Analysis of Rural Savings Mobilization for Poverty Alleviation in Ijumu Local Government Area of Kogi State
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ANALYSIS OF RURAL SAVINGS MOBILIZATION FOR POVERTY ALLEVIATION IN IJUMU LOCAL GOVERNMENT AREA OF KOGI STATE. BY ADEBAYO, CORNELIUS OWONIYI A THESIS SUBMITTED TO THE POSTGRADUATE SCHOOL OF AHMADU BELLO UNIVERSITY, ZARIA, IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN AGRICULTURAL ECONOMICS. DEPARTMENT OF AGRICULTURAL ECONOMICS AND RURAL SOCIOLOGY, FACULTY OF AGRICULTURE, AHMADU BELLO UNIVERSITY, ZARIA, NIGERIA MAY 2004 DEDICATION THIS WORK IS DEDICATED TO THE GIVER AND SUSTAINER OF LIFE – JEHOVAH GOD ii DECLARATION I hereby declare that this thesis was written by me and it is a record of my own research work, except where references are made to the published literature and duly acknowledged. This thesis has not been presented before in any previous application for a higher degree. ADEBAYO, CORNELIUS OWONIYI DATE The above declaration is confirmed. Dr. J.F ALAMU DATE Chairman, Supervisory Committee iii CERTIFICATION This thesis entitled “ANALYSIS OF RURAL SAVINGS MOBILIZATION FOR POVERTY ALLEVIATION IN IJUMU LOCAL GOVERNMENT AREA OF KOGI STATE” by Adebayo, Cornelius Owoniyi, meets the regulations governing the award of the degree of Master of Science (Agricultural Economics) of Ahmadu Bello University, Zaria, and is approved for its contribution to knowledge and literary presentation. Dr. J.F Alamu Date Chairman, Supervisory Committee Dr. S.A Sanni Date Member, Supervisory Committee Dr. Ben. Ahmed Date Head, Department of Agricultural Economics and Rural Sociology Dean, Post Graduate School Date iv ACKNOWLEDGEMENT I wish to express my profound gratitude to my major supervisor, Dr. J. F Alamu for his immense contributions towards the success of this research work. My sincere appreciation goes also to Dr. S.A Sanni, member of my supervisory team for her valuable suggestions in the course of this work. I express my gratitude to Professors A.O Ogungbile and T. K Atala; Dr. S.A Rahman, Dr. O.J Macaver, Dr. D.O Chikwendu, Alhaji. A. Zakari, Mr M.G Maiangwa, Dr M.O Akinola for their advice, suggestions and encouragement. My sincere thanks goes to Mr E.O Kunle, Mrs C. Kunle, Mrs B. Kunle, Mr & Mrs K. Ibitogbe, Mr & Mrs E.O Evanero, Mr & Mrs M. Obot, Mr T. Olowu, Alhaji & Hajia Abubakar Bichi, Miss Joy Otitoju, Engr. O. Ajayi, Dr (Mrs) J. Olajide, Dr & Mrs Ojo Aiyeduso and others too numerous to mention for their moral and financial contributions throughout the rather turbulent period. I also acknowledge with appreciation the words of encouragement offered by my friends, classmates and acquaintances especially Segun Ojuekaiye, Ogah Moses, Tanko Samuel, Lloyd Bayegunhi, Paul Abiyong, Cornelius Ekenta, Bola Adeogun, Linus Agbo Oseni Yusuf, Gadzama Ishaku,Linus Agbo, Vwapamkai Bafyau, Iliya Salisu. My special gratitude to my Christian brothers and sisters in Zaria especially Daniel Evanero, Jerry Obas , Folorunso Orifa , Darlington Ijenebar, Solomon Evanero, David Onwube, Osas Joshua, Jonathan Chidi, Godbless Okosi, Sunday Ntteh, Mike Cole, Godwin Akogwu, Jane Ibokette, Brown Ibokette for their love, hospitality and understanding during my stay in Zaria. My Daddy and Mummy (Mr & Mrs Adebayo Ittah), I pray Jehovah grants them long life to enjoy the fruit of their labour. To my brother and sisters Bolorunduro, Funke, Molu, Dupe and v Bejide. To my uncles, nephews nieces, and cousins – Ayo Kunle, Femi Fagbemi, Abayomi Kunle, Yemi Kunle, Kayode Fagbemi, Kola Asaju, Bode Fagbemi, Kenny Bello, Layole Kunle, my heartfelt thanks to you all. vi ABSTRACT This study examined some important factors that determine savings behaviour and the magnitude of poverty in Ijumu Local Government Area of Kogi State. Primary data were generated using field interview and structured questionnaires were administered to one hundred and twenty respondents. The analytical tools employed were descriptive statistics, multiple regression, Correlation analysis and Foster-Greer-Thorbeeke poverty measures. A quantitative determination of the dependence of rural savings on some household socio-economic characteristics like current assets, gross income, farmers’ age, household size and years of experience of household heads was carried out using regression and correlation analyses. The level of savings per household heads per annum in different occupational categories- farming, farming/trading, farming/artisans and farming/civil servants were N14, 989.45, N48, 471.00, N35, 005.30 and N41, 830.92 respectively. Regression coefficients showed that gross income, age of household heads and years of experience made significant contributions of about 55% variations in the level of savings. The results of correlation analysis revealed that of the five socio-economic factors examined, four were statistically significant at 1% level of probability. These were gross income, age, household size and years of experience in farming while current asset was not statistically significant. This study measures the magnitude of poverty in the area to buttress the need to boost the savings capacity of rural household with the aim of alleviating poverty. The result indicates that 66% of the sampled households live below the poverty line of N1, 274.90 while the poverty gap index and severity of poverty index were 0.42 and 0.27 respectively. The study recommends that farmers should have other sources of income apart from farming because of its seasonality. Savings incentives can be further stimulated through the physical presence of savings institution in the study area. vii TABLE OF CONTENTS PAGES Title Page…………………………………………………………..…i Dedication……………………………………….…………………...ii Declaration…………………….……………………………………..iii Certification…………………….……………………………….……iv Acknowledgement……………………………………………….…...v Abstract………………………………………………………..……..vii Table of Contents…………………………………………………....viii List of Tables…………………………………………………..…….xii CHAPTER ONE INTRODUCTION 1.1 Introduction……………………………………………..…..……1 1.2 Problem Statement…………….…………………………..……..3 1.3 Objectives of the Study……………………………………..…...4 1.4 Justification of the Study …….…………..……………………...5 1.5 Research Hypotheses…………………………………………….6 CHAPTER TWO LITERATURE REVIEW 2.1 Concept of Savings…………………………………..…..……….7 2.2 Meaning of Rural Poverty…….………………………..….……..8 2.3 Studies in Rural Poverty……….………………………….……...9 2.4 Determinants of Savings……….…………………………...…….10 viii 2.5 Savings and Investment Identity..………………………….…….14 2.6 Savings and Farm Investment…….……………………….…….15 2.7 Savings Mobilization and Poverty Alleviation…….……………16 2.8 Savings and Rural Banking Scheme……………….……………16 2.9 Savings Pattern in Rural Areas of Less Developed Countries (LDCs)…………………………….……..17 2.10 Measurement of Poverty…………………………….…..…..…20 CHAPTER THREE METHODOLOGY 3.1 Study Area……………………………………………………….22 3.2 Sampling Procedure………….………………………..…………22 3.3 Data Collection and Sources….…………………………..………23 3.4 Analytical Tools………………………………………………….24 3.4.1 Descriptive Statistics …………………………………………..24 3.4.2 Multiple Regression …………………………………………....24 3.5 Specification of Models…………………………………………..25 3.6 Selected Variables and their Measurement……………………….27 3.7 Pearson Correlation Analysis……………….……………….……28 3.8 Poverty Gap Index…………………………..………………….…29 3.8.1 Simple Head count Ratio/Poverty Incidence …………………...31 3.8.2 Poverty Depth (income Gap Ratio) …………………………….31 3.8.3 Severity of Poverty Index ……………………………………….31 ix 3.9 Limitations of the Study…………………………..………………32 CHAPTER FOUR RESULTS AND DISCUSSIONS 4.1 Socio-economic and Demographic Characteristics of Household Heads ….………………………………………..…. 33 4.1.1 Sex Distribution………………………………………… .….….. 33 4.1.2 Age of Household Heads………………………………..….……34 4.1.3 Educational Status………………………………………….….…34 4.1.4 Household Size……………………………………………..…….35 4.1.5 Dependency Ratio………………………………………….…….36 4.1.6 Farming Experience……………………….………………….…. 37 4.1.7 Occupation and Average Savings per Household Heads…….….38 4.1.8 Distribution of Household Income and Savings………………..40 4.1.9 Forms of Savings………………………………………………..41 4.1.10 Households Savings Habits and Utilization………………........42 4.2 Determinants of Rural Savings……………………..…………...43 4.3 Effects of Socio-economic Characteristics on Value of Savings ………………………..…….………………..45 4.4 Constraints to Savings Mobilization………….…….…………..47 4.5 Magnitude of Poverty in the Study Area…….…………………49 4.6 Test of Hypotheses…………………………..…………………52 x CHAPTER FIVE SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1 Summary…………………………………………………………53 5.2 Conclusion…………………………………………………..……54 5.3 Recommendations………………………………………………..54 5.4 Suggestions for Further Study……………………………………55 REFERENCES……………………………………………………...57 APPENDIX …………………………………………………………67 Sample of Questionnaire Administered……………………….……..68 xi LIST OF TABLES pages Table 1.0: Poverty Head count (1980-1996)…………………………….……..1 Table 4.1: Sex Distribution of Respondents……………………………..…….33 Table 4.2: Age Distribution of Respondents…………………………………...34 Table 4.3: Educational Status of Household Heads……………………… ..….35 Table 4.4: Household Size………………………………………….….……....36 Table 4.5: Dependency Ratios………………………………….……..…..…..36 Table 4.6: Farming Experience of Respondents………………….…………..37 Table 4.7: Distribution of Respondents by Occupation and Average Savings……………………………………….………...39 Table 4.8: Sample Statistics for Household Income and Savings Distribution……………………………….…………….40 Table 4.9: Forms of Savings…………………………………………..…….41 Table 4.10: Savings Utilization by Households……………………….…...42 Table 4.11: Estimated Regression Coefficients for Rural Savings…………44 Table 4.12: Pearson Correlation Coefficients between