INJIBARA UNIVERSITY

COLLEGE OF AGRICULTURE FOOD AND CLIMATE SCIENCE

DEPARTEMENT OF AGRO ECONOMICS

DETERMINANTS OF HOUSEHOLD HABBITES OF SAVING IN THE CASE OF GOGUSA

SHIKUDAD DISTRICT IN AWI ZONE

A SENIOR RESEARCH PROJECT REPORT; SUBMITTED TO DEPARTMENT OF

AGRICULTURAL ECONOMICS IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
B.SC. DEGREE IN AGRICULTURAL ECONOMICS

Prepared by;

1. Amenual Workneh...................... AFCR/287/11

2. Dinberu Ayichal............................AFCR/301/11
3. Dinka Mosisa ................................AFCR/302/11
4. Eliyas Kefale.................................AFCR/303/11
5. Haileyesus Hunegnew...................AFCR/312/11

July, 2021
Advisor
Habtamu M. ( M.Sc.) Injibara, Etiopia

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AKNOWLEGDEMENTS
Primarily we would like to thank God who provides us all the courage to make our dream to
come true. Then our appreciation and dedication go to our instructor Habtamu M. for his
professional guidance, constructive criticism and suggestion in doing this senior research paper.
And also, our appreciation goes to Injibara University, Department of Agricultural Economics
Staff members.

II
TABLE OF CONTENT page no.

AKNOWLEGDEMENTS....................................................................................................................................II

TABLE OF CONTENT......................................................................................................................................III

LIST OF TABLE................................................................................................................................................VI

ABSTRACT......................................................................................................................................................VII

ACRONAME..................................................................................................................................................VIII

CHAPTER ONE...................................................................................................................................................1

1. INTRODUCTION................................................................................................................1

1.1 Background of the Study......................................................................................................................1

1.2 Statement of the Problem.....................................................................................................................3

1.3 Objectives.............................................................................................................................................4

1.4 Research Questions..............................................................................................................................4

1.5 Scope and limitation of the study.........................................................................................................4

1.6 Significance of the study......................................................................................................................5

1.7 Organization of the paper.....................................................................................................................5

CHAPTER TWO..................................................................................................................................................6

2. LITERATURE REVIEW...............................................................................................................................6

2.1 Theoretical Literature Review..............................................................................................................6

2.2 Empirical Literature.............................................................................................................................8

CHAPTER THREE............................................................................................................................................11

3. RESEARCH METHDOLGY............................................................................................11

3.1 Description of the Study Area............................................................................................................11

3.2 Sources and Data Collection Methods................................................................................................11

3.3 Research Design.................................................................................................................................12

3.4 Type and Source of Data....................................................................................................................12

3.5 Sample Size........................................................................................................................................12

3.6 Sampling Technique.............................................................................................................................13

3.7 Sampling Size and Sampling Technique............................................................................................13

III
 3.8 Methods of Data Analysis..................................................................................................................14

3.9 Definitions of Dependent and Independent Variables.......................................................................15

3.10 Hypothesis........................................................................................................................................17

CHAPTER FOUR..............................................................................................................................................18

4. RESULT AND DISCUSSION...........................................................................................18

4.1 Demographic characteristics of household............................................................................18

In addition to the above categorical variable, the following are the description of all continues variables.
....................................................................................................................................................................21

4.2 Household Income and Expenditure Patterns....................................................................................21

4.3 Saving Performances of Households..................................................................................................27

4.4 Reasons for Savings...........................................................................................................................28

4.5 Determinants of Savings among Households.....................................................................................29

4.6 Income and Saving Pattern of the Households...................................................................................29

4.7 Contribution of Income towards Savings...........................................................................................30

4.8 Change in Savings..............................................................................................................................30

4.9 Mode of Savings of the Individuals....................................................................................................31

4.10 Savings and Accounts Available at the Financial Institutions Where People Save..........................31

4.11 The Main Constraints in the Household Habit of Saving in the Study Area....................................31

CHAPTER FIVE................................................................................................................................................32

5. CONCLUSION AND RECOMMENDATION...............................................................32

5.1 Conclusion..........................................................................................................................................32

5.2 recommendation.................................................................................................................................34

6. REFERENCES...............................................................................................................................................36

APPENDEX A,..................................................................................................................................................38

QUESTIONNAIRES...............................................................................................................38

IV
LIST OF TABLE page no.
Table 3.1 Sample distribution of Respondents ………………………...................……10
Table3.2
hypothesis………………………………………………………………………..................................12
Table 4.1.age of
respondent……………………………………………………………….............................14
Table4.2.sex of
respondent………………………………………………………………...............................14
Table 4.3. Occupation status of respondent…………………………………………….................…………
14
Table 4.4 educational status of respondent of the households ………………………………14
Table 4.5 marital status of respondent……………………………………………..................14
Table 4.6 family size of the respondent…………………………………………….................15
Table 4.7 description of all continues variables…………………………………........…...15
Table 4.8 income and expenditure of household …………………………………….....….15

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ABSTRACT
The research was conducted under the title determinants of household habits of saving in Awi
zone in the case of Gogusa Shikudad district of Ethiopia. Saving is an important
macroeconomic variable to be studied under the purview of the economic arena on an individual
as well as household basis. In a country like Ethiopia, the income standard is almost uncertain
and leads to more consumption rather than saving which has now been a central problem. The
main objective of the study was to assessing of the determinants of household habits of saving in
case of Gogusa Shikudad district, and more specifically; To identify the factors affecting for the
growth of household habit of saving, to identify the changing of saving pattern in households and
to identify the major constraints that influences household saving patterns. The selected design
to conduct this research is not experimental or laboratory research design rather it is survey.
Both primary and secondary sources were used to gather the data. The primary data were
structured interview and questionnaire. These methods were helpful in collecting information
from sampled respondents, different institutional operators and different key informants. The
secondary data had been collected from different thesis, and internet sources. Simple random
sampling technique was selected to select the sampled respondents. The data gathered during
this study have both qualitative and quantitative nature. For the accuracy of information, the
research was interpreted and analyzed by using descriptive statistics such as percentage, mean,
graph and tables. Based on collected data, the researcher identified the major determinants for
the growth of saving habit of households as well as the challenges encountered to the households
saving performance. In order minimize and alleviate the existed problems, some policy
implications are recommended like encourage saving, access to credit and improving income.

VI
ACRONAME
ACSI Amhara credit and saving institution
LCH Life cycle hypothesis
THI Total household income

VII
 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the Study

Ethiopia is a developing country where, there has been a consistent increase in the national
saving rate after the independence period, though with considerable fluctuations from year to
year. The present study tries to analyze the determinants and pattern of saving behavior in rural
household in Ethiopia (NAYAT,2005). Saving is an important variable for every country to be
studied for the economic growth and development of any country. Saving is an important
macroeconomic variable to be studied under the purview of the economic arena on an individual
as well as household basis.

According to classical economists like Adam Smith, David Ricardo and J.S.Mill, “saving is an
important determinant of economic growth”. Saving components can be based on an individual
or on household basis which proves to be the well being. As for an individual saving becomes
the cushion for the future’s intercourse of the unforeseen and upcoming as well as the uncertain
circumstances of life. Saving is the part of the income earned by the individuals. For the higher
economic growth for the country, marginal propensity to save should be higher but it helps to the
multiplier process. The determinants and patterns of saving differ from rural to urban region.
Saving is among important variables for economic growth of any country. Saving is about
income that is not consumed by immediately buying goods and services (Prinsloo, 2000;
Manyama,2007). Saving constitutes the basis for capital formation, investment and growth of a
country (Nga, 2007; Nwachuwu and Odigie, 2009). Serious problem confronting poor countries
including Ethiopia is the savings and investment gap. Because of this gap, these countries find it
difficult to finance investments needed for growth from domestic saving (Mirach and Hailu,
2014).

According to kifle (2012), it is also common to see these countries to finance their investment in
the short run partly through domestic government borrowings and/or foreign loan and grants but
this would significantly increase the country’s debt burden and would not be a solution in the
long run. However, both economic variables are not emphasized as a major variable for
interventions for overall development in Africa in general and Ethiopia in Particular. This is the
case mainly because of: First, most of the studies carried out in the field have focused on
developed economies and unable to show the ground reality in poor developing countries.
Second, most of the studies adopted a macroeconomic approach yet the behavior of economic
units on the aggregate level may not necessarily be the same as on an individual or household
level. And third, even the existing limited empirical research results in Africa related to rural
household savings and investment are varied and inconclusive (Zhu,2004, ; Nga,2007).

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The saving level in Ethiopia particularly in rural areas is very low and little is known empirically
about its patterns and determinants. Savings in rural Ethiopia is mainly made out of the income
from agricultural activities (Kifle, 2012).

Girma sighted as Degene (2012), seasonal and irregular as the cash flow through sale of
agricultural produce and availability of work is seasonal. However, rural household do indeed
save in the form of tangible assets and/or in financial forms which can be potentially utilized by
savings institutions and for investments which is very essential for both households and nation
well-being (Dimova and Sen 2010); (Karlan, Morduch et al., 2010) .
Domestic savings consists of three compromise savings are important determinants of household
welfare(Freidman,2006).On one hand, without savings, households have few other mechanisms
to smooth out. In recent years, economists, international organizations, and governments in
developing countries have placed increasing emphasis on the mobilization of deposits, not only
to increase domestic savings, to achieve sustained economic growth and development but also to
strengthen domestic financial intermediaries . The recent financial crisis has led to serious
repercussions in the global economy due to deep economic and moral losses of investors. These
events revealed the relevance of saving and especially its allocation in the nation economy.
Indeed, saving is very important in the development of industrial and financial systems as well as
the only means to accumulate assets in the absence of credit and insurance markets to households
(Girma, 2013). They could save in banks or nonbank financial institutions in cash form. In this
respect, access to financial institution that meets liquidity needs is crucial. This is the reason to
introduce rural financial institution such as saving and credit cooperatives that strategic in order
to increase financial savings and loan facilities (Kifle, 2012).

1.2 Statement of the Problem

Saving is a very important component which is responsible for combating or meeting any
emergency accrued by the individuals or the households or any corporate agencies. Saving is
more of meant for meeting contingencies but sometimes it also acts as a form of investment. But
sometimes people are not inclined towards saving and the very delicate reason is lack of
awareness. The present study can be a relevant one to know the reason of lower saving patterns
of households and what are the determinants which are responsible for saving. For effective
economic planning, the planners should have an idea regarding the volume of saving of different
groups of people and the method by which saving can be improved more over in a better way.
Right now, saving more and spending more simultaneously has become the basic and conflicting
factor for the economy. In Ethiopia especially at Awi zone in Gogusa Shikudad district there is a
very poor access to the saving and credit institution and lack of motivation of households to
develop their habits of saving. The study tried to fill the gap by providing insight in to the
households in the improvement of the habits of saving of households in the study area. Having
the constraints and gaps in mind, this study can be used to show the major performance and
problems on the household habits of saving in the study area and to saving habit improvement
actors to improve the income or standard of living through providing some possible solutions in
the major constraint areas which base the major findings. In general, this study addresses the

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determinants of household habit of saving in improving the income of households in the study
area.
The present influence of the households in this district has lack of awareness about the use of
saving, inaccessibility sufficient saving and credit institution. Thus, there is an immediate need to
carefully understand the determinants of both the household saving habit and the saving pattern
in the rural households of district. To advocate appeals for saving, there is a need to know about
the saving motives of the individuals (Nayk, 2013). An understanding of the saving preferences
also helps in calculating the saving instruments which can efficiently arouse saving.

1.3 Objectives

1.3.1 General Objectives

 The general objective is assessing of the determinants of household saving habits of in
case of Gogusa Shikudad district.

1.3.2 Specific Objectives

Specific objectives of the study are as follows:
 To identify the factors affecting for the growth of household habit of saving in Gogusa
Shikudad district.
 To identify the major constraints that influences household saving patterns.
 To assess the performance of households towards their saving culture in the study area.
1.4 Research Questions
1. What are the factors affecting the household habits of saving in the areas of
Gogusa Shikudad district?
2. What looks like the saving performance of households in Gogusa Shikudad
district?
3. What are the constraints which faces households saving habits?

1.5 Scope and limitation of the study

The study was conducted in Gogusa Shikudad woreda, Awi zone in Amhara region that focus on
the determinant of household habits of saving assessment. The limitations that were faced during
the study are mainly in collection of data which are relevant to the study. In collecting data
absence of relevant, accurate and specified secondary and primary data in the study area was its
own obstacle to analysis. It was focused on identifying the determinant factors that forced people
to their saving habit and using saving of institutions. In this area; As far as the time limit is
concerned this study was focuses on the current situation of household’s habit of saving.

1.6 Significance of the study

The study conducted on the saving and income expenditure among rural and urban households
for various expenditure classes, little effort has been made to study the saving pattern related to
the individual’s behavior towards saving within rural sector. The study taken to be on pattern of
saving habits in the households that provides an important indicator for economic development
of the country. This study is also help to define the factors influencing the saving pattern and to
analyze certain constraints in the saving attitude in the rural areas.

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1.7 Organization of the paper
This paper has five chapter and chapter one deals with introductory part which contains
background, statement of the problem, objectives, basic research questions, significance of the
study, scope and limitation of the study and the significance of study. The second chapter deals
with theoretical and empirical review. Chapter three is methodology which contains description
of the study area, type and source of data, method of data collection and sampling procedure and
method of data analysis. The fourth chapter is result and discussion and the last chapter deals
with conclusion and recommendation.

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2. LITRATURE REVIEW

2.1. Theoretical literature review

2.1.1 Conceptual Framework

Household: A social unit living together where all the individuals share a common kitchen.
Savings: The share of disposable income not spent on consumption of consumer goods but
accumulated or invested straight in capital equipment or in paying off a home mortgage or not
directly throughout purchase of securities.
Financial institutions: Private (shareholder-owned) or public (government-owned)
organizations that, generally speaking, act as a way between savers and borrowers of funds
(suppliers and consumers of capital).
Consumer spending pattern: Good and services bought by households in the fulfillment of
their needs and wants. It includes non-durables such as food, semi-durables such as clothing and
durables such as refrigerators etc.
Average Propensity to Save: Fraction or percentage of disposable (after tax) personal income
not spends for consumer goods. It in general varies with the intensity of income.
Household savings is defined as that part of current income, after the payment of direct taxes,
which is not consumed or transferred for future consumptions. Saving includes current
disbursements made in the form of a reduction in household liabilities, such as repayment of
loans. By contrast, any portion of the current expenditure of households not financed by current
income but rather by the use of credit represents an increase in the financial liabilities of
individuals and is treated as negative saving. In addition, household saving includes regular and
recurring employer and employee contributions to pension and insurance funds and the interest
earned on those funds. Saving is also defined in terms of flows in the current account and
excludes any capital gains and losses (Schultz, 2005; Nga, 2007; Cronje, 2009).
There are some theoretical models in the literature which explains different determinants of
savings and asset accumulations (Schultz, 2005; Nga, 2007; Rijckeghem and Ucer, 2009).
Keynesian model explains that the motive behind savings is the desire to bequeath an estate.
Disposable income is taken as the major determinant of individual savings in which People with
a low income considered as unable to save (Schultz, 2004; Nga, 2007; Rijckeghem and Ucer,
2009). In neoclassical economic theory, individuals are assumed to be rational beings who can
respond in predictable ways to changes in incentives. Individual utility is usually assumed to be a
function of consumption and savings are often treated by residual of resources that remain after
consumption (Beverly et al., 2003; Cashell, 2009; Rijckeghem and Ucer, 2009).
However, these theories were initially developed for developed economies and unable to explain
the economy and the feature of households in developing countries as they have different
characteristics (Schultz, 2005; Nga, 2007). According to Zhu (2004), some of the peculiar
features of household’s savings in developing countries in general and their rural areas in
particular are; large household size, agriculture as a major source of income and most households
live in abject poverty.

5
Many researchers indicate that many rural households in developing countries, particularly in
Africa, are too poor to save (Rutherford, 2000; Robinson, 2001; Devaney et al., 2007). However,
as Coleman and Williams (2006) stated, the poor do save even though they do not have complete
access to savings facilities in formal financial institutions. Instead, they use informal institutions
for their savings. These include livestock, crop products, housing materials, farm equipments,
and some other precious metals like jewelry.
Low saving has been a dominant feature of the Ethiopian Economy. At household level,
irrespective of small size, rural households in Ethiopia do save in many ways, as individuals or in
a group. They usually save in kind mainly in food-grains or in livestock (Dejene, 2003).
In recent years economists, international organizations and governments in developing countries
have placed increasing emphasis on the mobilization of deposits not only to increase domestic
savings, to achieve sustained economic growth and development but also to strengthen domestic
financial intermediaries ( Besley, 1995). Similar study by Baharumshah et al, (2003) argues that
the existence of positive effects of household savings on economic growth. The recent financial
crisis has led to serious repercussions in the global economy due to deep economic and moral
losses of investors (Bhalla, 1998). These events revealed the relevance of saving and especially
its allocation in the nation economy (Bernhiem and Shoven, 1991). Indeed, saving is very
important in the development of industrial and financial systems (Attanasio, 1998; Baharumshah
et al., 2003) as well as the only means to accumulate assets in the absence of credit and insurance
markets to households. Although there is controversy regarding the relation between savings and
economic growth, it is generally agreed that once savings start to rise-perhaps due to increases in
income-they enhance the potential to finance investment , and lead to the creation of more
opportunities in the economy (Attanasio,1998; Bernhiem and Shoven, 1998).
Domestic savings consists of three components, viz., corporate, households, and government
savings. Household saving could be accumulating in real assets or financial assets. Large part of
saving accumulation in developing countries is in the form of real assets (Rehman et al.,2010).
These include livestock, precious metals, or food stocks. However, these real assets less useful
for industrial activities since it does not liquid. The weakness saving in real assets is important
reason for household in developing countries to save in financial assets (Deaton, 1989). They
could save in banks or non- bank financial institutions in cash form. In this respect, access to
financial institution that meets liquidity needs is crucial. This is the reason to introduce rural
financial institution such as saving and credit cooperatives that strategic in order to increase
financial savings and loan facilities. Household save for a variety of reasons such as liquidity
constraint or life cycle savings. In developing countries savings are important determinants of
household welfare. On one hand, without savings, households have few other mechanisms to
smooth out unexpected variations in their income, and so, shocks may create some problems of
human capital accumulation at early ages (Attanasio, 1998).

2.2 Empirical Literature

According to Degene (2003), Low saving has been a dominant feature of the Ethiopian
Economy. The average share of gross domestic savings and investment from GDP was 12.4 and
18.5 percent which is very low, respectively. At household level, irrespective of small size, rural

6
households in Ethiopia do save in many ways, as individual or in a group. They usually save in
kind mainly in food grains or in livestock.

2.2.1 Relationship between Saving and Income

The present study empirically examines the relationship between saving, income and
consumption showing a positive relationship between saving, income and consumption. As the
income of the individual increases, consumption increases and simultaneously saving also
increases (Bernhiem and Shoven, 1991). Economic studies have shown that income is the
primary determinant of consumption and saving. Rich people save more than poor people, both
absolutely and as a percent of income. The very poor are unable to save at all. Instead, as long as
they can borrow or draw down their wealth, they tend to save. That is they tend to spend more
than they earn reducing they are accumulated saving or going deeper into debt. So we can say
that there is a deep relationship between consumption, income and saving and they all affects to
each other which can be shown with the equation,(Sameroynina ,2005);. :
C=f(Y) ................eqn (1)

Y=C+S...............eqn(2) Where; C=Consumption

S=Saving
S=Y-C ...................eqn (3) Y=Income
Many people fail to save what they need to for retirement (Munnell, Webb, and Golub-Sass
2009). In economics, the life-cycle hypothesis (LCH) is a concept addressing individual
consumption patterns. The life-cycle hypothesis implies that individuals both plan their
consumption and savings behavior over the long-term and intend to even out their consumption
in the best possible manner over their entire lifetimes. The key assumption is that all individuals
choose to maintain stable lifestyles. This implies that they usually don't save up a lot in one
period to spend furiously in the next period, but keep their consumption levels approximately the
same in every period.

2.2.2 Saving Patterns of Household and Money Owed to the Households

Understanding how people save in particular, knowing whether certain people are more
vulnerable financially because of their saving choices financial preparedness for retirement and
anticipate their economic well-being thereafter. In recent years, employer pension schemes have
shifted from defined benefit to defined contribution plans, and interest in reforming part of the
Social Security retirement system has increased. Thus pension plans and Social Security are
becoming or may become more like individual saving. Research on how people save is needed to
help gauge the economic security of future retirees, inform the current debate on Social Security
reform and prevent inequalities in wealth from being perpetuated (Sameroynina ,2005)

2.2.3 Saving and Money Deposited in Banks

Sometimes people think they are doing finances well when those money-saving behaviors are
really compromising the security of their savings. A budget and regularly depositing money into
a saving account will build up a nice buffer in case fall on hard times, but also doing these things
can potentially put a big hole in that safety net. Poor is not that relational in depositing in banks
because of less income (Rehman H, Faridi Z, Bashir F, 2010)

7
2.2.4 Saving Behavior and Household Investments
The investments made by the households in different sectors are subjected to high income and
more savings. The rural households have very less income and high consumption as their
marginal propensity to consume is high and they are subjected to save less which significantly
puts an impact on their investment pattern (Attanasio, 1998, Bernhiem and Shoven, 1991).
Investments in unincorporated businesses and farms or rental properties are no where applicable
for these communities.

2.2.5 Saving Behavior and Preference for Saving

In The rural communities have a very less income which supposes them to save less and
even if they save they prefer the savings account through which they can have easy way of
transaction at any point of time and they save a very less amount in the financial
institutions showing a significant result of saving (Cashell, B.W, (2009)).

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 3. RESEARCH METHDOLGY

3.1 Description of the Study Area

This study tries to be taken in Gogusa Shikudad found in Awi town administration in Amahara
regional state located. It is far away 15km from Kosobar town. The area is bounded by Banja
Gogusa, west Gojiam and Ankasha Gogusa woreda in the northern, southern and eastern and
western respectively. The total population living in this woreda is 109,912, of these 52,758 are
males and 57,154 are females. Base from the woreda. The woreda has 211,520 livestock
population (woreda extension agent).

The major economic activity of the area is mixed farming system mainly crop production and
livestock raring. The most commonly cultivated annual crop in the area is Wheat, red Teff,
barely, potato and others. Their annual crops are cultivated by subsistence farming in the study
area. Due to the accessibility of the respondents, access to information and proximity to the
campus, these study area is selected.

3.2 Sources and Data Collection Methods

It is a combination of quantitative and qualitative types of research. Quantitative research taken
to be generally describe the amount of income earning monthly (yearly), amount of income to
save and how much to consume from total amount of income. On the similar manner qualitative
type of research was used to explain in detail why people develop their saving habits. These
studies had both primary and secondary sources were employed. Primary source to be based on
data collection through focus (target) group discussion .The secondary data was also be collected
from annual reports, internets, published and unpublished documents.
Different data methods were employed. These include; questionnaire and interview.
Questionnaire was prepared in the form of structured and open-end questions. Interview tries to
be carried out to get detailed information on the household saving habit, factors that affects
saving behavior of households and level of income. Small groups of persons, both male and
female were selected and invited for focused group discussion.

3.3 Research Design

To undertake this study, it can be tries to use cross-sectional research design involving both
qualitative (case study and depth interview) to discover the understanding motive of desires and
quantitative (mainly using survey questionnaires).

3.4 Type and Source of Data

Different type of data was collected and the data that should relevant to the objective of the study
from different sources. This study was using both primary and secondary data sources. The
primary data was collected from sample of respondents and key informants. The secondary data
was collected from other research efforts, books, statistical reports, official documents and
different institutions.

9
3.5 Sample Size
The size of the sample depends up on the precision desires and there is no single rule that can be
used to determine sample size. But the larger sample is much more likely to be representative of
the population. So in these cases, our total population of the study area is about 109,912 from
which 52,758 are males and 57,154 are females. Due to the representativeness of the whole
population, the target population should be minimized to about 100 households. And in the other
word From the total population 100 households are taken as a target population, because they all
are mixed in farmers, governmental employed, students, private sectors etc. the sample size was
determined using the simplified formula developed by Yemane(1967) at 95% confidence level.
According to this formula the sample size is obtained to be 80 households at the given
significance levels.
n = N/1+N (e) 2

Where; N = target population

e = significance level(0.05)
n= sample size

But, because of shortage of time, budget and distance factors, under these study only 30
households should be taken.

3.6 Sampling Technique

The subject of this study was via the head of the households, in the study area, which includes
both male and female heads. The sampling technique plays a great role for accuracy and validity
of information. The technique that should be selected the study area is purposive sampling
because of the nearness of the study area to the campus, in order to gather data and other
information relevant to this study. And to avoid biasness in sampling, simple random sampling
technique had been employed.

Since the study was concerned with determining household habit of saving in Gogusa Shikudad
district, the conceptual structure of the study to be descriptive. A cross-sectional study should be
made to investigate the determinants of household habit of saving by collecting data from the
randomly selected respondents.

3.7 Sampling Size and Sampling Technique

Table 3.1 Sample distribution of Respondents
Gogusa Shikudad woreda

Target of households 100

30
Sample size selected

But due to time, money and other constraint it should tries to take only sample of 30. Therefore,
using sample size proportion of population, it is selected 30 from the total of 100 target
households.

10
The overall household survey was following a random sampling technique though the study area.
But at the beginning by simple random sampling 30 households was randomly selected from the
study area.

3.8 Methods of Data Analysis

In this study both descriptive was used to conduct determinants of household habit of saving. To
describe the characteristics of households who have saving habit’ descriptive statistics like mean,
percentage and frequency should be employed.

3.8.1 Analysis of Descriptive Statistics

Descriptive statistics describe the main features of a collection of data quantitatively. It aims to
summarize a data set quantitatively. Descriptive statistical used to describe coefficient of
variation, standard deviation, etc.
It tries to use the descriptive statistical analysis simply to describe what is going on in our data
and to present the quantitative description of the households. For descriptive statistical analysis,
it could be used percentage, average, minimum and maximum values to the quantitative data
numerically.

3.9 Definitions of Dependent and Independent Variables

Saving; - is a basic instrument in the improvement of household’s life or in the poverty
alleviation effort as it helps to smooth consumption. It is also usually the entry point for a
potential user in interacting with financial service providers. The saving habit of the households
in the study area was asked. Hence, due to low saving habit of households, the vital role of
financial capital seems inadequate. When individuals have saved some amount of money, the
performance of their income becomes improved. More saving money would mean more capital
(Demise, 2011).
Income: - Were approached from expenditure side and saving. This is because households are
assumed to reveal their true behavior when they are asked about their expenditure. Thinking that
they will be reluctant to reveal their actual income, their expenditure on both food and essential
non-food items are considered. And a monetary value is attached to each to have an aggregate
indicator. In this study, it is assumed to be used to know who more saved in the sectors and the
more is saved would mean the more income he/she has generated. Consumption is typically
measured by total expenditures, which track the value of money, time and assets spent on both
food and non-food goods and services (Levin 1991 cited in Anne I. 1996).
Age: Study findings support consideration of age of an operator as a factor that may affect firm
survival and growth.
Sex: Sex of a respondent is one of the variables that can be considered in the model, being
categorized as (0) female (1) male.
Education: Education and skills are needed to run micro and small enterprises. Research shows
that majority of the lot carrying out micro and small enterprises in Ethiopia are not quite well
equipped in terms of education and skills. Majority of those who run saving (ACSI) are the
ordinary lot whose educational background wants King and McGrath, (2002) in their study

11
suggests that those with more education and training are more likely to be successful in the
(ACSI).
Older, more educated owners seem to have a better chance for business success than younger and
less educated people. There is a believed that older people bring more maturity to a situation and
those with more education also have more experience to save. This means when educational
status of households increases, their income increases significantly. Studies are also asserted that
the more educated people become successful in their business.
Family size: When the number of family size of the household increases their saving
performance is declined. They consume more rather than to save. The most probable explanation
could be more family size could mean they consume more and decrease their Income and they do
not motivate to save (Demise, 2011). In addition, when family size increases, their income also
increases.
Occupation; Is a task or an employment whether governmentally or privately in order to
safeguard the life time of oneself. It is one of the determinant factors in the saving habits of the
community.
Marital status; Is the condition when the two opposite partners are joint together with
agreement. It is one of the determinant variables that influence the saving habits of households.
3.10 Hypothesis; Is subject to test i.e., to confirmation or rejection on empirical grounds.
Table 3.2 hypothesis
Determinants of Continuous categorical Effects of eachh factor on
saving household saving habits
Income  positively
Occupation  positively
Family size  negatively
Marital status  negatively
Sex  negatively
Consumption  negatively

Age  positively

Education  positively

4. RESULT AND DISCUSSION

This chapter analyses the result of the determinants to develop household habit of saving by
using descriptive statistics. The former were used to description purpose while the later was used
to analyze determinates of household habit of saving. Under this section there are demographic

12
characteristic factors which describe the total background of the respondents. Such factors are;
age of respondents, sex, marital status and family size.

4.1 Demographic characteristics of household

4.1.1 Age Groups

Table 4.1 age of respondent
Variable Obs. mean Std.dev. min max
Age 30 33 7.02058 20 49

Age is the most determinant factor that affects household habit of saving positively. As discussed
in the above description, from the total observation the average of the respondent’s age is 33.
From minimum age 20 and maximum age 49. Among this, most of the respondents are falling
under the age of 30-40, those who are the more productive stages. And also the least number of
respondents falls under the age of 40-50. Respondents under this age save higher relative to
others. Because age affects saving of households positively that means if the age of households
increase, the amount they save also increases.

4.1.2 Sex of the Individuals

Table 4.2 .sex of respondent
Sex Freq. Percent
female 8 26.7
Male 22 73.3

Total 30 100.00

Out of the sample households taken for the study 73.3% are male and 26.7% are female. Under
those respondents 22 of them are males and 8 of them are females. The sex of the head of the
household emphasizes the impact of saving as it is shown that the male population are more and
suppose to involve themselves in different occupational status are inclined to save more. The sex
of the population determines the income to as larger extent as the wage paid to male population
is more than that of female population which is again reveals the differences in the saving
behavior of the population. The consumption pattern also signifies the differences in saving.

Occupation Frequency Percent

government employed 12 40.0
private 18 60.0
Total 30 100.0

Out of the study 40% of respondents are government employed and 60% are private. The
occupation affects saving of household’s habit positively. In the rural area the government
employed is better saving habit than private.

13
4.1.4. Educational status of respondents

Table 4.4 educational status of respondent

Education status Frequency Percent

educated 15 50.0
uneducated 15 50.0
Total 30 100.0

Education is one factor that influences the saving habit of household positively. The educated
household is a good saving habit and uneducated is bad saving habit. Out of the study 50% 0f
respondent are educated and 50% are uneducated.

4.1.5 Marital Status of the Respondents

Table 4.5 marital status of respondent
Marital
Status Freq. Percent

Unmarried 7 23.3
married 23 76.7

Total 30 100.00

Marital status are also factors that affect household habits of saving positively, i.e. unmarried
respondents save more than married people. The marital status of the respondents and the head of
the households also determine the saving habits of the rural households. The married population
is subjected to more liabilities which discourage them to save more as role in the model of saving
pattern. From the above description 76.7 of respondents married and those 23.3% of respondents
are unmarried, who have higher saving habit than married respondents. From the total
respondents 7 of them are unmarried and 23 of them are married.

4.1.6 Family Size

Table 4.6 family size of the respondent
Variable Obs. Mean Std.dev min max
Family size 30 2 1.53316 1 7

Family size is one of the continuous variables that affect household habit of saving. That means
if the number of families increase, they run to consume more instead to save. Large household
size could lead to increase in non-farm business expenses such as payment of school fees,
hospital bill, clothing, feeding as well as the purchase of other household consumable items. This
could detrimental to increase production in the rural economy, a disinvestment resulting from
dis-saving. As we can see from the statistical description the average number of families from
the total observation is about 2 members from which maximum number of families are 7 and
minimum number are 1 members.

14
In addition to the above categorical variable, the following are the description of all continues
variables.
Table 4.7 summary of all continues variable
Variable Mean Std Dev.
Age 33 7.02058
Family size 2 1.53316
Income 5177 4501.70826

Consumption 2163 1674.5449

4.2 Household Income and Expenditure Patterns

Table 4.8 income and consumption of the households
Variable Obs. mean Std.dev. Min max
Income 30 5177 4501.70826 400 20000
Consumption 30 2163 1674.5449 950 6566

In the above table the average income of the respondent is 5177birr with standard deviation of
birr 4501.70826 with maximum earning of 20000 birr and minimum earning of 400 birr per
month .The respondent who have higher income saves more than respondents that who have less
income. Savers have higher on-farm as compared to their counterparts.
The total consumption expenditure of sample households ranged from Birr 950 to 6566per
month and the mean expenditure was 2163 birr with standard deviation of 1674.5449. From all
the expenditures of sample households, expenditure for food items, farming inputs, non-food
items and ceremonial purposes are the major one on which the respondents spend their incomes.

4.3 Saving Performances of Households

Table 4.9 households saving performance
Variable Obs. mean Std.dev. min max
Y 30 1163.3 1223.26114 0 5000

House hold savings is value deposited by households. Farmers usually save from their proceeds
for consumption smoothing purposes throughout the year, accumulation of wealth, and for
contingency amount of household savings was 1163.3 Birr with standard deviation of birr
1223.26114. The lowest saving level among the savers was 50 Birr and the highest reaches 5000
Birr per month. The household’s density of saving is varied because there are factors which
affects saving habits of households Since there is no complete information on all household
savings, it can be investigated mainly financial institutions like ACSI, (Amhara credit and saving
institutions) and some sample respondents. From the productive point of view, financial savings
are interesting since raising it could potentially increase resources for investment. As the
information obtained in the ACSI in Tilili institution, in the study area. A study by Adeyemo and

15
Akala (1992) pointed out that as the annual household income increases; the average amount of
savings per month in the household also increases.

4.4 Reasons for Savings

Why do households save their valuable money that they not spend on food, water, and other
daily expenses? None of the members choose earning interest as a motive to save, from different
alternatives. Unlike what is assumed in theory, households not only save for future consumption
but also for future investment. This may explain the reason for insensitivity of saving to interest
rates as found in numerous empirical studies. If the households have the opportunity to deposit
money at cooperative, their prime reason is not the inter-temporal substitution motive-earning
interest but simply to have access to loan and stored safely. This concurs with the studies by
Browning et al. (1996) showing that interest on savings does not motivate saving amongst rural
households. The three most common saving motives for both men and female members were: to
obtain loans, for emergencies and for housing building. The propensity to save to obtain loan and
for emergencies correspond with the result of the study of Karlan et al.(2006) about micro
saving in Philippines, which was also for emergencies and loan. These results show that poor
households need different types of deposits to deal with different needs. Accessible products
such as the voluntary saving accounts allow withdrawals at any time for emergencies, and
compulsory saving accounts enable households to accumulate money for expected expenses,
such as to obtain loans and housing building.

4.5 Determinants of Savings among Households

The preceding section has provided some descriptions concerning the relations between saving
and household socio-economic variables. The study were found by Sameroynina (2005); Brata
(1999); Khalek et al. (2009); Schrooten and Stephan (2003) showing that income positively
influences household savings. The results of the study also show that household savings were
affected by gender. Considering the gender dummy, we conclude that men households save more
than women households. Consistent with several empirical studies (Admas and Vogel, 1986;
Attanasio, 1998), this finding suggests that the level of saving among rural household positively
related with credit. In this study, the household family size does have significant impact on
savings. It is socially evident as well that only one person is responsible for all type of financial
matters for the family in this study area.
If family size is much large households cannot save much amount of money than having small
family size. Family size is also a major cause of fewer saving. This result is consistent with
Burney and Khan (1992) which suggests that the larger the household size, the higher the
expenditure and the smaller the amount of saving by the household.

4.6 Income and Saving Pattern of the Households

Income is an important determinant of the saving patterns of the rural households. Income is a
positive factor that analyses the savings of a country or a household. The rural households
experience a very low level of income as many of the rural families earn their livelihoods from
the agriculture, many are daily wage workers, petty traders and other self-employed activities.

16
The level of income is very low but the marginal propensity to consume is very high among the
households. So, the saving rate of those households is very low.
As we can seen the data get from ACSI in the study area Gogusa Shikudad distrct, Most of the
households do not accrue a sufficient level of income which makes on their part to borrow some
amount of money to sustain their livelihood. Very less people often take loans from the financial
institutions. Out of fear and incapability of repaying the loan most of the households do not take
any loans.

4.7 Contribution of Income towards Savings

Income is an important determinant of saving. Income is positively related with savings. When
the income of the individuals increases, savings also increases and when the income of the
individuals decreases the rate of savings also decreases. The change in income signifies the
changing growth rate in savings. The present study revealed that 390 Birr is the average amount
that an individual saves out of his related income. The more the amount, the more is the standard
of savings.

4.8 Change in Savings

Savings contributes a positive relation with the income of the households. If the income
increases the savings also increases and vice versa. There may be a lot of fluctuations
experienced in the savings, investment and in owing the physical and financial assets of a
household.
Investments in unincorporated business, professional practices, farms or rental properties
including major improvements, for example land improvements and share in the case of
partnership, increase or decrease in cash held in accounts in banks, trust or loan companies, and
cash in hand in form of savings, increase or decrease in money owed to households by Persons
outside household, increase or decrease in money deposited in banks and other institutions for
future security are estimated to examine the change in the savings rate.

4.9 Mode of Savings of the Individuals

Most of the rural people have awareness towards saving, but their saving habit does not much
develop. Saving may be in form of physical or financial. In the study areas most of the people
save in the form of cash. As we can seen there is no peoples to use different forms of saving like;
in the form of liquid asset or cash in hand, some save in form of gold, silver, and other precious
metals, rather they use in cash form.

4.10 Savings and Accounts Available at the Financial Institutions Where People
Save
As the study survey information from ACSI the financial institutions available nearby
encourages the people to save where the preference of saving over a year signifies short term,
middle term and on a long term basis where short term saving accounts to daily, monthly and
quarterly and medium term saving accounts to half yearly, yearly and more than one year where
as long term saving are applied on a two year, five year and on above five year basis. But most of
the people’s interest and preference towards the amount of saving in different period is below

17
300birr. As the survey result some of the household saves in weekly and some of them save
monthly.
4.11 The Main Constraints in the Household Habit of Saving in the Study Area
Constraints are obstacles which resists something or someone from doing specific tasks. There
are constraints which faces the household performance of saving in the study area. This problems
are governmental, social and economical and others. Such problems are; backward awareness of
households, less education levels, insufficient income earning power of the community, lack of
adequate infrastructure, insufficient accessibility of saving and credit institutions etc. the major
once which are surveyed in the study area.

5. CONCLUSION AND RECOMMENDATION

5.1 Conclusion
This research was conducted in Awi zone in Gogusa Shikudad district on the determinant for
improvement of household habit of saving. Based on the objectives and findings of the study,
the following conclusions are explained. The results of the descriptive analyses of the
determinants of household savings shows that almost all of the household save their income in

18
cash form, but their is a variation in density of saving among the households. The significant
determinant explanatory variables of rural household savings in the study area were household
family size, income and consumption levels of the households. This study shows rural farm
households indeed save in respective of their low economic status. Based on the discussion part
there are factors which describe the demographic characteristics of the households. Among this
determinants some of them are significantly affect the saving patterns of households. These
demographic characteristics are; age, sex, family size and marital status but family size is a
significant determinant variable. The study has found that there has been a significant change in
the levels and density of savings pattern of the rural households because of the increase in
income earning variation among the households. As it can see into the saving pattern of these
communities we find that savings are accounted to be very low as because of their low
occupational status and low income. All of the income is spent on consumption and it’s very
insufficient to feed the larger family groups. From the information gained from ACSI and the
sampled respondents there are different constraints faces the household’s patterns (habits) of
saving. Some this constraints like; low access of saving and credit institution; low awareness
households about their saving patterns; insufficient educational accessibilities; lower income
pattern of communities and some of the households are carelessness on their health status etc, are
more of less assessed in the study area of the household.

5.2 recommendation
The purpose of this paper is to identify the determinants of household saving pattern in Awi zone
sub Gogusa Shikudad district of Ethiopia using the data available from the household survey. As
it can seen from the result of the study savings patterns of household are determined by family
size, income and consumption pattern of households.
1 The households could take different measurements in order to make limited their
family size.
2 The government could also provide family planning service to the households.
3 Households should be encouraged for improving their income levels and enlighten
on the need for savings households could also minimize their consumption levels in
order to develop their saving habits.
4 institutions are also involved in development projects need to increase their
support to improve the business environment of the communities and used to
upgrade their income.
5 Such decisions include supporting through revolving funds since households are
more effective and efficient in mobilizing funds with low default rate. This will
enable them to expand their production output and increase their savings thereby
stimulating the rural economy.
6 An efficient wage act policy should be implemented by the government as many of
the rural people are the daily wage worker amounting them to proper ways which
can meet the consumption needs and some portions of the income can be saved.

19
 7 The financial institutions should amount to high interest rates provided on savings
which can motivate the households to save in these institutions mostly in post
offices, banks etc rather than keeping at home.
8 There should be a proper channel of agents who can advise or council these people
regarding saving. Policy-wise, efforts should be made to encourage the rural
households to save through giving trainings for the household and using the formal
channel.

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 Beverly S, Sherraden M (1999). Institutional determinants of saving: implications for low-
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OrbetaJr AC (2006). Children and Household Savings in the Philippines. Philippines Institute for
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Journal of

APPENDEX ,
Injibara University College of Agriculture Food and Climate Science
Department of Agricultural Economics
Dear respondents this questionnaire is designed to investigate the determinants of household’s
habits of saving. You are sincerely and kindly requested to fulfill below questionnaires. You are
one of the respondents selected to participate on this study. Please assist me in giving correct and
complete information to present a representative finding on the current status of the factors
affecting the saving habits of households this study area.
Research questioner

22
1) Name of respondent--------------------
2) Age of respondent----------
3) Sex(gender)------
4) Marital status
a) Married
b) Unmarried
5) Occupation
a) Governmental employed
b) private
6) Education level
a) educated
b) uneducated
7) family size-------------------
8) Sources of income (what are the source of income for most of the farmers?)
a) farm sources
i. livestock and poultry------------------------------
ii. different farm product---------------------------------
iii. others---------------
b) non-farm sources
i. supper market----------------------
ii. restaurants------------------
iii. wage of labor (per day)-----------------
iv. Governmental salary (per munth)---------------------
v. Others---------------------
8) land size (in hectares)--------------------------
9) Amount of output yearly produced per hectare in quintal
10) Price of output per quintal
11) Total amount of expense per years(consumption per year)
A. Inputs
 seed
 fertilizer
 labor
 machinery
B. tax
C. housing expense
D. Infrastructures E) consumption--------------------
 electric
 water
 transportation
 telephone communication
 others
12) Have you participate in saving institution?

23
 a) Yes
b) no
justify---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
13) if your answer is ‘’yes ‘in question number 12, what types of saving institution you
participate?
A) Formal (in the form of money)
B) Informal (physical asset at home levels)
Justify----------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
14) If you save in formal saving institution, how much you save per month or yearly?
15) If you are in informal institution, how much you save per year?
16) If your answer is’’ no’’ in question number 12, what are the most determinant
factors that you do not participate in saving institution?

24