The Relationship between the Percentage Share of Industry Deposits and the Percentage Share of Industry Loans and Advances: The Case of Ghanaian Banking Industry

Abstract

The purpose of the study was to describe the relationship between the percentage share of industry deposits taken by a bank and the percentage share of industry loans and advances given by such bank, using 2012 fiscal year as a reference point. The study made use of cross-sectional analysis. The population of this study was made up of all commercial banks operating in Ghana. They are twenty-six (26) in number. However, a sample size of twenty-four (24) of these banks was used for the study. Data was mainly collected from secondary sources including financial reports of the selected banks, scholarly journals, business and financial newspapers, corporate journals, and report of 2013 Ghana Banking Survey. Descriptive, inferential and exploratory data analyses were performed. The study revealed that there is a strong positive correlation between the percentage share of industry deposits and the percentage share of industry loans and advances. The regression model which establishes the relationship between percentage share of industry deposits and lending is given as Y = 0.423+ 0.899X, where Y is the percentage share of industry lending and X being the percentage share of industry deposits. The coefficient of determination (R-sq) is 85.6%. The study therefore confirms the findings by Olokoyo (2011) that commercial banks deposits have the greatest impacts on their lending.

Keywords: Banks, Industry, deposits, loans and advances, relationship, percentage share