DETERMINANTS OF HOUSEHOLD SAVING CAPACITY IN MERSA TOWN, ETHIOPIA

ABSTRACT Saving is the amount of money remaining after deducting consumer expenditures from disposable income over a specific period. It is essential for financial and capital accumulation, driving economic growth, especially in developing nations. However, Ethiopia’s saving rate is notably lower than that of its peers, leading to a heavy reliance on foreign aid and ongoing searches for foreign direct investment, which undermines the country's global competitiveness.Furthermore, there is a scarcity of research focusing on the constraints affecting households' saving capabilities from a microeconomic perspective. The aim of this investigation is to scrutinize the determinants of household saving capacity in Ethiopia, particularly in Mersa Town, through an examination of the socio-demographic and socioeconomic aspects of household heads. The research methodology was involved an individual-based cross-sectional survey, and quantitative analysis approaches. The total population of the study used24,539 household heads, with a sample of 375 respondents selected through simple random sampling, during the data collection phase, respondents, lack of willingness, 4 observations were omittedrepresenting the entire study area with a confidence level of 95% and of error of 5%. Data collection was structure questionnaires and interviews. the Findings revealed that out of 371 sample respondents, only 40.2% of them was saver, whereas the remaining 59.8% were do not save from their monthly income, as a result, the level of saving rate was found to be very low. The study also revealed that the extent of saving by female household head is more than that of male counterparts, but the mean of monthly saving is inverse relationship. The econometric results indicate that credit access, monthly income, sex, occupation, and years of work experience significantly enhance household saving capacity. In contrast, age, marital status, family size, housing status, and education level negatively affect saving capacity. The findings emphasize the need for strategies to boost saving rates and encourage the adoption of formal financial institutions.