Microeconometric analysis of the determinants of savings behaviour in Zimbabwe: 2009-2012

Abstract

A high savings culture is a foundation of a sustainable national social, sound financial and economic policy. The main objective of this paper was to gain insights on savings behaviour by individuals in Zimbabwe after the adoption of the multiple currency exchange rate system. A micro econometric approach which took into account of individual heterogeneity was adopted. The selected individual characteristics inputted in the logit model as savings predictors were age, marital status, religion, education, position in the household, household size, type of accommodation, place of accommodation, employment status, income, number of people employed in the household, and expenditure per month. The goal was to understand which variables authorities and commercial banks might need to target in order to promote a savings culture in Zimbabwe after most people lost their savings in the banks due to hyperinflation. Secondly, we investigated within a sample of savers what determined the number of times individuals would deposit money in the bank by use of Poisson regression model. Finally, we came up with a savings predicting model which helps banks identify targeted customers based on the individual characteristics. The results revealed that majority of the variables were significant as predictors to savings. However, income level proved to be the most significant variable as it had the least probability value. To promote a saving culture, banks in Zimbabwe may need to consider bringing in differentiated and tailor made products for the high net worth and the mass market.