Farm Household Saving And Its Determinants In Trans Nzoia County, Kenya

ABSTRACT

Funds available for investments are either from credits acquired from financial

institutions or from household savings. Although some research has shown that rural

households in Sub-Saharan Africa save, little is known about the factors that influence

saving and asset accumulation among them. Low investment in Kenya is easily

attributable to decreased savings. The study aimed at developing a broader understanding

of the savings habits and practice of farm households in Trans-Nzoia County by

providing an appropriate answer to the question: what are the determinants of farm

household saving. The study was organized round three objectives: to determine how

much savings, on average, farm households actually undertake in a year, to establish their

forms of saving and to examine the determinants of saving, consistent with the Kenya

Vision 2030's explicit concern for rural sector participation in mobilizing savings for

investment. A cross-sectional survey was conducted with 140 households drawn from

Kinyoro (70) and Saboti (70) Divisions of Trans Nzoia County. Data was collected using

structured questionnaires and analysed through the use of Ordinary Least Squares (OLS) ..

A households saving function estimated showed that S= -16,517 + 0.080 1- 16,358YS -

4,757HS + 1,160AGE - 14,816GH and that Income, Level of Education of the household

and household sizes were the most significant determinants of saving. Age and gender of

the household head had effects on the level of savings but not significant at 5% level.

What was surprising, though, was the negative effect of education giving an impression

that the more educated household heads are, the less they save and also the positive

relationship between age and saving, implying that older people save even more. To

enhance household saving, Policies to promote income growth, lowering cost of

education and family planning are recommended.