ABSTRACT
This study examined the determinants of savings among members of selected Agro-based cooperative societies in Ini Local Government Area of Akwa Ibom State, Nigeria. The objectives of the study were: to relate socioeconomic characteristics of the cooperator to savings; determine the amount saved and the extent of usage by the cooperators; identify the motives for savings; determine the factors that influence savings as well as the factors that militate against their savings. Primary data used in the study were obtained from one hundred and twenty (120) respondents using a randomized sampling technique. Obtained data were analyzed using descriptive statistics and econometric models. Regression analysis was used to estimate the factors that influence savings while principal component analysis was used to identify the factors that militate against savings by the cooperators. The results of the socioeconomic characteristics showed that majority (74.17%) of the cooperators were active with a mean age of 44 years, 5 months. Majority (60.83%) were male; (71.67%) of the male were married while (53.33%) had between 1-5 persons in their household with an average household size of six (6) persons. Majority (80%) of the cooperators were literate with an average of eleven (11) years in formal schooling while (35.83%) had between 11-15 years of farming experience with a mean farming experience of fourteen (14) years; ( 23.33% ) were new in the cooperatives and had stayed between 1-3 years with a mean year of membership of eight (8) years. The result also showed that on the average, the respondents saved N26583.5 per annum with a minimum contribution of N1000 and a maximum contribution of N120,000. Majority (76.67%) of the cooperators earn below N100,000 monthly with an average monthly income of N82702 while 60% of them spent below N40,000 per month. The result of the regression analysis showed that marital status, household size and monthly expenditure negatively influenced savings while age, years of education, years of cooperative membership and household income positively influenced the savings of the cooperators in the study area. The result of the marginal effect of savings showed that if income increases by N1.00, savings will increase by 0.3761 kobo. The study recommends educational and training programs that will encourage members to cultivate the habit of savings with their cooperative societies.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Contents vi
List of Tables viii
Abstract ix
CHAPTER 1:
INTRODUCTION
1.1 Background
of the Study 1
1.2 Statement
of the Problem 4
1.3 Objectives
of the Study 6
1.4 Hypotheses 6
1.5 Significance
of the Study 7
CHAPTER
2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
Literature 8
2.1.1 Concept of savings 8
2.1.2 Cooperative and its nature 10
2.2 Theoretical
Framework 13
2.2.1 Theories of saving 13
2.2.2 Neoclassical economic theories 13
2.2.3 Psychological and sociological theories 15
2.2.4 Behavioral theories 16
2.2.5 Institutional theories 17
2.3 Empirical
Review 20
2.3.1 Determinants of savings 25
2.3.1.1 Real per capita income 25
2.3.1.2
Demographic features 26
2.3.1.3 Real interest rates 26
2.3.1.4 Social barriers to savings 27
2.3.2 Determinants of personal savings 27
2.4 Analytical Framework 29
CHAPTER
3: RESEARCH METHODOLOGY
3.1 Area
of the Study 32
3.2 Map
of Akwa Ibom State Showing the Study Area 35
3.3 Sampling
Techniques 36
3.4 Method
of Data Collection 37
3.5 Method
of Data Analysis 37
CHAPTER 4: RESULTS AND DISCUSSION
4.1 Socio-Economic Characteristics of the
Agro-Based 41
4.1.1 Age of agro-based cooperative societies 41
4.1.2 Sex 43
4.1.3 Marital status 44
4.1.4 Household size 45
4.1.5 Level of education 46
4.1.6 Farming experience 47
4.1.7 Years of membership of the agro-based
cooperative society 48
4.1.8 Household monthly income 49
4.2 The Amount Saved by Different Types of
Agro-Based Cooperative
Society 51
4.3 Motives for Saving 52
4.4 The
Factors Affecting the Savings of Agro-Based Cooperators in the
Study Area. 53
4.5 Factors Militating Against Savings of the
Agro-Based Cooperative
Societies 57
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 60
5.2 Conclusion 61
5.3 Recommendations of the Study 62
References
LIST OF TABLES
4.1: Distribution of
respondents according to age in relation with their
savings
per month 41
4.2: Distribution of
respondents according to sex in relation to their
Monthly
savings 43
4.3: Distribution of
respondents according to marital status in relation
to their
monthly savings 44
4.4: Distribution of
respondents according to household size in relation
with
their monthly savings 45
4.5: Distribution of
respondents according to their level of education in
Relation to their monthly savings 46
4.6: Distribution of
respondents according to farming experience in relation
to their
monthly savings 47
4.7: Distribution of
respondents according to their years of cooperative
membership in relation to their monthly savings 48
4.8: Distribution of the
respondents according to their monthly income in
relation
to their monthly savings 50
4.9: Distribution of the
respondents according to the amount saved in
different agro-based cooperative societies per
month. 51
4.10: Distribution of
respondents according to their motive for saving 52
4.11: Ordinary least square
regression estimates for the determinants of
savings among agro-based cooperators 54
4.12: Factors militating
against savings of the agro-based cooperators in
the study area 58
LIST OF FIGURES
3.1: Map of Akwa Ibom State
Showing the Study Area 35
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The importance of agriculture in a
developing economy cannot be over-emphasized. It plays a significant role in
the economic development of any nation. According to Ahmed (2006), it provides
food for the growing population, and raw materials for foreign exchange
earnings for development of the industrial sector. Growth in agriculture is
often the keystone of overall socioeconomic growth and development. Rural
farmers are the main actors in agricultural development as they account for
about 90% of food production in Nigeria and other developing countries (Adams
and Vogel, 1990; Central Bank of Nigeria, 2004).
In Nigeria, agriculture has remained the
largest sector of the economy. It generates employment for about 70% of the
population and contributes about 40% to the Gross Domestic Product (GDP)
(Adeboye, 2004). Agriculture is practiced at subsistence level in most parts of
Nigeria. This is characterized by numerous farmers operating several scattered
small and fragmented plots of land using traditional methods like land rotation
and bush burning and traditional implements like hoes and cutlasses (Ike and
Umuedafe, 2013). There has been no significant improvement upon this especially
in the south-south and south-east zone of the country (Uneze, 2013).Most
farmers have limited resources, a factor that limits their productivity, investment,
savings and income. In the midst of these, farmers have resulted to a number of
options to enhance their farm production and improve their well-being. One of
these options includes pooling resources together and working as a cooperative
society.
In
recent years, economists, international organizations, and governments in
developing countries have placed increasing emphasis on the mobilization of
deposits, not only to increase domestic savings so as to achieve sustained
economic growth and development but also to strengthen domestic financial
intermediaries (Adams and Vogel, 1990; Besley, 2013). Saving has been
considered as one of the determinants of growth to lead the underdeveloped
countries to the path of development. This will provide a cushion of security
against future contingencies, serves as an important means of improving
well-being, insuring against time of shocks and providing a buffer to help cope
in times of crises (Rutherford, 1999; Zeller and Sharma, 2000). For a nation,
it provides the funds needed in the developmental efforts. According to Surya
(2012), to achieve a higher rate of growth within relative price stability, the
marginal propensity to save should be raised through appropriate policies and
incentives that improve production, income and savings. In an era of
international financial integration for macroeconomic stability, higher
domestic savings are essential, due to its significant influence on the
circular flow of income (Iyoha et al;
2003).
Many formal financial institutions in the rural areas
including commercial banks and microfinance banks appear to have failed to
provide savings facilities that are acceptable and attractive to rural dwellers
(Adebayo and Yusuf, 2004). This is because many rural inhabitants still save
values in kind or patronize traditional savings and credit associations to save
for unexpected future events. In cooperatives, members are encouraged to save
voluntarily and as a matter of obligation. Agricultural cooperatives are
particularly able to influence the savings habits of members by linkage of its
other functions such as credit, input supply and agricultural marketing to the
savings obligation of the member. Agro-based Cooperatives play a significant
role in promoting the economic interest of their members and in particular
promote thrift among its members by affording them an opportunity for
accumulating savings and paying reasonable interest without risk on such
savings (Cheruiyot et al.,
2012). Formation of Agro-based
Cooperatives has numerous benefits to members among which are the
following: members are encouraged to
save since they are readily accessible, interest rates on saving and lending is
better than elsewhere a fact that sound idealistic, members are taught how to
handle their finances in a responsible manner which encourages savings
mobilization. It also encourages regular
social interaction between members (Kabuga and Batarinyebwa, 2005).
Generally,
lack of access to credit by rural farmers is attributed to the fact that they
lack formal education as well as collateral which denied them access to
conventional banking system. Worse still, credit obtained from informal
financial institutions is not always enough for any significant increase in
their agricultural production (Ike, 2009). In view of this particular
circumstance of credit situation in rural sector, and peculiar constraint that
surround credit availability to rural farmers, reports have shown that a
sustainable way to reduce this problem is through enhanced savings mobilization
from rural farmers themselves to increase the amount of loanable funds in rural
banks as well as to increase the extent to which they accumulate capital for
farming (Rosenzweig and Wolpin, 1993; Vonderlack and Schreiner, 2001; Central
Bank of Nigeria, 2004).
Saving
mobilization among members of agro-based cooperative societies in rural areas
is very low. This is evidence in the inability of most cooperators to provide
for the basic needs of life during active farming years (Bridsall et al; 1996; Nwachukwu and Peter 2009).
This should be a source of concern to policy makers, since about 70% of Nigeria
population are engaged in agricultural activities (Berko, 2001). On this note,
it is therefore important to critically examine the determinants of savings
among members of agro-based cooperative societies.
1.2 STATEMENT
OF THE PROBLEM
Savings
has been noted by Gonzalez-Vega (2003); Ike and Idoge, (2006) as an important
component to developing a strong rural financial system. Uneze, (2013) observed
that savings mobilization by small scale farmers in agriculture has been
difficult because of the peculiarities of this sector. In view of the risk
involved in agriculture, the transactional cost of providing financial services
to small scale farmers by formal financial institutions has remained high and
this has led to their exclusion by formal financial institutions. Savings is
important for accumulation of capital required to generate future income,
enable future consumption and to provide mechanism for managing risks. The
inability to build appropriate levels of institutional capital from members of
agro-based cooperatives has remained a major problem hampering their
development in Nigeria (Berko 2001; Ijere 1992). In this regard, policy makers
have not really drawn up an adequate and comprehensive rural savings scheme
that will ginger rural farmers to save their capital productively (Vonderlack
and Schreiner, 2001).
In
Ini Local Government Area of Akwa Ibom State, one of the constraints to
increasing food production lies in lack of adequate amount and access to
capital by rural farmers for improved agricultural production technologies
(Udo, 2014). The improved method of production involves acquisition of larger
farm land, high quality seeds and seedlings, agrochemicals, fertilizer, the use
of modern equipment, improved livestock breeds, good housing and feeds. Thus,
if these rural farmers are to adopt new production technologies, they have to
either borrow more money to acquire the modern inputs or commit a greater level
of their personal resources to the farm. According to Yahaya (1998), formal
financial institutions such as Banks and other organized financial houses like
National Agricultural Insurance Scheme consider rural farmers as high-risk
category of borrowers due to their poverty and high potential of repayment
default. Therefore formal sector borrowing becomes a difficult option for these
farmers but in this situation, their
household savings become very important for sustaining and developing
rural farming as they are constrained to commit greater levels of their
personal resources to enhance production. However, with low investment, output
becomes low resulting in low income as well as low savings perpetuating the
vicious cycle of poverty. There is also the feeling that the socioeconomic
characteristics of these rural farmers significantly contribute negatively to
their level of savings and capital accumulation thus forming part of the
problems identified by the study.
1.3 OBJECTIVES
OF THE STUDY
The
broad objective of this study is to assess the determinants of savings among
members of selected agro-based cooperative societies in Ini Local Government
area of Akwa Ibom State.
The
specific objectives were to;
1.
examine the socio-economic
characteristics of the agro-based cooperators in relation to savings.
2.
determine and ascertain
the amounts saved and the extent of
usage by agro-based cooperators in the study area.
3.
identify the motives for
savings made by members.
4.
estimate the factors that
influence the savings of the agro-based cooperators in the study area.
5.
identify the factors that
militate against savings by the agro-based cooperators in the study area.
1.4 HYPOTHESES
H1:
Savings of members of agro-based cooperatives is positively related to age, sex
level of education, farming experience, years of membership of cooperative
societies and household income and negatively related to marital status,
household size and consumption expenditure of the household.
1.5
SIGNIFICANCE
OF THE STUDY
The
study will show the factors influencing the saving pattern and attitude among
cooperative farmers. It shall also provide a framework through which the saving
of the rural farmers can be improved.
The study will also widen the scope of information available to both students
and professionals on cooperative economics and management. Policy makers in
cooperative departments seeking guidance and methods for improving cooperative
performance and rural savings will find this research work useful. The general
public who may consider cooperative form of economic organization as a possible
alternative agency to foster socio-economic development will find this study a
useful companion.
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