COLLEGE OF NATURAL AND COMPUTATI ONAL SCIENCE

DEPARTMENT OF STATISTICS
FACTORS THAT INFLUENCE THE SAVING HABIT OF WERABE UNIVERSITY
WORKERS

A RESEARCH PROPOSAL TO BE SUBMITTED TO WERABE UNIVERSITY

DEPARTEMENT OF STAATISTICS IN PARTIAL FULFILLMENT OF THE
REQUIREMENT FOR BACHELOR OF ART (BA) DEGREE IN STATISTICS

PREPARED BY:

Abduselam Muhe ..............R/0033/12

ADVISOR: - Mr.Tofik M. (MSc)

February, 2023

WERABE, ETHIOPIA

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 Abstract
Saving is one of the most predictable determinants of personal success and economic
development. People desire to save although they tend to postpone saving until they have
some stability in their lives. The purpose of this study has been to assess saving habits and
identify factors that influence the saving habits of Werabe University at EIH of Werabe
University. The sampling will be based on stratified random sampling and then which follow
simple random sampling from each group. The analysis will be done using binary logistic
regression with SPSS statistical software. This study will be expected to reveals factors
affecting saving habits of the college employee instructors and give solution how to solve
problems.

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Contents
Summary................................................................................................................................................II
List of acronyms..................................................................................................................................V
List of tables..........................................................................................................................................V
CHAPTER ONE...................................................................................................................................1
1. Introduction...............................................................................................................................1
1.1. Back ground of the study........................................................................................................1
1.2 Statement of the problem.......................................................................................................2
1.3 Objective of the study..............................................................................................................3
1.4 Significance of the study..........................................................................................................3
1.5 Scope of the study...................................................................................................................3
1.6 Organization of paper..............................................................................................................4
CHAPTER TWO.......................................................................................................................................4
2.1. Literature review........................................................................................................................4
2.1.1 Literature review in Ethiopia................................................................................................4
2.2 Saving institutes.......................................................................................................................5
2.3 Characteristics of saving associations......................................................................................5
CHAPTER THREE....................................................................................................................................6
3.1. Study methods............................................................................................................................6
3.1.1 The study area......................................................................................................................6
3.1.2. Study population..................................................................................................................6
3.1.3. Method of data collection...................................................................................................6
3.1.4 Sampling design and techniques..........................................................................................6
3.1.5 Sample Size Determination...................................................................................................7
3.1.6 Method of data analysis.......................................................................................................7
Logistic regression model..............................................................................................................8
Assumption of logistic regression..................................................................................................9
Model description.......................................................................................................................10
Goodness of Fit Test.................................................................................................................10
3.1.7 The Study Variables............................................................................................................10
3.1.8 Work Plan...........................................................................................................................11
3.1.9 Budget breakdown.....................................................................................................................11

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REFERENCES........................................................................................................................................13

IV
List of acronyms
ACSI - Amhara Credit and Saving Institution

ASCA - Accumulation Saving and Credit Association

DCSI - Dedebit Credit and Saving Institution

EIHE -Ethiopian Institution of Higher Education

GDS - Gross Domestic Saving

MIF - Micro Finance Institution

PPSWOR - Probability Proportion to Size with Out Replacement

RSCA - Rotating Saving and Credit Association

SCCO - Saving and Credit Co-operatives

List of tables

Table 1: Research work schedule………………………11

Table 2: Budget used for the researches……………….12

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CHAPTER ONE
1. Introduction
1.1. Back ground of the study
In the world, the concept of saving has played an important role in economic analysis since
it facilitates the stability of economic growth. Saving is defined as the difference between
income and consumption. (Denizer Wolf and Ying,2002) defined saving as a difference
between disposable household income and household expenditure. Based on a study done by
World Bank (1995), household saving is calculated as the net of increase in household assets
rather than as the difference between income and consumption because of its weak estimates
of consumption. Nevertheless, regardless of its definition, saving give a lot of benefits of to
an individual or government as a whole. According to (Norilmiah et al,2003) saving will
increase the level of the future wealth and improve the quality of life. It will increase the
economy of the family and thus ensure that savers be financially independent. The more that
individuals can become to be financially self- sufficient on retirement, the less the financial
burden on the state. "If a household is not saving enough to fund its needs, wether it is
consumption or investment, it will have to borrow. The more you borrow, the less
creditworthy you become and the higher interest rate you have to play. Exactly the same
happens at the content level.

Normally the concept of saving is obviously, however, saving is a mechanism by which

people meet their future need and use wisely. The basis of saving helps their own Future
interest or their family interest or for in parting education to their or for building or as a safe
guard against hard shipping during old age sickness. Saving is key instruments to sustain the
life of the person. It also plays on important role economic development of the country.

Personal saving has two primary functions. First, saving provides the economic security of
the safety net. By transferring resources from the present to the future via savings, individuals
are prepared to face unexpected and irregular financial circumstances. Second, saving leads
to accumulation of wealth that enables individuals to improve their living standard and to
respond to new opportunities (Gokhale, 2000). Everyone agrees that, starting to save early
has merit in it and “Money grows on the tree of patience” and there are benefits of “power of
compounding “, but few actually practice it. When it comes to saving, people in general and
the poor in particular might not be completely rational and completely knowledgeable (karim,
2010) .The goal of promoting financial saving habit is to make people more aware of
financial opportunities, choices, and possible consequences. There is a growing recognition
of the importance of financial education as it relates to saving ( Greenwald etal, 2001; Gill,
2004). Financial education is one way of increasing savings and asset accumulation.
( Sherraden et al,2007) say that the extent to which an individual understands the process and
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benefits of asset accumulation is likely to affect their willingness to save. When we come to
in our country also the attitude of the peoples will be more or less, poor. Thus, EIHE of
Werabe University has been selected for the present study. It is, therefore, important to
conduct researches on employee instructor’s saving habits. Furthermore, in EIHE of Werabe
University also the necessary of saving habits is known, but not common.

1.2 Statement of the problem

Most of the developing countries have low rate of saving habits, so that improving saving
habit is a primary goal for people living in this part of their world (Michael et al, 2001).
Improving saving habit of individuals is given attention to look at a variety of savings
services used by people /customer in the community. Improving this depends not only on
attending of government provider but also on appropriate execution of recommended
component of saving in household of the community and institutions or sectors. However,
most of the studies focus on descriptive statistics produce hard –to- generalize on a wider
perspective of the effect of saving habits which is, saving habit and institution of saving area
have become increasingly important for safety nets of the employee instructor’s, investigation
of factors associated with saving habit assumes critical importance, provision of saving
services varies widely across individual in Ethiopia and understanding these variations at the
individual and in the community level in order to successful implement any saving related
policies and programs and also what types of problems to influences the saving habits.

Thus, the purpose of this study is to assess the current status of saving habits services, and
factors that influence utilization of these services such factors to be the attitude of the
instructor’s, incomes, expenditures and then to find out the possible reasons for under
utilization of saving habit services using primary data collected from EIHEDC -of Wollo
university. Due to this reason we involves these types of the problems with a solution.

1.3 Objective of the study

1.3.1 General objective

To determine saving habits and identify factors that influences the saving habits of Werabe
University workers

1.3.2 Specific objectives

 To assess the current status of saving practices of Werabe university workers

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  To identify factors that influences the saving habits of Werabe University
workers

 And to show the relationship between monthly income, consumption, house

status, age, monthly salary and family size value with saving habit of the
University workers

1.4 Significance of the study

Assessing saving habits is very important to understand and evaluate the achievement gained
in the implementation of saving programmers as a source of information for the employee
instructor’s about the benefit of saving in improving employee instructor’s life. It is hoped
that results of this study will improve policy makers’, planners’ and researchers’
understanding of the determinants of saving habits of employee instructor’s in the study area
and may serve as an important tools for any possible information towards improving saving
habits. This researched is essential as it contributes to the effort of the country in improving
saving habits of college employee instructor’s. The research would important to makes them
aware about saving habits and most instructors would be understood, it helps for the
instructor’s for policy like ‘make it habit to save money’ than making extravagance, to
maintain sustainability of current economic growth and ameliorated the effect of
demographic structure on saving habits, and it would be clue for other researchers or it would
to initiate other researchers to make better and detail study.

1.5 Scope of the study

It is better if the scope of the study is wide to reach at the accurate and precise result as much
as possible. Due to constraints of budget and time this study mainly focuses on the financial
saving habits of college employee instructor’s in Werabe University. The study encompasses
the EIHE of Werabe University which is one institution established in the University, even
though there are other institutions. The other scope is that, the study is done where there are
high government officials were employed.

1.6 Organization of paper

The study will contain five chapters. The first chapter introduces the background of the study,
statements of problem, research objective, research question, operational definitions and
significance of the study, organization of the study, scope and limitation of the study. The
second chapter deals with literature review of the study that includes; relevant and sub topic.
The third chapter contains description of the study area, methodology of the study and data

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source. The fourth chapter covers data analysis and interpretation and the last chapter is
conclusion and recommendation that will be made by the researcher.

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CHAPTER TWO
2.1. Literature review
2.1.1 Literature review in Ethiopia
The study of saving has a contribution to change personal behavior and economic growth in
the country. Dedebit creadit and saving institution (DCSI) and Amhara credit and saving
institutions (ACSI) take more than 65% share in serving clients in the market (Befekadu,
2007). Higher cross domestic savings (GDS) has improved the saving income function of
employee instructor’s. The major determinants of GDS are demographic aspect, interest rate,
tax, broad money, stage and duration of disease, association of infectious disease, export, etc.
The result of this study shows export has high value to saving habit; tax has a significant
positive effect when it regresses on private saving. The impact assessment of micro finance
records positive results of saving habits in the country by different researchers.
( Mengistu ,1997) shows that increase in the number of program beneficiaries is one indicator
of the contribution of assistance program to employment creation and income generation.
(Kassa ,1998) shows in south Ethiopia in the area of education, consumption expenditure,
medical expenditure, family assistance, employment creation, and income generation are very
important to saving habits. In addition, (Kassa ,1998) reported a 30 .82%, 10.5% and 19.7%
annual growth in consumption expenditure of the first, second and third credit cycle
beneficiaries, respectively. About 7%, 8.03% and 2.07% growth in first, second and third
saving cycle beneficiaries’ respectively. Using Wilcoxon grouped pair’s non parametric test,
he did not accept the null hypothesis of average income before and after saving is the same at
5% level of significance implying that the average income after saving is greater than before
saving in the first , second and third credit cycle.

2.2 Saving institutes

At this time, there are different types of saving system in the world. This is categorized in to
three ways, and these are formal saving sector (saving and credit co- operative (SACCOS),
back and insurance companies), semi-formal saving sector (microfinance institution (MFI)
and informal saving sector (save at home, saving at clubs, deposit collector, reciprocal
lending, rotating savings and credit association (ROSCA) , accumulation savings and credit
association (ASCAS) etc (Ziorklui and Barbee, 2003). Informal saving has different names in
different countries. In Ethiopia, the effective financial structure has 95% of the productive
asset which is composed of 70-80% loan and 10-20% liquid investment and the remaining

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5% is unproductive assets composed of land, buildings and equipments. On the other hand
70-80% of credit union liability should be composed of members’ saving to achieve financial
independence. In order to finance non- performing assets, improve earnings and absorb
losses, members share capital and institutional capital should be greater or equal to 20% and
to 10% of total asset respectively. Rate of return and costs operating expenses to total assets
ratio is set to be less than 10% and other return and cost to be greater or equal to market rate.
However, administrative cost should not be greater than 5% of the average total assets
(Gebeyaw, 2008) .In our country, there are different traditional financial system which have
long history and dominant contribution to economic betterment and social wellbeing of the
society. Traditional institutions organized with a sense of cooperation and risk sharing has
enabled Ethiopians to experience saving and financial management within its cultural
context. “Equb”,”Edir”, “Mahiber” etc are some of the informal financial institutions that
shaped the social bond and interaction (Gebeyaw, 2008).

2.3 Characteristics of saving associations

The most important purpose of saving institutions is to make mortgage loan on residential
property. Theses organization is known as saving associations, building loan associations and
cooperative banks. As home financing institutions, they primary attention to single family
residence and are equipped to make saving in this area. Some of the most important
characteristics of saving association are:

 It is generally a locally owned and privately managed home financing institution.

 It receives individuals’ saving and uses thesis funds to make long term amortized
loans to home purchasers.
 It makes save for the construction, purchase, repair, or refinancing of houses.
 It is state or federally chartered.

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CHAPTER THREE
3.1. Study methods
3.1.1 The study area
Werabe university is one of the higher educational institution found in Ethiopia. It locates in
Werabe town and 172 km far from Addis Ababa. Currently, the University operating education
programs in 47 departments under 6 colleges, one institution and two schools. The University is
found at around 2 Km far from the center of the town.

3.1.2. Study population

The target population consists of all Werabe University workers.

3.1.3. Method of data collection

In this study the researcher will be use primary data .The primary data collected by designing
and distributing the information using questionnaires and interviews on the sample
instructor’s or the respondents. The questionnaire will have opened and closed ended
questions. Not only questionnaire but also personal talking will be made through active
participation of the researcher to make the researcher aware about how to save money.
Therefore, the researcher has been appointing to carry out every day personal talking.

3.1.4 Sampling design and techniques

There are different kinds of sampling design depending on the type of study being conducted
the kinds of conclusions the researcher would like to be able to draw from the study results.
Generally there are two broad categories of sampling. These are probability sampling and
nonprobability sampling.

Probability sampling is the most preferred type of sampling. There are four common methods
of selecting probability sample. These are simple random sampling, systematic random
sampling, stratified random sampling and cluster random sampling. Among these four types
of sampling methods, the researcher will be tried to apply simple stratified sampling
techniques. Simple stratified sampling is a random sampling method in which each
observation has equal chance of to be included in the sample and the nature of study
population is heterogenous.
The data which is cross –sectional will be collected from the target population through a
structure questionnaire. And also sampling technique is a system of taking small ratio of
observation by using large population to get information of those large populations from

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sample observation by using statistical techniques. This technique also the researcher use
stratified random sampling (SRS) techniques in order to get good representative sample size
and this technique is by selecting appropriate sample size from target population (studied
population).

3.1.5 Sample Size Determination

Normally the sample size determination requires three factors, which are: - Level of
precision, Margin of error and Level of confidence.

Care should be taken when the researcher determine the sample to make more accurate and
to get high precision. Hence, the sample size depends up on the following four criteria.

 Desired level of precision(s)

 Level of significance(α)

 Margin of error(d)

 Estimated proportions(p and Q)

The formula to determine the sample size is:-

2
( z α ) pq
no = 2 , FPC= no/N
2
d

Note: When n o/N>5%, use n =no/ (1+no/N), other wise use n=no, n o/N≤5%, from
(Cochran ,1977)

This formula will be used to determine the sample size.

3.1.6 Method of data analysis

The researcher’s data will be analyzed by using quantitative and qualitative data analysis
method. In quantitative data analyzing method the researcher will use descriptive statics like
frequency, tabulation, percentage. In qualitative data will be analyzed by using narration and
explanation methods.

Logistic regression model

Logistic regression analysis extends the techniques of regression analysis to research
situation in which the outcome variable is categorical. Generally the response verifiable is

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binary, such as (save or no save presence or absence, success or failure etc) in logistic
regression.

Logistic regression will be used to predict probability of a dependent variable (infected

patients survival) on the basis of continuous and/or categorical independent variables and to
determine the percent of variance in the dependent variable explained by the dependent
variables; to rank the relative importance of independent variables; to assess interaction
effects; and to understand the impact of covariate control variables.

The logistic regression applies maximum likelihood estimation after transforming the
dependent into a log it variable (the natural log of the odds of the dependent variable
occurring or not). In this way, logistic regression estimates the probability of a certain event
occurring. Note that logistic regression calculates changes in the log odds of the dependent
variable, not changes in the dependent variable itself as ordinary list square regression does
(Hosmer and lemeshow, 1989).

However, logistic regression has many analogies to OLS regression: logit coefficients
correspond to beta coefficients in the logistic regression equation, the standardized log it.
2
Coefficients corresponding to beta weights, and a pseudo R statistics available to summarize
the strength of the relationship between the independent variables and the dependent variable,
does not require normally distributed variables, does not assume homoscedasticity, and in
general has less stringent requirement (Hosmer and Lemeshow, 1989)

The logistic model is generally given by:

β o+ β 1 x 1i +β 2 x2 i +. . . .. . . .. +β k xki

Q( x )=
e
β o+ β 1 x1 i +β 2 x2 i+ .. . . . .. +β
e k xki

1+

Assumption of logistic regression

Assumption were should consider for the efficient use of logistic regression as given
below (homer and lemeshow, 1989).

 Logistic regression assumes meaningful coding of the variable logistic coefficients

for abnormal logistic regression is to code the dependent class of interest as 1 and
the other class as 0.

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  Logistic regression does not assume a liner relationship between the dependent and
independent variable.
 The dependent variable must be categorical.
 The independent variable need not be interval no normally distributed no linearly
related and no equal variance with in each group.
 The group must be mutually exclusive and exhaustive; a case can only be in one
group and every case must be a member of one of the groups.
 Larger samples are needed than for linear regression because maximum
likelihood coefficients are largely sample estimates.
 The log it regression equation should have a linear relationship with the logit forms
of the dependent variable.
 Absence of multi co linearity among explanatory variables.

Large sample are required.

 The error terms (the residuals) need to be binomially distributed, however,

normally distributed description of error is not assumed.
 The logistic regression model should be correctly.
 The error terms need to be independent.
 Logistic regression requires quite large sample size.

 Logistic regression assumes linearity of independent variables and log odds. Odds ratio (OR):
it is usually to describe the chance that the binary response variable leads to a success
relative to failure. It is defined to be the ratio of odds of the two categories’ where odds
are the ratio of the probability of success to the probability of failure.
[Odds=π / (1-π)], where π is probability of success and 1-π is probability of failure.
To perform tests of hypotheses regarding the fit of the model the deviance is compared to the
percentiles of a χ2 distribution

Model description
Binary logistic regression is most useful when you want to model the event probability for a
categorical response variable with two outcomes. Since the an event must lie between 0 and
1, it is impractical to model probabilities with linear regression techniques, because the linear
regression model allows the dependent variable to take values greater than 1 or less than 0.

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The logistic regression model is a type of generalized linear model that extends the linear
regression model by linking the range of real numbers to the 0-1 range.

Goodness of Fit Test

Goodness of fit test for Hosmer Lemeshow goodness of fit test. The goodness of fit test,
with p-values, indicate that there is insufficient evidence to claim that ( H1: ~Ho: the model
does not fit the data adequately). If the p-value is less than the accepted α-level = 0.05, the test would
reject the null hypothesis of an adequate fit.

3.1.7 The Study Variables

I. Dependent variable
The response variable in this study is the status of saving habits in EIHE of Werabe
University college employee instructors. The habits of college employee instructors are
identified either save out of income or no save out of income. The responses variable is a
dichotomous category, and thus coded as the value 1 for ‘save out of income and 0 for no
save out of income.

II. Independent variables

 The independent variables in this study are classified as occupational variable
economic variable and demographic variables. Those variables are listed and
categorized as follows.
 Educational level
 Monthly income
 Medical expenditure
 Method of saving
 Family assistance
 Consumption expenditure
 Extra income
 Family size
 Marital status

3.1.8 Work Plan

Table 1: Research work schedule

Activities Date ( E.C)

Finalization of the proposal Approximately up to December 30, 2015
Literature review Approximately up to February 30, 2015
Development of study tools Approximately up to March 30, 2015

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Data collection Approximately up to April 30, 2015
Data entry, cleaning and Approximately up to May 30, 2015
analyzing

Drafting and presentation of the Approximately up to June 30, 2015

research

3.1.9 Budget breakdown

To conduct viable research, it requires available budget. The researcher is planned to
minimize costs as much as possible and to the best of this understanding it will worth 2000-
3000 Ethiopian birr. The details of the proposed research budget usage are presented below.
Table 2: Budget used for the research
No Activities Budget breakdown

1 Data collection materials and human resource 1000 birr

2 Making analysis 400 birr

3 Organizing the 1000 birr

Research

4 Finalizing the research 400 birr

5 Total 2800 birr

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REFERENCES
 Agresti, A. (2002); An introduction to Categorical Data Analysis. John Wiley and So, Inc.
 Andrew,Coleman,(2008); Inflation and the Measurement of Saving and Housing
Affordability.
 Befekadu Kereta,(2007); Outreach and Financial Performance Analysis of Microfinance
Institution in Ethiopia.
 Bewick, L. and Jonathan, B. (2005); Statistics review 14: Logistic Regression.
 Cochran, W.G (1977). Sampling Techniques. Third edition, John Willey and sons (ASIA).
 Feifei Wang, (2010). A cooperation of Employee Saving Motives between Chins and
Americans.
 Gebeyhw Aychile, (2008). Financial Performance of National Bank of Ethiopia Worker’s
saving and Credit Association with Special Emphasis to Adjustments.
 Gokhale, (2000) Personal Saving in Developing nations, Furthered Evidence.
 Green Wald,(etal,2001;Gill,2004). Saving Performance in individual Development
Accounts: Does marital status matter ;Journal of marriage and family.
 Hosmer and Lemeshow, (1998) Applied logistic regression , 2nd ed, university of
Massachusetts and the Ohio state university, Massachusetts and Columbus http:
 Karii .Wuensch Journal of Social Behavior and Personality, (1998, 13, 139-150).
 Kassa Woldesenbet,(1998).Impact Analysis of Southern Ethiopia Micro Enterprise project
on Beneficiaries social and economic.
 Karim Moussoly,(2010). Participation in Private Retirement Saving Plans,2008.
 Mengistu,(1997).Determinants of Micro enterprises loan Repayments and efficiency of
screening Mechanism in urban Ethiopian: in case of Bahirdar and Awassa Town.
 Pelrine, Richard and olive Kabatalya, (2005) “Saving Habits, Needs and Priorities in Urban
Uganda “Kampala; USAID/ RURAL SPEED.
 Ziorku S.Q,(2003). Financial Sector Reforms stratages and Financial Savings in SSA.

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