International Journal of Accounting, Finance and Risk Management

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Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia

Received: 04 September 2019    Accepted: 26 October 2019    Published: 17 April 2020
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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.

DOI 10.11648/j.ijafrm.20200502.14
Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 2, June 2020)
Page(s) 93-100
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Microfinance, Rural Households, Saving, Tobit Model

References
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[6] Asfaw T. and Jema H. 2013. Impact of Microfinance on The Livelihood of Smallholders Farmers: The Case of Oromia Credit and Saving Share Company, Grawa Branch, East Hararghe Zone, Oromia National Regional State, Ethiopia (Doctoral dissertation, Haramaya University).
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[8] Tony S. Getaneh G. and Anne F. 2014. Overview of Practical Challenges in Local Saving Mobilization by Ethiopian Microfinance Institutions. The Association of Ethiopian Microfinance Institutions (AEMFI), Oct 22-24, 2014 Hawassa, Ethiopia.
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[10] Gimbo District sub branch Office of Omo Micro Finance Institution (GDOMFI). 2018. Annual report on Saving and loan disbursement, accessed 5 March 2018.
[11] Muluken A. and Mesfin L. 2014. Factors Affecting the Performance of Microfinance Institutions: The Case of Hawassa City. JBAS. Vol. 6 (1). 2014.
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[13] Gimbo District Office of Agriculture and Rural Development (GDOARD). 2018. Report on socio economic profile and background information of the district, accessed 19 March 2018.
[14] Wolday A. 2000. Review of Microfinance Industry in Ethiopia: Regulatory Frameworks and Performance. The Association of Ethiopian Microfinance Institutions (AEMFI) Occasional Paper No. 2, August, 2000. Addis Ababa, Ethiopia
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[17] Maddala, G. S. 1992. Introduction to Econometrics. 2ndEdition. Macmillan Publishing Company, New York, USA
[18] Aron H., Nigus A. and Getnet B. 2013. Assessment of Saving Culture among Households in Ethiopia. Report on Mengistu K., Mengistu U., Nigussie D., Endrias G., Mohammadamin H., Temesgen K., & Yemisrach G.(eds.), 2013. Proceedings of the National Conference on ‘Loan and Saving: The Role in Ethiopian Socioeconomic Development’, 15-16 February 2013, Haramaya, Ethiopia.
[19] Alemu T. 2015. Rural Households Saving Behavior: The Case of Wonchi District, Southwest Shewa Zone, Oromia Regional State, Ethiopia. Thesis submitted to Haramaya University. August 2015.
[20] Girma T., Belay K., Bezabih E. and Jemma H. 2014. Saving Patterns of Rural Households in East Hararghe Zone of Oromia Regional State, Ethiopia. Journal of Development and Agricultural Economics. 6 (4): 177-183.
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[22] Birhanu M. 2015. Factors affecting rural households Savings: The case Of Gedeb Hasasa District, West Arsi Zone, Oromia Regional State, Ethiopia. Thesis Submitted to Haramaya University, May 2015
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Author Information
  • Southern Agricultural Research Institute, Bonga Agricultural Research Center, Bonga, Ethiopia

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  • APA Style

    Ejigu Mulatu. (2020). 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, 5(2), 93-100. https://doi.org/10.11648/j.ijafrm.20200502.14

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    ACS Style

    Ejigu Mulatu. Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia. Int. J. Account. Finance Risk Manag. 2020, 5(2), 93-100. doi: 10.11648/j.ijafrm.20200502.14

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    AMA Style

    Ejigu Mulatu. Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia. Int J Account Finance Risk Manag. 2020;5(2):93-100. doi: 10.11648/j.ijafrm.20200502.14

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  • @article{10.11648/j.ijafrm.20200502.14,
      author = {Ejigu Mulatu},
      title = {Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {5},
      number = {2},
      pages = {93-100},
      doi = {10.11648/j.ijafrm.20200502.14},
      url = {https://doi.org/10.11648/j.ijafrm.20200502.14},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20200502.14},
      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.},
     year = {2020}
    }
    

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    AU  - Ejigu Mulatu
    Y1  - 2020/04/17
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    AB  - 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.
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