Determinants of Household Choice of Savings Demand Options in Kenya

Abstract

The objective of this study was to investigate the determinants of household choice of savings demand options in Kenya. Most studies are not conclusive on the factors that inform households’ choice of savings demand options. Moreover, a close analysis of the studied variables reveals that there exists a discrepancy in different findings of different variables. This study adopted a microeconomic approach and purposes to fill this gap discrepancy, by modelling the formal and informal savings models using the multinomial probit model. This study utilized the cross-sectional secondary data for analysis from the Kenya National Financial Access Household Survey 2019. We find that both household demographic and socioeconomic factors affect the savings decisions in Kenya. The study established that formal savings increases with education level, urbanization, marital status, employment formality, male gender as well as financial health whereas, it declines with family size. Age is also a key factor. The study recommends promotion of financial health, education programs, especially female education empowerment to encourage savings among female gender, as well as promotion of economic activities, creation of more employment opportunities and a conducive environment so as to enhance savings by the government.