Household saving is a crucial determinant of the supply of funds for investment. However, saving trend in Ethiopia particularly in the study area is very low and little is known empirically about its patterns and determinants. This study, therefore, was aimed at investigating the determinants of the saving behavior of households in Dire Dawa city, Eastern Ethiopia. Data were collected from four Kebeles and 122 sample households taken from the selected kebeles by using interview schedule. Descriptive statistics and Tobit regression model were used to analyze the data. The results showed that 70.5% of the entire sample households had savings during the survey time. The results of Tobit model revealed that annual income of household head education level, credit use of the household, annual expenditure of the household, self-employed, location of business area and the perception of interest rate had significant influence on the amount of household saving in the study area. And also 57% of the households used formal institution for saving. The findings suggest that saving of the households is largely determined by income level. It is therefore important to ensure the availability of credit service, create awareness and educate the households to enhance saving.
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