Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.6, No.9, 2015 134 Households Saving Behavior: Knowledge, Practice and Affecting Factors in North Gondar Zone, Amhara, Ethiopia Tsega Hagos Mirach 1 * Yemane Michael Hailu 2 1.Assistant Professor in Economic Policy Analysis, School of Economics, College of Business and Economics, University of Gondar, Gondar, Ethiopia, P.O.Box: 1369, Gondar, Ethiopia 2. PhD Candidate at Addis Ababa University, College of Business and Economics, Addis Ababa, Ethiopia *Corresponding author: Email: - tsegina2007@gmail.com Abstract This study aims on analyzing the socio-economic determinant of households saving in north Gondar using descriptive analysis. From the descriptive analysis the average monthly income of households was found 1473.83 Birr. 54% of the total respondents have saving practice, and urban dwellers relatively save better than rural dwellers. Female headed households save 55% higher than male headed households. Moreover, those who have known time pattern of money getting save 221% more than the unknown time pattern do. The findings also indicate that those households who kept their money at home and used traditional saving ways save 451% and 74% less respectively than these who used banks. Related with respondents’ family background on saving and expenditure 52.2% have had no discussions with their family. Common reasons found for households not to save are cultural background, lack of money, lack of education, social affairs, inflation, unemployment and low interest rate. Keywords: Household Saving, Socio-Economic Analysis, North Gondar 1. INTRODUCTION Long-term economic growth requires capital investment – in infrastructure, education and technology, business expansion, and so forth – and the main domestic source of funds for capital investment is household saving. Development economics recognized for several decades the importance of the mobilization of domestic saving for economic growth in developing countries. Thus, the positive relationship between saving/investment and economic growth has long been an established fact in economics (Schmidt-Hebbelet al., 1996; Bisatet al., 1997; and Sinha, 1999). In developing countries, economic fluctuations and climate risk lead to important income -variations and leave the households vulnerable to severe hardship. Moreover, their social coverage is restricted and the credit and insurance markets are not well developed. Thus, these countries often face saving allocation problems and have difficulties to develop productive investments. According to Deaton (2005) and Rogg (2006), one of the serious problems confronting poor countries including Ethiopia is saving and investment gap. Because of this gap, these countries faced challenges to finance investments needed for growth from domestic saving. It is also common to see these countries to finance their investment in a short run partly through domestic government borrowings and/or foreign loan and grants but this can significantly increase debt burden and cannot be a solution in a long run. Though Ethiopia is recording sustained economic growth for the last many years, the country is still categorized among the least developed countries. According to MoFED 2010/11, the GDP growth rate is 11.4%, Poverty head count index is 29.6% and inflation rate was 18.1%. Ethiopia's financial sector is fairly underdeveloped. There are few indigenous banks that have been established with different proclamations and regulations. Moreover, often these banks are urban based and give loan to these engaged in trade and industry. Though the loan size is not adequate and charge high interest rate, microfinance institutions are grappling to widen their outreach to rural areas which comprises majority of the country`s population. Thus, saving is a way to smooth consumption and to withstand adverse shocks. The average gross saving rate as percentage of GDP of the country is 21% (MoFED , 2012). Hence, a better understanding of households saving behavior is important. Most saving researches done so far in developing countries in particular in Ethiopia are at macro level. Since macro works are based on macro economic data, they couldn`t consider consumer heterogeneity and diversity of saving behavior (Touhami et al. 2009). On the other hand, micro econometric analysis allows estimating the importance of economic variables and the role of households features in the saving behavior. Cognizant of this fact, this study attempts to analyze the main determinants of household saving in Ethiopia giving special emphasis to North Gondar zone using micro economic evidences, which is limited in the country and none in the Zone. The rest of the paper is organized as follows. Section 2 presents review of both the theoretical and empirical literatures. Section 3 describes the sampling techniques, method of data collection and the empirical model used. Section 4 reports the results found from the descriptive analysis. Section 5 deals with the implication and contribution to knowledge. Finally, section 6 is the conclusion and recommendation part.