Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia
International Journal of Accounting, Finance and Risk Management
Volume 5, Issue 2, June 2020, Pages: 93-100
Received: Sep. 4, 2019; Accepted: Oct. 26, 2019; Published: Apr. 17, 2020
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Author
Ejigu Mulatu, Southern Agricultural Research Institute, Bonga Agricultural Research Center, Bonga, Ethiopia
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Abstract
Despite the importance of saving to both savers and financial institution, different household and institutions related factors separated a lot of farmers from saving in Microfinance institutions. This study was conducted with specific objectives: to identify factors affecting farmers’ saving in microfinance institution and to assess challenges and opportunities in microfinance service provision in the Gimbo district of Kaffa zone, Southern Ethiopia. The study was based on the data collected from 200 sample households selected through two-stage sampling technique. Both descriptive statistics and econometric model were used to analyze the data. A Tobit model was used to assess the determinants of households’ saving. Econometric model result showed that education level, land size, farm income, household expenditure, distance from service provision center, and perception on interest rate were found to be significant in influencing the households’ saving in Omo micro-finance. Low loan recovery performance, low saving mobilization, lack of office facilities, lack of awareness on services and lack of coordination with other government sectors were major challenges in microfinance service provision in the district. The result suggests the need of microfinance institution and concerned government bodies playing role regarding improving saving culture of households through financial literacy, modernization of working procedures in saving service provision, and reviewing the saving interest rate for encouraging farmers to save.
Keywords
Microfinance, Rural Households, Saving, Tobit Model
To cite this article
Ejigu Mulatu, Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia, International Journal of Accounting, Finance and Risk Management. Vol. 5, No. 2, 2020, pp. 93-100. doi: 10.11648/j.ijafrm.20200502.14
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This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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