Abstract:

This study is conducted under the title “Determinants of Urban Household Saving Behavior in Ethiopia.” Its main objective was to empirically investigate the determinants of urban household saving behavior in Mekelle city, Ethiopia. Cross-sectional primary data was collected using self-administered open-ended and closed-ended questionnaires from 150 households from seven sub-cities of Mekelle city. Selection of the sample was by two stage stratified sampling techniques, where the first stage units were sub-cities and the second stage units were the households. Descriptive statistics and binary logistic regression model was used to test the formulated hypotheses. The study found that household headed by a female, total income of household, and saving experience had a positive and significant impact on household saving. However, age of the household head, additional earner in the household, and dependency ratio of the household had a negative and significant influence on household saving. The governing saving motive found in this study was precautionary motive. The study recommended that government in collaboration with financial institutions should promote household saving by introducing different packages of prize-linked promotional savings; government should continue and spend the utmost effort to stabilize inflationary pressures using short-term and long-term strategies; and, government should strive to increase the disposable income of households. This study focused on household saving using only financial saving and employed smaller sample and binary logit regression model. Thus, further research may be undertaken to incorporate larger samples by employing other econometric models such as Heckman sample selection model and OLS regression models.

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