Household Saving Behavior: The case of rural industry in Bantul

In generally rural industries self financed their activities. by their holder’s own capital. In the situation where other financial sources were limited, the own capital is very important for rural industries. The question is what are the sources of this capital? We are talking about household saving, now. In the relation with the development of rural industries there is a need to explore the behavior of this kind of saving in order to increase the role of rural financial institutions. Based on a case study at a sub-district in Yogyakarta, I found that rural industry households have sufficiently ability to save. They were also save in financial assets, beside real assets. However it also important to underlined that these saving more in the non-bank financial institution than in the banking institution, included the Village Units of Bank Rakyat Indonesia (BRI). This situation could be indicated that banking institution just gives little attention on the rural households saving ability. Since saving ability could be argue as a repayment ability indicator, this finding also explained why there were very limited rural industries that got credit from banking institution. Using an econometric model of life-cycle theory, this study also found that household saving was determined by household’s income, both of education level and sex of the industry holders, and the varieties of industries. This mean that in order to solve the lack capital problem in rural industries we also have to consider those variables, especially the education and the varieties of industries.