Savings patterns of small-scale farmers in a peri-urban area (Moretele District: North West Province)

Abstract

The study uses the conventional economic approaches to savings behaviour as a point of departure. In the past, agricultural programmes and policies overlooked the importance of savings mobilization in favour of credit extension programmes. This line of economic development approach arose from the assumption that poor rural people cannot save and will not respond to opportunities to save. The latest research results clearly demonstrate that rural people do mobilise significant voluntary savings, even at their low levels of income. The thrust of the study was to research savings behaviour and motivation to save by resource poor farmers, with specific reference to farmers in Moretele District, Northwest Province. The study tested the hypothesis that poor people cannot save, and went further to analyse determinants of savings behaviour, motivations to save, sources of savings mobilization, savings accounts used and motivations to use a specific savings product. The application of the life cycle hypothesis was also analysed. Linear multiple regression, Ordinary Least Squares (OLS) technique, analysis of variance (ANOV A), and factor analysis (FA) were used to analyse the data pertinent to the study. The findings of the study confirmed income as a major determinant of savings mobilization in the district. The extent of dependency, defined as the proportion of the population of a country falling in the age groups of 0-15 and 64 years and older, considered economically unproductive and therefore not counted as part of the country's labour force was found to have a negative effect on the ability of farmers to save. This is due to large family sizes and high levels of dependency in households. Age was also discovered to influence savings behaviour, but not in accordance with the application of the life cycle hypothesis. With regards to motivations to save, it was found that farmers in the district mainly save to cater for emergencies and for grandchildren's education, and not for accumulation/investment purposes. In addition to the abovementioned savings motives, farmers were however found to consider an investment imperative as reflected by an interaction between savings for accumulation and emergency purposes. The low investment imperative may change if other emergency management structures are considered. The main sources of savings mobilization for the farmers were income from livestock sales and government social security grant (government old age pension). These farmers were discovered to prefer ordinary savings plans. The rationale for this choice was found to be motivated by ease of quick access to savings and the liquidity provided by this savings product. The liquidity requirement is regarded as a strategy to address emergencies and any other financial need that might arise. The findings of the study calls for policy instruments that will expedite the implementation of outreach programmes and strategies for voluntary savings mobilization that will cater for investment imperative and emergency needs. Critical to this will be the development of savings products that respond to the various needs of resource poor farmers as well as to serve different categories of rural savers. The decentralization of savings institutions and linking of formal and informal financial institutions will enhance access to financial services by the rural population. Policies intended to discourage large families would help reduce the high rates of dependencies and relieve pressure on household income, which could be used for savings.