Factors Influencing Deposit Mobilization: A Study on Commercial Bank of Ethiopia (original) (raw)
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DETERMINANTS OF COMMERCIAL BANK DEPOSITS IN ETHIOPIA: A CASE OF COMMERCIAL BANK OF ETHIOPIA
The survival of every commercial bank highly depends on bank deposit because deposit mobilization is a major activity of all commercial banks. As the result, the issue of banks deposit and its determinants is crucial to the financial sector of developing country like Ethiopia. Therefore, this study aimed to identify and evaluate those factors affecting bank deposit in general by taking Commercial Bank of Ethiopia as evidence. Accordingly, the researcher adopts mixed research approach. The rationale of using such a mixed approach is to gather data that could not be obtained by adopting a single method.Regarding to the qualitative data; questionnaire is used to gather information from the employees of commercial bank of Ethiopia particularly for those employees who actively participated in deposit mobilization tasks in CBE city branches. Regarding to the secondary data; time series data covering 1998 -2014 was analyzed. First, the time series data were assessed using descriptive statistics for the variables as well as the test for heteroskedasticity, autocorrelation and normality testing to know if the assumptions of CLRM violated or not. Second, estimated model was a single regression equation with deposit as the dependent variable and explanatory variables as deposit interest rate, overall inflation rate, number of branch opening, gross domestic product, individual foreign remittance and dummy variable. Estimation was done using Ordinary Least Squares technique by E-views7 statistical package. The results from economic analysis showed that all the explanatory variables were positively correlated with the explained variable.
Factors Affecting Deposit Growth of Commercial Banks in Ethiopia
2019
The purpose of this study is to determine the factors affecting deposit growth of commercial banks in Ethiopia. In order to achieve this objective descriptive and econometric analyses were performed. The target populations were all commercial banks operating in Ethiopia. Accordingly, six commercial banks were purposively selected for this study. The panel dataset for the study used consisted annual data spanning from 2001 to 2017. The data were gathered from National Bank of Ethiopia and the purposively selected commercial banks' annual reports. The dependent variable used in this study was commercial banks' deposit growth. The explanatory variables used in this study were advertising and publicity, bank branches, exchange rate, inflation, loan and advances, money supply and nominal gross domestic product. Different diagnostic tests namely test for zero mean of error terms, homoscedasticity, no autocorrelation, no multicollinearity and normality were conducted to check the appropriateness of the model. The diagnostic results show that none of the classical linear regression model assumption is violated. To determine the effects of the independent variables on the dependent variable fixed effect model was used The Fixed-effect model results show that bank branch, exchange rate, loan and advances and nominal gross domestic product have significant positive effect on commercial banks' deposit growth. However, inflation and money supply found to have significant negative effect on bank deposit growth. The effect of advertising and publicity was found to be positive and insignificant. Thus, based on the findings the study suggests that commercial banks should open more branches and expand their loan giving capacity in order to increase their deposit. Further, the government should work seriously to increase the country's gross domestic product.
Haabtamu Kindu Belay , 2023
Deposits are an indispensable tool commercial banks use to enhance its profitability through advancing deposits mobilized to its customers in form of loans which make in return interest to commercial banks. The objective of the study was to investigate the effects of deposit mobilization on the banks financial performance in commercial banks of Ethiopia. The research used a census to study a population of 17 commercial banks in Ethiopia. The main source of data was secondary data or the documentary method Data were processed by use of descriptive statistics after editing have been done. The research used the explanatory research design, Balanced fixed effect panel regression model and Eviews 10 econometric software was used for the data of all 17 commercial banks in Ethiopia covered the period from 2014 to 2021 total population of banks operating in the country. The study used the Return on asset as the proxy of profitability to measure financial performance of banks. The findings indicated that majority of the variable used in the study positive and the significant effect on financial performance the case commercial banks in Ethiopia. The branch expansion used made the bank to increase in terms of customers made financial services accessible in the unbanked people and it has led to the increase in deposits over the years. The findings also indicated that a positive change in deposits interest rate affects the level of deposits received and later on the profitability of the bank. The study show that the general inflation and gross domestic product where significant effect on the increase in deposits this also made the, net profit increasing due as the loans volume increases. The statistical correlation revealed that there is a positive relationship between deposits mobilization and financial performance of commercial banks in Ethiopia. Based on these findings,. The study recommends the bank to develop strong deposit mobilization strategies towards marketing and mobilize more deposits as they are indispensable tools towards the profitability of the bank.
Determinants of Deposit Mobilization and Related Costs of Commercial Banks in Ethiopia
2015
The objective of commercial banks in Ethiopia is to make profits and thus satisfy the needs of their respective owners. The making of profits and even staying on board of these conventional banks depend on the strategies adopted by each bank to mobilize deposits from the public that is an input to earn income for most conventional banks. In order to make good strategies, however, the banks should know what factors determine the deposit mobilization activity in the real world. This paper then explores the theoretical as well as empirical analysis of those factors having an impact on deposit volume in banks and even assesses which ones are more significant or less significant. To do the practical investigation in terms of commercial banks in Ethiopia, the researcher collected the relevant data from annual reports of twelve years (2001/2-2012/13) and from questionnaires and interviews made to senior bank officers of seven banks. The data is analyzed through the econometric analysis using SPSS software. The study reveals that the branch expansion, the money supply, the exchange rate of Birr to USD and general inflation are the most significant factors of deposit mobilization activity. The other variables-deposit rate and real per capita GDP growth rate have insignificant power to influence the dependent variable. In this research, as opposed to the conventional economic theory, the deposit rate is found to have negative relation against the deposit volume for the period under study. The study also exposes that the deposit mobilization activity is becoming challenging, its associated costs are escalating and the competition is also becoming stiff-the outcome of the competition favoring the big size state banks. Beyond that the government policies are also favourng the latter in an effort to mobilize huge fund for a national development activities. The research recommends that banks have to do much in branch expansion studying potential deposit areas.
Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks
Science Publish Group, 2021
Abstract The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry-specific and Macro-Economic variables. The research used secondary data from 2010-to 2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation was used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicates branch macroeconomic factors such as bank size, broad money supply, and inflation have a significant positive effect on the deposit growth of commercial banks. Contrarily, the Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia. Keywords Deposit Growth, Panel Data, Fixed Effect
IOSR Journal of Business and Management, 2014
This study sought to analyse the relationship between banks' deposit interest rates and deposit mobilisation in Zimbabwe for the period 2000-2006. We developed an Ordinary Least Squares (OLS) model to show the relationship between the response and explanatory variables. Pearson's correlation coeffient (was employed to demonstrate the strength of the relationship. Before running the regression equation the data was first tested for; stationarity using the Augmented Dicker-Fuller Test, multicollinearity using correlation matrix and autocorrelation using the Durbin-Watson statistic. The study found a positive relationship between deposit rates and banks' deposits for the period under study and all the other explanatory variables were statistically significant. Also, the coefficient of determination () was found to be significantly high showing that the explanatory variables were able to account for the total variation of the dependent variabledeposits. The study recommended banks to tap into the unbanked markets through massive branch expansion, offering low cost accounts and increasing interest offered on deposits to attract more deposits. The government should come up with consistent policies and create a conducive political environment for business and foreign direct investment.
International Journal of Theoretical and Applied Mathematics, 2019
This paper empirically examines the long-run and short run dynamic effects of deposit rate (r), inflation rate (π) and GDP on bank deposit. The study targeted commercial bank of Ethiopia (CBE) because it has been taking a lion's share in terms of deposit amount which in turn plays a vital role in deposit refunding for investors. To show the long-run and short run dynamic effects of r, π and GDP on the deposit amount of CBE we took 30 years data from the year 1988 to 2017 from MOFED, CSA, National bank of Ethiopia and CBE data sets. To achieve the objectives vector error correction model (VECM) was used after checking the possible assumptions of our economic series. The results of ADF test statistics confirms our economic series are stationary at their first difference. This indicates that the variables are integrated of order one, I (1). Johansen's co-integration test suggests one co-integrating relationship between the variables. According to our findings, the coefficient of the error correction term for CBE deposit is statistically significant, and the speed of convergence to equilibrium of approximately 16 percent. Hence, in the short run, deposits are adjusted by 16 percent of the past year's deviation from equilibrium. The joint effect result indicates that except deposit rate all included variables have no significant short-run effect on deposit amount. More specifically, the result of Johansen normalization restriction shows in the long-run on average inflation rate and GDP have a negative effect on deposit, while deposit rate has a positive effect on the total amount of deposit held by CBE, among other findings. Finally, the government and other concerned bodies should take necessary steps to mobilize deposit in CBE.
2017
This paper seeks to investigate the relationship between deposit mobilization, credit risk and profitability of Ghanaian banks from 2002 to 2011. Secondary data were obtained from financial statements of 17 Ghanaian banks who have operated consistently within the study period. Panel regression analysis is used in the estimation of a function relating to the return on assets (ROA) to measures of credit risk and deposit mobilization as well a few control variables. The results reveal a significantly positive relationship between credit risk, deposit mobilization, growth in interest income, capital adequacy ratio and profitability of Ghanaian banks. However, a significantly negative relationship between year-on-year inflation and ROA was found. With regard to the relationship between bank size and profitability, the results found no significant association between the two. The research suggests that profitable banks in Ghana depend more on bank deposits as one of their main financing o...