27
who had attended University have moderate savings as well as 26 of those who attended College.

On the other had 120 household heads did not attended school and are not saving at all similarly

to 117 who reached the Primary School level and are not saving at all. . The finding is that

saving culture increases as the education level increase as the relationship will be provided in the

correlation and regression analysis.

Table 4.8: Education level reached and Extent of Saving

Education
Saving Culture level
non Primary secondary Universit
Extent of Saving College e school school y Total
A little saving 17 20 65 68 1 171
Moderate saving 26 29 7 62
not saving at all 4 120 117 62 303
Saving a lot 3 3 6
Total 50 140 182 159 11 542

4.4.3 Age and the Saving Culture.

The data indicates that at the early years and late years of the Household age, the saving culture

is very poor. For example, 33 households who are aged 15-17 are not saving at all and 81 of

those 60 years and above are also not saving at all. On the other hand 94 of those aged 18-34

have a little saving and 4 of those aged 35-59 are saving a lot. It is key to note that 124

households are not saving at all as it would be expected that this age group to save more hence

indicating a Poor Saving Culture in Murang’a County.

Table 4.9: Age group and the extent of saving

28
 Saving Culture Age Group
6
Extent of Saving 15 18 35 0 Total
1
A little saving 2 94 64 1 171
Moderate saving 44 17 1 62
12 8
not saving at all 33 65 4 1 303
Saving a lot 2 4 6
20 20 9
Total 35 5 9 3 542

4.4.4 Income and Saving Culture.

The data indicates that higher earnings would lead a household to have enough for consumption

and remain with some to save. From the data those with low earnings do not save. For example

any household earning below Ksh5,000 that is Ksh4,999 and below are not saving at all as

indicated by the 168 households. Similarly 63 households with an earnings between Ksh5,000

and 10,000 are also not saving at all. On the other hand, 72 households earning above 10,000

have a little saving 6 households earning above 50,000 are saving a lot while anyone earning

above 20,000 have moderate savings. The findings indicate high income levels leads to a better

saving culture as will be illustrated in the correlation and regression analysis.

Table 4.10: Household Income level and the extent of saving.

Saving Incom
Culture e level
Extent of 10,001 20,001 30,00 40,001 4,999 5,000 50,001 Don't No Total
Saving 1 Know respons

29
 e
A little 72 1 98 171
saving
Moderat 8 24 12 7 11 62
e saving
not 4 168 63 62 6 303
saving at
all
Saving a 6 6
lot
Total 84 25 12 7 168 161 17 62 6 542

4.4.5 Household Debt Burden and Saving Culture.

The data indicates that households that are in debt tend to have a poor saving culture as much of

their earnings are used to pay off debts. For example any household that is either heavily

burdened or very heavily burden indicated by the 82 and 26 households respectively are not

saving at all. Similarly 101 households that are moderately burdened are not saving at all. On the

other hand households that are burdened a little or not at all burdened tend to save as indicated

by the 90 households that are burned a little and have a little saving as well as the 67 that are not

at all burdened. It is key to note that 6 of those not at all burned are saving a lot but 55 of them

are also not saving at all. It indicates a Poor Saving Culture in Murang’a County whereby one is

not burdened by debt at all yet they do not save.

Table 4.11 Household debt Burden and the extent of saving

Saving Debt
Culture Burden
Extent of Burdened Heavily Moderately not at all Very Total

30
 Saving a little burdened burdened burdened heavily
burdened
A little saving 90 14 67 171
Moderate 62 62
saving
not saving at 39 82 101 55 26 303
all
Saving a lot 6 6
Total 129 82 115 190 26 542

4.4.6 Desire to save and Saving Culture.

The data indicates that each household would want to save. All the 542 households said “YES”

that they would wish to save. However they are influenced by these factors leading them into a

poor saving culture. Desire to save induces a good saving culture as households are willing to

save.

Table 4.12: Desire to save

DESIRE TO SAVE

Frequency Percent Valid Cumulative

Percent Percent
Valid YES 542 100.0 100.0 100.0

4.5 Regression Analysis

The study established the relationship between the Saving Culture from the extent of saving with
the effect from the socioeconomic factors.
Table 4.13: Regression Model.

31
 Model Summaryb
Model R R Adjusted Std. Error Change Statistics Durbin-
Square R Square of the R F df1 df2 Sig. F Watson
Estimate Square Change Change
Change
1 .883a .779 .777 .34710 .779 377.950 5 536 .000 1.685
a. Predictors: (Constant), DEBT BURDEN, AGE, INCOME, HOUSEHOLD SIZE,
EDUCATION
b. Dependent Variable: EXTENT OF SAVING
The results indicate a strong association between these variables have a fairly strong positive

relationship where R=0.883 and the P value < 0.05. Hence, the relationship is statistically

significant. The independent variables in this study explain up to 77.9% of the variations in the

Saving Culture in Murang’a County with the relationship being statistically significant whereby

the R2=0.779 and P=0.00<0.05.

Table 4.14: Regression coefficients

Coefficientsa
Model Unstandardized Standardized t Sig. 95.0% Confidence
Coefficients Coefficients Interval for B
B Std. Beta Lower Upper
Error Bound Bound
(Constant) 1.742 .063 27.867 .000 1.619 1.865
HHSIZE -.118 .012 -.298 -9.768 .000 -.142 -.094
EDUCATION .127 .025 .175 5.179 .000 .079 .175
1 3.669E-
INCOME .000 .500 16.656 .000 .000 .000
005
AGE -.001 .001 -.016 -.605 .546 -.003 .002
DEBT -.104 .017 -.174 -6.040 .000 -.138 -.070

32
a. Dependent Variable: EXTENT OF SAVING

The regression line indicates that there is a negative relationship between the household size and

Saving Culture. An increase in the number of households by 1 would result to .118 decrease in

Saving Culture. As the household numbers increase, the dependency level increases thus less

extent to save. The variable is significant since p=0.00<0.05 thus can be used to predict the

Saving Culture model. The findings are in agreement with other studies whereby similar results

were found. Mwangi, (2020) study on the saving behavior in Kenya indicated that increase in the

family size by one person from the mean reduces the savings potential for both digital and non-

digital savers by 1.6 and o.7% respectively. The study also provides that most people prefer

smaller families today, due to resource constraints, which limit access due to various competing

needs. With every new family member beyond the mean household size of four, comes added

expenditure whose impact is a reduction in disposable income. However the findings contradicts

the findings by Zulkapli et al., (2022) where the findings saw a positive and significant

correlation that influences respondents to save and invest their money. When the number of

households increases, then there is a lot of savings that we have to use for expenses and use in

the event of an emergency in the future.

The regression analysis also indicate a positive relationship between education level and Saving

Culture. If a household head have a unit higher education that their attained level then their

tendency to save increases by .127. The variable is significant since p=0.00<0.05. The findings

are in agreement with other studies that brought out similar results. Grohmann, (2018) indicates

that more educated people have higher financial literacy hence good financial behavior and tend

to save more. Income is also statistically significant with (3.669E-005, p=0.00<0.05). However

33
in the data, 12.5% of the responses are not used to determine the extent of saving since most of

the respondents did not give their responses or indicated they do not know.

Debt burden is also a statistically significant variable in the study with p=0.00<0.05. A unit

increase in the level of debt burden leads to a .104 decrease in the saving culture thus the

households save less. The household tend to pay off debt and little is left to keep as savings

especially those that are heavily and very heavily burden. Many are also saving to pay debts or

dissaving to make the payments. Age is not statistically significant since p=0. 546>0.05. The

regression analysis indicates that a unit change in age leads to a decrease in saving level. From

the data households from all age levels are not saving and maintain a poor saving culture

especially those below 18 years and those at 60 and above. However, it is key to note that even

those in the middle years of their life are not saving. The finding contradicts with the life cycle

hypothesis which indicates that people save a lot in their middle years of life but also agrees that

people in the late and early years.

34
 CHAPTER 5: SUMMARY, CONCLUSION AND POLICY IMPLICATIONS
5.1 Introduction
This chapter contains a summary of the study, provides the conclusions made and the

recommendations to various sectors based on the findings. The chapter also indicates areas

where additional research can be carried out to fill various research gaps.

5.2 Summary of the Study.

The study indicates a Poor Saving Culture in Murang’a County. The findings provide that only

1% of the households save a lot with 56% not saving at all. Most of the households in Murang’a

have low levels of education indicating low financial literacy which influences their saving

behavior. The income earning levels in the County are also low with many people earning below

$2 a day thus struggle to meet their basic needs and have some left for saving. Households are

also struggling in debt where they save or dissave to pay debts therefore little or no savings done.

The dependency level in the households is also high with families having 3 or more members

which would indicate that much goes into consumption to cater for the large families hence little

remains to save, they live paycheck to paycheck or beyond their earnings and have to borrow for

consumption leading to debts. Age has no effect on saving thus the study fails to reject the null

hypothesis. Most of the people in the mid years of their lives are not saving similarly to those in

early and late years.

5.3 Conclusions
The study stresses the poor Saving Culture in Murang’a County. Based on the findings

socioeconomic factors have a huge impact on the saving Culture of the County. Age has no

effect on the savings of the people but household size, income, education level and debt burden

have a significant relationship to the extent of saving in Murang’a. Murang’a county households

are not saving in all age groups and are earning little and burdened in debt. However, everyone

35
wishes to save but are constrained by the socioeconomic factors. The national government and

the Murang’a County government should not the impact lack of savings could have on the

economy and the household welfare and wellbeing. The financial institutions and digital saving

platforms should also take a concern on how they could influence a high saving rate. Labour

unions have a role too to ensure a minimum wage that would be sustainable and ensure workers

can save.

5.4 Policy Implications.

Based on the findings, focus should be on the socioeconomic factors to ensure they are favorable

to improve Murang’a County’s saving culture. In terms of education, there should be financial

literacy to the households regardless of their level of education such that everyone is empowered

on the need to save. Workers should also be taught and encouraged to save a portion of their

income as a retirement saving during their fruitful middle age. On the other hand the government

and financial entities should maintain trust such that the workers will be encouraged to save

especially the NSSF. Households should also ensure they maintain a smaller household size such

that they reduce the dependency ratio. They should be taught on family planning methods which

will control the birth rates. Smaller families will have low consumption and more will remain to

save. The government should also reduce taxation and provide incentives such that people

remain with enough income to have for consumption and savings. A lower taxation could

motivate the people to work hard and earn higher incomes. Financial institutions and saving

platforms should also consider a reasonable interest rate such that people are motivated to save

and see the value of their savings especially those with longer maturity time. The national and

county governments should also strengthen existing community economic activities aimed at

more savings including Chamas, and SACCOs.

36
Households should also be encouraged not to accrue debts and only take debts that could result

into raising incomes such as investments. It involves taking reasonable loans and those that have

low interest rates thus they will not face debt burden in the long run. Labour unions should also

champion for the minimum wage especially those working in industries and factories such that

they have enough income to consume and save. The old people in the county should also receive

the family support in form of the pension schemes to sustain them for their wellbeing. The

government can come up with household specific interventions targeting vulnerable families to

support them. For the NGOs they can offer charitable support to the communities and improve

their wellbeing through trainings.

5.5 Areas for Further Research.

Further research should be carried out to understand the role financial institutions are taking in

the economic field in Murang’a County. The research can focus on the people’s trust in these

institutions and the how to bridge the gap. The study also considered few socioeconomic factors

that is the household size, income, education level, age and debt. More studies can be carried out

to investigate other factors such as gender, marital status and employment/occupation. Tis study

also recommends that the research to be extended to other counties in Kenya especially rural

counties.

37
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