DETERMINANTS FOR CHOICE OF SAVING INSTITUTIONS: THE CASE OF ETHIOPIAN POSTAL SERVICE ENTERPRISE

Abstract

The growth of any economy depends on capital accumulation, which in turn depends on investment and an equivalent amount of savings to match it. Understanding the determinants of the aggregate savings rate is a crucial prerequisite in designing a number of policy interventions. The aim of this paper was to investigate the determinants for household choices for different saving institution the case of Ethiopian Postal Service Enterprise .The study used both primary data and secondary data to answer research questions. The primary data was collected from 120 respondents using random sampling technique. Both descriptive and econometrics analysis was used. Both logit and multinomial logit models applied including sampling method . From the descriptive analysis, the study found that, from the sampled respondents, 102 of them (85%) responded that they are saving in each month on average. The study found that people with lower education prefer to save their money with Equib and cooperatives while those with higher education prefers to save at bank, and those with average educational attainments prefer to save at MFI. Based on rank, banks are found to be the safest, efficient, liquid, and encouraging institution than others. On the other hand, Equib was found to be the most accessible, strength social relationships and having possibilities of getting loan than others. Regarding to challenges absence of incentives takes the lion share in their choice making decision of to save and where to save. The finding of the multinomial logit model shows that, income positively and significantly affects household choice of banks over others and possibilities of getting loan positively and significantly affect household choice of Equib, MFI and cooperatives over banks; and interest rate positively and significantly affect household choice of bank over Equib. Regarding to households decision to save or not, income and being married positively affect saving and increase in the number of dependent household members and having higher education negatively affect the decision to save. Finally, the paper recommends to governments, central bank and any other responsible bodies to create an arrangement to people for the possibilities of getting loan, incentives should have to be made by different saving institutions to increase saving deposit and expansion of outreaches of MFI would be highly relevant especially for the poor segment of the society.