Factors Influencing Deposit Mobilization: A Study on Commercial Bank of Ethiopia

Abstract

The study had looked at the potential of the country regarding deposit mobilization by taking CBE as evidence. The study used time serious secondary data to be collected from Commercial Bank of Ethiopia data base. The study had found variables that can affect the total deposit of commercial banks. Eight variables are regressed with the dependent variable, i.e. total deposit; these variables include Total Loans and Advances, Total Revenue, Total Expense, liquidity, Total Asset, Consumer Price Index, and Operating Expense. The analysis techniques have been chosen suiting the study’s objectives and nature of variables. All these variables are tested using Eviews 20.0 software VAR model. The result of Johansson co-integration test with lags in level shows in the long run Reserve Requirement and Consumer Price Index are negatively affect the Total Deposit in Commercial Bank of Ethiopia whereas the Total Asset, Total Liability and Total Loans and Advance affect Commercial Bank of Ethiopia`s Deposit positively and all are statically significant. Once the variables are co integrated we used the vector error correction (VECM) to determine the short run coefficient. And In the short run, among the given Determinants of Commercial Bank Deposit only Consumer Price Index and The total Loans and Advance are significant and affect the Deposit in Commercial Bank of Ethiopia negatively. Finally the study had recommended what should be done to mobilize more deposits.

Keywords: Income, Expense, Asset, Liability, Reserve, Loan and Consumer price index

DOI: 10.7176/JESD/12-1-06

Publication date: January 31^st 2021