Rural household’s forms and motives of saving in Tanzania: Insight from southern Tanzania, Lindi Region in Mtama District Council

Abstract

Saving plays a critical role in improving household welfare, enhancing livelihood resilience, and supporting long-term socio-economic development, particularly in rural communities where incomes are seasonal and uncertain. This study examined the forms of saving and the motives for saving among rural households in Mtama District Council, Lindi Region, Tanzania. This study was guided by the theory of the Life-Cycle Hypothesis. The study adopted a cross-sectional research design and employed both quantitative and qualitative approaches. The target population was rural household’s head in selected wards. A sample of 150 households was selected using multistage and simple random sampling techniques. Primary data were collected through questionnaires and interviews, while descriptive statistics and thematic analysis were used to analyse quantitative and qualitative data, respectively. The findings revealed that 54.7% of the surveyed households practiced some form of saving, whereas 45.3% did not save due to low and irregular incomes. The most common saving mechanisms included Village Community Banks (VICOBA), Rotating Savings and Credit Associations (ROSCAs), formal banks, livestock and other household assets, agricultural produce, and self-saving at home. Informal financial institutions, particularly VICOBA, emerged as the most preferred saving mechanism because of their accessibility, flexible conditions, and ability to provide affordable loans. The major motives for saving were smoothing household consumption, wealth accumulation, financing agricultural activities, preparing for emergencies, and house maintenance. Conversely, income uncertainty, low earnings, and large household sizes were identified as the primary constraints to household saving. The study concludes that although rural households demonstrate a strong saving culture, they predominantly rely on informal and asset-based saving mechanisms due to limited access to formal financial services. Strengthening rural financial inclusion, improving household incomes, and enhancing financial literacy would promote sustainable saving behaviour and contribute to poverty reduction in rural Tanzania.