An analysis of savings among rural poor households in Rwanda

The household’s savings are considered the primary source of the investment, which is in turn the driver of economic growth and development. This study attempted to identify the determinants of private savings among the rural poor households in Rwanda. We used the 5th round of the Integrated Household Living Conditions survey data conducted in Rwanda every four years. A simultaneous-equations model was specified and estimated using the 2SLS method to account for endogeneity and simultaneity bias, complemented with t test and correlation analysis. The results from the t test show that savings among rural poor households is significantly positive. The econometric estimates showed farm income is not among the determinants of saving while consumption is among the most significant drivers of saving of the rural poor in Rwanda. We recommend that socioeconomic development programs, projects and/or policy that aim at improving the level of income and thus affecting the savings among rural poor households should be enhanced

An analysis of savings among rural poor households in Rwanda

peer reviewedA household’s savings are considered a primary source of investments which drive economic growth and development. This study identifies the determinants of private savings among poor rural households in Rwanda. It uses data from the 5th round of the Integrated Household Living Conditions surveys conducted in Rwanda every 4 years. It specifies a simultaneous equations model and does the estimations using the 2SLS method to account for missing variables and a possible correlation between some covariates and the error term, which is complemented with a T-test and correlation analysis. The results of the T-test show that savings among poor rural households are significantly positive. The econometric estimates show that in contrast with existing literature, income and all other forms of wealth are factors which do not influence the savings of poor rural households, while consumption is positively correlated with savings. We recommend that socioeconomic development programs, projects, and policies that aim at improving income and consumption levels thus affecting savings among poor rural households should be enhanced