Why are investment and savings so low in developing countries? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. The underdeveloped financial sector leaves the middle class with few opportunities to invest their savings. unchecked The rich often keep their savings abroad due to the fear of political instability. unchecked Income is low, and poor people don’t have a whole lot left over to save. unchecked Interest rates in developing countries are notoriously low.

Investments and savings are so low I developing countries because of the following:

• The underdeveloped financial sector leaves the middle class with few opportunities to invest their savings.

• The rich often keep their savings abroad due to the fear of political instability.

• unchecked Income is low, and poor people don’t have a whole lot left over to save.

Explanation:

In developing countries, the income levels are often very low. It is as a result of this low levels of income that the people in such country generally finds it hard to even meet the basic needs and consequently do not have anything left to be saved. Take for example in Nigeria, a developing country, it is said that More than 70% of the population lives below $2 in a day, it would be impossible for such people in the population to save.

Also, the rich class in developing countries due to the fear of political uproar and instability often put all their savings abroad in a foreign land. Most times, the rich class in developing countries do not save in the domestic economy.

Also the middle classes that can avoid to save often finds it difficult to save due to the fact that there is lack of enough saving options which is made available to them. The Financial markets of a developing country is either underdeveloped or is not in existence.

Also when the government of a developing nation tries to extract money through tax on individuals then even this money is being embezzled by politicians and corruption rather than into legitimate productive investment.

With regards to the above mentioned reasons, savings are so low in developing countries and noting that funds for investment comes from savings. Low savings results in low investment in developing countries.

answer; capital structure decision;