Determinants of Deposit Mobilization of Commercial Banks in Ethiopia

Abstract

The aim of this study is to assess the determinant of deposit mobilization in reference to Commercial banks in Ethiopia. The study adopts explanatory research type. The study was also guide by pure quantitative research approach. The necessary data required for this study was secondary data. The secondary data was the audited financial statement for the period of 2005 to 2017. The data was collected from the National Bank of Ethiopia and ministry of finance and economic development (MOFED). The study used non probability sampling, through purposive method in order to take sample size. Currently, there are 18 Commercial banks with their respective branch operation in Ethiopia. The researcher base on their year of establishment considering that, the bank that operates long life expected to have large number of customer and deposit amount than that of new one. Thus, seven Commercial Banks was taken as sample namely, Commercial bank of Ethiopia, Awash International Bank S.C, Bank of Abyssinia S.C, Wegagen Bank S.C, United Bank S.C, Nib International Bank S.C, and Dashen Bank S.C  . Data was analyzed using descriptive statistical techniques like mean, standard deviation, minimum and maximum. The correlation analysis is also used. Fixed effect Econometric model was adopted. The result shows that number of branch (NOBR) had positive and significant effect on deposit mobilization (DM) of Commercial banks in Ethiopia. This result may indicate that increase in number of branch was increase the accessibility of bank service, therefore the more banks accessible the more customers was access and as the same time the more deposits was collected. Saving Deposit Interest Rate (IR) had positive and significant effect on DM of Commercial banks in Ethiopia. Loan to Deposit Ratio (LDR) had positive and significant effect on deposit of Commercial banks in Ethiopia. This result implies that when the amount of loan is high there is high amount of money is circulated in the country. Inflation Rate (INF) had a negative and insignificant effect on DM of Commercial banks in Ethiopia. Gross Domestic Product (GDP) had a negative and insignificant effect on DM of Commercial banks in Ethiopia. This is because of the absence of favorable economic conditions in our country. And also inconsistent increase of GDP in the country during the study period was negatively affect Commercial bank deposit in Ethiopia.

Keywords: Deposit Mobilization, Commercial Banks Operating in Ethiopia

DOI: 10.7176/RJFA/13-1-02

Publication date: January 31^st 2022