Members’ Savings Behavior and Determinants of Savings in Rural Savings and Credit Cooperatives in Alamata and Ofla Woredas of Tigray Region, Ethiopia
Teka, G/Tekle Tekle
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Ethiopia’s Agriculture Development led industrialization strategy (ADLIS) has the basic objective of reducing rural poverty, increasing agricultural production and productivity. Though agriculture is the crucial sector in the national economy, its production and productivity is unsatisfactory. There are different types of banking and non-banking financial intermediaries in the world, and they differ in the services they offer to their clientele. In Ethiopia, there are two types of non-banking financial intermediaries: share company microfinance institutions, and savings and credit cooperatives. The delivery of financial products and services through microfinance institutions in Ethiopia is one of the policy instruments used to enable rural and urban households to increase their output and productivity, induce technology adoption, increase input supply and increase income thereby helping them to reduce their poverty and attain food security. The specific objectives of the study were to examine savings behavior of members in rural savings and credit cooperatives, to identify factors that influence the magnitude of savings of members of RUSACCOS and to suggest strategies to improve the savings behavior of members of RUSACCOS. This study was undertaken in Alamata and Ofla woredas of the Tigray Region. From ten RuSACCOs, 130 member respondents and 50 officials were selected respectively. Both primary and secondary data were collected. Descriptive statistics of the study showed that between the dependent and independent variables of the study, all selected variables except educational level of respondents influenced the savings behavior of members. To identify factors that influence the magnitude of savings, the second stage of estimation (OLS regression) was used to ascertain the variables which significantly influence members’ annual savings magnitude in RUSACCOS. Seventeen variables were hypothesized that significantly influence the members’ savings magnitude in RUSACCOS, by removing the most insignificant variables the OLS result shows that only eight variables (members age, land holdings, livestock holdings, distance of the respondent’s residence from RUSACCOS office, the amount of onfarm income, expenditure on social/religious ceremonies, amount of loan received from savings and credit cooperatives and access to training) were significantly related to the magnitude of members’ annual savings in the RUSACCOS. The study concluded that RUSACCOS are becoming appropriate options for the rural households which are providing financial services and products to the rural community. Hence, to promote these financial institutions in the rural areas in a sustainable manner, the study suggested some measures to be taken by the concerned organizations. The government and non government organizations may encourage savings and credit cooperatives first rather than spreading the resource over all the cooperatives in the region, because savings and credit cooperatives societies are the surest ways of increasing savings and lowering the cost of living, mobilize rural finance and create investment in rural area of the region.