Determinants of Saving Mobilization in Microfinance: Evidence from Amhara Credit and Saving Institution

Abstract

Microfinance institutions (MFIs) are good instruments to fill the gap of conventional banks’ limitations in reaching the poor and hence they are considered as one of the most effective interventions for empowering the poor in their economic and social involvements through saving mobilization scheme. However, experiences has shown that some MFIs recorded unsatisfactory growth in saving rates due to a different factors that can be emanated from both internal and external bases. This study is, therefore, aims to investigate the determinants of saving mobilization, which helps to assess the extent of savings mobilized by participants and assisting poor people to improve their saving taking the experience of Amhara Credit and Saving Institution (ACSI). A sample size of 270 households are derived from a household survey conducted in the three selected districts namely Dessie, Kombolcha and Hiak in south Wollo zonal branch of ACSI. Appropriate descriptive and econometric techniques are employed to analyze the data. In econometric analysis, the Tobit model is employed to examine the determinants of household’s saving rate with the help of stata econometric software package. Among the potential factors identified and hypothesized, variables such as gender, occupation, social capital and source of money for saving were positively and significantly affect household saving rate whereas contribution of ACSI to enhance saving was negatively and significantly affect household saving rate. ACSI’s contribution to enhance saving in terms of low level of contribution has negative significant effect implying that the lower the level of contribution by ACSI to encourage saving, the lower the client’s saving rate. Thus, beyond the microfinance program there is a need to make an effort on adoption and implementation of long-term intervention programs in the study areas by the concerned bodies, for largely the government. This helps ACSI to reverse the vicious circle of “low income – low saving – low income.”