Mobilization of Domestic Savings in Formal Financial Institutions: The Missing Link to Economic Growth

Abstract

The purpose of the study was to examine factors that affect a Kenyan household’s decision to save in formal financial institutions. This is because domestic saving finances investment and therefore economic growth. A non-experimental research design was utilized using secondary data collected from a national-wide household survey in Kenya in 2009. Cluster stratified probability sampling was used in selecting regions and households that were included in the survey. A total of 6,598 households were used in the survey, using a questionnaire to gather information on financial access. Descriptive and inferential statistics were used for data analysis. The results indicated the factors that influence household’s decision to save in formal financial institutions were availability of loans, level of financial information, location of household, sector of employment, expectations about future economic conditions, level of income, number of banks in district of residence, transaction cost and time to nearest bank branch.