Rural Savings: Their Magnitude, Determinants, and Mobilisation

The general view about the rural population in Pakistan isthat a vast majority of it has a deplorably low standard of living. Theincomes of most of the rural people are so low that one wonders how theymanage to survive. Studies on poverty in the country show that theincidence and the intensity of poverty in the villages is much higherthan in the towns. Yet the available data about rural incomes and familybudgets show that the average propensity of the rural households to saveis much higher than the national average. Several questions need to beanswered in this regard. Are the data about rural incomes andexpenditures reliable? Are the findings a consistent feature over timeor only a temporary phenomenon for a year or so? Do only larger farmerssave or do the smaller peasants and non-farm rural people also manage tosave? Is this finding unique only to our rural populace or is thereevidence of similar findings from elsewhere? What is the possiblerationale for this unusual saving behaviour? What is the magnitude ofrural savings and what could be their role in rural development?Finally, how could these savings be encouraged and mobilised? This paperaims at exploring and answering these questions with the help ofwhatever data are available. Apart from the Introduction, the paper isdivided into five sections. In the first section, we present evidence ofhigh rates of rural savings in Pakistan and some other countries.Section 2 discusses the rationale of this savings behaviour and thedeterminants of rural savings. In Section 3, we examine the magnitude ofrural savings and their possible role in rural development. Section 4deals with the problem of mobilisation of rural savings. The finalsection sums up the discussion.