THE EFFECTS OF PREDICTOR VARIABLES ON SAVINGS BEHAVIOUR OF RURAL SMALLHOLDER FARMERS IN KARAGA DISTRICT OF NORTHERN REGION

Abstract

The study assessed the effects of predictor variables on savings behaviour of rural smallholder farmers in the Karaga district. This study employed the survey research design and used a multi staged sampling technique to select 300 respondents. Spearman Correlation was used to establish the relationship between Peer Influence, Institutional Influence, Self-Control, Financial Literacy and Savings Behaviour. Probit Regression was also employed to estimate the influence of Peer Influence, Institutional Influence, Self-Control, Financial Literacy, Age, Gender, Marital Status, Level of Education, Income and Level of Dependency on the Savings Behaviour of smallholders in the Karaga District. The Results indicated that majority (33.70%) of respondents were in the active age group of 36-45 whiles 60% of the respondents were males. About 69.30% of the respondents were not educated. The findings of the study also revealed that 74.30% of the smallholders do save, whiles 52.33% of those who save preferredsavingin the form of cash. Some smallholder farmers save in non-cash forms of which a large number (98.50%) saved in grains. Amongthe cash savers,23.67% saved withVillage Savings and Loans Association, 7 % keepcash at home and as little as 0.67% saves on telecommunication network mobile money. Safety and security were the main reasons for most of these choices. Again, in establishing a relationship between Peer Influence (PII), Institutional Influence (II), Self-Control (SC) and Financial Literacy (FL) and Savings Behaviour (SB), the Spearman Correlation revealed a positive one, with FL having the strongest relationship of (rho=.731) with SB whiles II has the least association of (rho=.421) with SB. The Binary Probit Regression also revealed sex, marital status, dependency ratio, income, peer influence, institutional influence, self-control and financial literacy as significant predictors of rural smallholder farmers’ savings behaviour. However, age and level of education was found insignificant and for that matter do not influence savings behaviour as earlier predicted. The study therefore recommended widening up VSLA to include men, improving advocacy on financial literacy and sensitization of smallholder farmers on telecommunications networks mobile money services to improve smallholder farmers’ savings behaviour.