This thesis explains savings and deposit behavior of rural and urban households in Honduras. Three models are estimated with data from a survey of 484 households: two logit models explain the probability of a head of household being a saver and a bank depositor and a multinomial logit model explains the probabilities of holding cash, bank deposits, cooperative deposits, and non-financial assets.
Separate estimations for rural and urban households highlight the seasonality and volatility of incomes and limited bank branches in rural areas. Dependent variables are the states of being a saver or a depositor. Several explanatory variables are significant. In urban areas, the probability of being a saver is increased by sector of economic activity (agriculture, trade, and services) and education and decreased by gender (male) and dependency ratios. Wealth is not significant: poor and rich have the same probability of being savers. In rural areas, this probability is increased by wealth, education, and being a borrower.
Education increases the probability of being a bank depositor in rural but not urban areas. Urban households with monthly incomes are more likely to deposit than are rural workers with daily incomes. Transaction costs influence this probability in both areas, as do the condition of bank borrower and expectation of getting future loans. The attractiveness of interest rates is not significant, which suggests that transaction costs are more important for the net return on deposits. Wealth increases the probability of being a depositor, as wealthier households more easily overcome limitations of the supply of deposit services.
Transaction costs influence the choice between bank deposits and cash in rural but not urban areas. When transaction costs are lower, cooperatives attract depositors from banks. Loan expectations and being a borrower increase the probability of being a depositor rather than holding cash at home. Being male increases the probability of holding bank deposits or non-financial assets rather than cash. Holdings of non-financial assets increase with wealth.
The thesis discusses difficulties of deposit mobilization in rural areas due to small deposits and low population density. Small financial organizations may not be prepared for this task. Appropriate prudential supervision is recommended.