Abstract

This paper examines the major socioeconomic and demographic determinants of rural households’ saving behavior in Sinana district, Ethiopia. A random sample of 267 rural households was selected from four rural kebeles of the district. The study used both descriptive statistics and econometric model for the analysis of primary data. The result of descriptive statistics demonstrates that 47.2% of the sampled households preferred formal saving, 33.3% preferred informal saving and 19.5% preferred both formal and informal saving behaviors, respectively. Econometric result confirms that the probability of preferring informal saving increases with increase in access to credit and distance from formal financial institution, and decreases with increase in square root of annual total income as compared to preferring formal saving behavior. Similarly, the probability of preferring both formal and informal saving behaviors increases with increase in the tropical livestock holding, and decreases with increase in land size as compared to preferring formal saving behavior. Therefore, these variables need special attention in addition to the intervention of concerned authority if the saving behavior of rural households is to be improved.

Key words: Multinomial logistic model, households, saving behavior, Sinana district.