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

Ejigu Mulatu

doi:doi:10.11648/j.ijafrm.20200502.14

| Peer-Reviewed

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

Ejigu Mulatu

Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 2)

Received: 4 September 2019 Accepted: 26 October 2019 Published: 17 April 2020

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

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.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 2)
DOI	10.11648/j.ijafrm.20200502.14
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), 2020. Published by Science Publishing Group

Keywords

Microfinance, Rural Households, Saving, Tobit Model

References

[1]	FAO. 2015. Statistical pocketbook2015. Food and Agriculture Organization. Rome.
[2]	Aminu S. and Samuel A. 2015. Microfinance impact on agricultural production in developing countries-study of the Pru district in Ghana. International Journal of Academic Research and Reflection Vol. 3, No. 3, 2015.
[3]	Obo D. 2009. Microfinance in Ethiopia. Institute of Social Studies.
[4]	Dereje K., Yenenesh T., Sisay B. and Jemal Y. 2013. Determinants of women’s participation in microfinance services: empirical evidence from Rural Dire Dawa, Ethiopia. African Journal of Agricultural Economics and Rural Development Vol. 1 1, pp. 001-007, September, 2013.
[5]	Ebisa D., Getachew N. and Fikadu M. 2013. Filling the breach: Microfinance. Journal of Business, Economics and Management. 1 (1): 10-17.
[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).
[7]	Mujeri, M. K., 2015. Improving access of the poor to financial services. General Economics Division of the Planning Commission, Bangladesh.
[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.
[9]	CIMMYT. 2015. Financial products for farmers and service providers report Ethiopia.
[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.
[12]	Tsega H. and Yemane M., 2014. Determinants of household saving in Ethiopia: a case of North gondar zone, Amhara regional state. International Journal of Development and Economic Sustainability. Vol. 2, No. 4, pp. 37-49, October 2014.
[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
[15]	Addisu A. 2011. Cash Saving and Livelihood Diversification Practice Among Better Off Rural Households in Case of Shashemene District of Oromia Regional State, Ethiopia.
[16]	Yamane T. 1967. Statistics, An Introductory Analysis, 2nd edition. New York.
[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.
[21]	Parker, J. 2010. Theories of consumption and saving (Economics 314 coursebook)
[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
[23]	Chemonics International. 2007. Improving access to financial services in rural Uganda: Rural SPEED final report. Washington DC, Chemonics.
[24]	Aflonia N. M. 2011. Households’ Saving Decisions in Kenya. A Thesis Submitted in Partial Fulfilment of The Requirements for the Award of the Degree of Doctor of Philosophy in The School of Economics of Kenyatta University. November, 2011.

Cite This Article

Plain Text BibTeX RIS

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

Copy | Download

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

Copy | Download

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

Copy | Download

@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://article.sciencepublishinggroup.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}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia
AU  - Ejigu Mulatu
Y1  - 2020/04/17
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200502.14
DO  - 10.11648/j.ijafrm.20200502.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 93
EP  - 100
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200502.14
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.
VL  - 5
IS  - 2
ER  -

Copy | Download

Author Information

Ejigu Mulatu

Southern Agricultural Research Institute, Bonga Agricultural Research Center, Bonga, Ethiopia

Download PDF

Sections

Plain Text BibTeX RIS

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

Copy | Download

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

Copy | Download

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

Copy | Download

@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://article.sciencepublishinggroup.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}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Smallholder Farmers’ Saving: The Case of Omo Microfinance Institution in Gimbo District of Kaffa Zone, Southern Ethiopia
AU  - Ejigu Mulatu
Y1  - 2020/04/17
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200502.14
DO  - 10.11648/j.ijafrm.20200502.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 93
EP  - 100
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200502.14
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.
VL  - 5
IS  - 2
ER  -

Copy | Download