SAVING HABIT OF RURAL HOUSEHOLDS: THE CASE OF GEDEB WOREDA OF GEDEO ZONE, SOUTHERN REGIONAL STATE OF ETHIOPIA

Household saving is a crucial determinant of the supply of funds for investment. However, saving level in Ethiopia particularly in the study area is very low and little is known empirically about its determinants. This study, therefore, was aimed at investigating the factors that affect saving habit of rural households in Gedeb district of Gedeo zone, Southern Ethiopia. A cross sectional data collected from 295 rural sample households using interview schedule. The data collected were analyzed by using descriptive and econometric tools. The result of descriptive statistics revealed that the major challenges of saving practice in the study area were unplanned spending, high cost of living, high social commitments, spending income as soon as earning, very low income, unavailability of financial institutions, lack of trust in financial institution and lack of knowledge /awareness on saving whereas to acquire asset (house, land, clothes, TV etc.), to pay education fee, for household consumption (to buy food), to pay medical expenses, to receive interest rate for saving, to attend funerals and similar function and to get loan and credit access were the major opportunities of saving practice in the study area. The estimate of ordinal probit model with marginal effect found that age, education level, annual expenditure, farm land size, livestock owned, annual income, distance to financial institution, and frequency of extension contacts had significant influence on rural households’ saving habit. The finding suggests that awareness creation and trainings about saving benefits should be given to the society, price stability policies targeted on major food items should be appropriately formulated, encourage rural households to look for additional jobs without jeopardizing their permanent job of crop and livestock production, prior attention should be given to small and very small landholders for improving productivity of the existing land through land management system and modern cultivation system.