Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 294

Full Length Research Paper

Institutions’ effect on households’ savings in Kenya: A ranked ordered multinomial/conditional probit model approach

Githinji Njenga
  • Githinji Njenga
  • Kenya Institute for Public Policy Research and Analysis (KIPPRA), Kenya.
  • Google Scholar
Susan M. Onuonga
  • Susan M. Onuonga
  • School of Economics, Kenyatta University, Kenya.
  • Google Scholar
Moses Muse Sichei
  • Moses Muse Sichei
  • United Nations Development Programme (UNDP), Sierra Leone.
  • Google Scholar

  •  Received: 09 March 2017
  •  Accepted: 12 April 2018
  •  Published: 31 May 2018


Savings is a vital source of investment funds especially for developing economies. However, like in many developing countries, domestic savings in Kenya remain low. Hence, posing a significant development challenge. Household savings contribute a sizeable share of domestic and national savings in both industrial and developing countries. Households should not however, be considered as fully autonomous actors without the influence of institutions. Institutions influence behavior and therefore outcomes. The institutional theory of saving thus indicates that institutional factors significantly affect the ability to save. This study uses a ranked ordered multinomial/conditional probit model to analyze the effect of institutions on households’ savings in Kenya. Data from the Financial Access National 2006, 2009, and 2013 surveys was used in the analysis. The study results show that institutional factors including the travel cost to access a saving option, trust in a saving option, information and saving expectations influence the saving levels in Kenya. It is therefore important to address the travel cost of accessing the saving options through the promotion of non-traditional means of provision of saving services, build trust in saving options, and enhance financial education in the country. Further, enhancing formal education, income levels and reducing gender gaps is important in order to improve saving performance in the country.

Key words: Kenya, institutions, households, saving levels.