Savings and asset allocation of households in Uganda

The Government of Uganda has put in place the Plan for the Modernization of Agriculture as part of its poverty reduction program. That program incorporates the improvement of households’ access to formal financial services as one of its main components. To examine the program, this study uses primary data to determine the savings and portfolio allocation behavior of households with and without access to formal financial services. Findings reveal no significant difference between both types of households in the marginal propensity to save out of long-run income. The precautionary demand for liquidity and the desire to avoid risk are important factors shown to influence portfolio allocation decisions by households.