An analysis of the determinants of rural household savings in Bondo district
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Date
2012-10-17
Authors
Oriaro, Hellen Adhiambo
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Abstract
This paper investigates the determinants of rural household savings in Bondo district, Kenya. The endogenous variables examined in this study include: age, bank distance, dependency, education level, employment status, income, interest rate, wealth and urbanization. The urbanization variable was later dropped as it gave conflicting results.
A total of 120 househol heads were interviewed and both qualitative and quantitative results were obtained. The main empirical findings of the paper are:-
i) The most significant factor determining household
savings is income. The other variables that were found
to be significant are wealth, interest rate, employment
status and education level.
ii) Dependency was found to have a positive coefficient in
Rarieda division. Thus, high dependency was found to
reduce savings only in urban areas but in the rural areas,
a positive relationship was found to exist between
savings and dependency.
iii) Education motive was found to be the most important
motivation for household savings in Bondo district.
iv) Businesslike occupations contributed more to rural
household savings than wage employment.
v) Contrary to expectations, bank distance was found to
have a positive coefficient, implying that the long
distances to the saving institutions encouraged savings
in the rural areas.
vi) Wealth may not encourage savings in rural areas.
Based on these findings, it was suggested that rural househols savings could be increased through:-
i) Promotion of non-wage occupations in rural areas
ii) Encouraging the wage earners to engage in businesses
that would boost their income levels.
iii) Implementation of savings policies at lower levels such
as the divisional and locational level.
iv) Promotion of public awareness programmes by
financial institutions. This would lead to increased
awareness by the rural folk on the advantages of
financial savings.
Description
56p. Applied Economics Department
Keywords
Savings and investments--Kenya--Bondo district