The Determinants of Deposit Growth in Case of Commercial Banks in Ethiopia

Abstract

Deposits are the foundation upon which Banks prosper and grow. And deposit is engine to financial institution operations due to the fact maximum companies in rising markets depend closely on financial institution loans as a supply of financing. So, this study investigates bank-specific variables and macro-economic determinant of commercial banks deposit growth in Ethiopia. Macro-economic factors consider under this study were age dependency ratio, unemployment rate, population growth, broad money supply and Inflation. While bank specific variables included were branch expansion and bank size. Eight commercial banks have been the subject for the study by incorporating a 10 years’ data ranging from the period 2010 to 2019. A quantitative research approach and explanatory design were adopted in carrying out this research. The study had employed fixed effect panel data estimation techniques to analyse the influence of bank specific and macroeconomic factors on deposit growth using Eviews 10. The results of regression analysis showed that branch expansion, bank size, broad money supply and inflation have a positive and significant effect on deposit growth of commercial banks. On the other hand, Age dependency ratio and population growth have negative and statistically significant effect on deposit growth. Finally, the study recommends there should be stable inflation, a healthy money supply and population growth and branch expansion.

Keywords: Deposit, Commercial banks and Fixed effect.

DOI: 10.7176/RJFA/12-19-03

Publication date:October 31^st 2021