A few studies conducted in Ethiopia about rural household’s saving behavior devoting much attention to macroeconomic data. Therefore, this paper examines both motives of rural household’s saving and factors affecting their saving behavior by using micro leve
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A few studies conducted in Ethiopia about rural household’s saving behavior devoting much attention to macroeconomic data. Therefore, this paper examines both motives of rural household’s saving and factors affecting their saving behavior by using micro level data sets. Primary data were obtained from structured and semi-structured questionnaire, key informants interview, field observation and focus group discussion whereas the secondary data were gathered from banks and micro-finance institutions. A multistage sampling technique was used to select the study area and178 sample respondents. The descriptive statistical tools including frequencies and percentages were used to examine motives of rural household’s saving whereas chi-square test and t-test were used to examine statistical significance between dependent and explanatory variables. In addition, binary logit model was used to analyze factors affecting rural household’s saving behavior. Results show that mitigating emergency, smoothing future consumption, high interest rate, planning to have luxury life and starting new business were reasons behind the motives of rural household’s saving whereas lack of surplus income, shortage of formal financial institutions, lack of awareness and low interest rate were discouraging factors to save in the area. Furthermore, Age, education level, access to credit and extension service, interest rate, transaction cost and livestock ownership of household heads were factors significantly influencing rural household’s saving behavior . Giving emphasis on adult education, income diversification, expanding branches of formal financial institutions, proving extension service and revising interest rate were points recommended to all concerned bodies to enhance rural households saving behavior in the study area.
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