Factors influencing the choice of saving mechanism: evidence from Uganda National Household Survey

Abstract

Worldwide, savings are an important determinant of both individual and national wellbeing, and the choice of savings mechanism has critical micro- and macroeconomic implications. According to the UNHS for 2019/20, majority of Ugandans (51 percent) keep money at home as their saving mechanism, an increase from 33 percent recorded in 2016/17. This poses threats to efforts geared towards achieving Uganda’s Vision 2040 and the 2030 Sustainable Development Goals (SDGs), especially SDG 1 which aims to end poverty in all its forms and everywhere. While several studies have investigated the determinants of savings in Uganda and elsewhere, little is known about factors that influence the choice of saving mechanism. The study was thus aimed at investigating the socio-economic factors that influence the choice of a saving The study adopted a cross-sectional design and used secondary data from the 2019/20 UNHS, mainly the socio-economic module. The distributions of categorical variables were explored using frequency distribution tables and pie charts whereas summary statistics were generated for quantitative variables. Independent variables were assessed for multicollinearity using a correlation matrix before including them in the model. Multiple logistic regression analysis was employed because the dependent variable was binary Regarding the results, 54 percent of the participants were saving money at home. Most of the participants were female (52.0 percent), from rural areas (73.1 percent), from central region (28.0 percent), never married (45.8 percent), in income quintile 5 (20.7 percent), and attained some primary education (33.5 percent). Education level, region, wealth status, receiving income by cash and mobile money were the only significant factors influencing the choice of saving mechanism. On other hand, sex, age, residence, household size, and marital status did not significantly influence the choice of saving mechanism. The government should work closely with private financial institutions to sensitize the population nation-wide about the benefits of saving money in financial institutions rather than keeping at home. Furthermore, financial institutions should provide strong incentives to encourage the population to save with them.