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DETERMINANTS OF INFORMAL SAVINGS IN SOUTH WESTERN NIGERIA

OLURINOLA, Isaiah Oluranti (1992) DETERMINANTS OF INFORMAL SAVINGS IN SOUTH WESTERN NIGERIA. Savings and Development, 25 (2). pp. 225-251.

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Abstract

The paper discusses the determinants of informal savings in Southwestern Nigeria using the linear probability model and multiple regression technique. It utilizes cross-section data generated from a survey conducted by the authors between October and November 1989 on the savings habit and utilization in the informal sector. The empirical results revealed that savings behaviour in the informal financial sector is affected by income, age, occupation, education and region of residence. They showed that the self-employed, less educated and rural population identified more with informal savings and had a higher informal savings ratio. The two cardinal variables from economic theory (income and age) accounted for the bulk of the variation in the level of informal savings. The empirical results confirm that marginal propensity to save informally is positive, less than one; but the absolute income hypothesis that marginal propensity to save is greater than average propensity to save in the informal financial sector is contradicted. The result suggests that with a rising income, the average propensity to save informally declines while, presumably, the fraction of income saved increases in the formal sector. Evidence of people becoming more thrifty was also established, but savings of this kind was not really and could not have been motivated by the reason of saving-up towards retirement. In the process of capital accumulation, a conclusion of the paper is that savings policy should target the self-employed in the informal sector. Another conclusion reached by the paper is that any policy that succeeds in achieving increased earnings in the informal sector has a tendency of increasing the propensity to save in the formal financial sector, even at the expense of the informal one.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions: UNSPECIFIED
Depositing User: Dr. I. Oluranti Ogunrinola
Date Deposited: 02 Jun 2014 17:39
Last Modified: 02 Jun 2014 17:39
URI: http://eprints.covenantuniversity.edu.ng/id/eprint/2645

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