DETERMINANTS OF RURAL HOUSEHOLD SAVING BEHAVIOUR: A CASE OF LIMU DISTRICT, EAST WOLLEGA ZONE OF OROMIA, ETHIOPIA

Savings play a vital role in enhancing household economic security, promoting investment, and contributing to national capital formation. However, in rural areas where income levels are generally low and access to financial services is limited, the capacity and willingness of households to save remain constrained. Understanding the determinants of household saving behaviour is therefore essential for designing effective policies aimed at improving financial inclusion, reducing poverty, and fostering sustainable economic development. This study was conducted to identify the determinants of rural household saving behaviour in Limu woreda, East Wollega Zone, Oromia regional state, Ethiopia. The study employed both primary and secondary data sources. Primary data were collected from 204 randomly selected rural households using structured questionnaires, of which 202 valid responses were used for analysis. Descriptive statistics and econometric techniques were employed to analyse the data. A Probit regression model was used to identify factors influencing households' decisions to save, while the determinants of the extent of saving were analysed using a saving amount model. The results of the Probit model revealed that age of the household head, educational level, number of trainings received, and access to financial institutions positively and significantly influenced household saving behaviour. In contrast, family size and the number of dependents negatively and significantly affected the probability of saving. The marginal effect results indicated that a one year increase in the age of the household head increased the probability of saving by 0.79%, while an additional training session and an additional year of schooling increased the likelihood of saving by 9.4% and 3.05%, respectively. Conversely, an additional family member and dependent reduced the probability of saving by 5.87% and 10.04%, respectively. Variables such as sex of household head, marital status, membership in social associations, and number of literate family members, credit-use experience, and market availability were found to be statistically insignificant in influencing saving decisions. Furthermore, the analysis of the extent of saving indicated that age, educational attainment, training participation, and credit-use experience positively and significantly influenced the amount of savings accumulated by households, whereas family size negatively affected the level of savings. The findings suggest that demographic characteristics, human capital development, and institutional factors are critical determinants of rural household saving behaviour. The study concludes that improving educational opportunities, strengthening financial literacy and training programs, expanding access to financial institutions, promoting productive credit utilization, and reducing household dependency burdens are essential strategies for enhancing rural household savings. Therefore, policymakers, financial institutions, and development organizations should focus on strengthening financial inclusion and capacity-building interventions to improve saving behaviour and support sustainable rural development. Keywords: Household Saving Behaviour, Rural Households, Probit Regression Model, Financial Inclusion, Financial Literacy, Limu Woreda, Ethiopia.