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
Highlights
According to Zerayehu S. et al, (2013) for a healthy and energetic economy a sound financial system is crucial
Banks have been more aggressive towards the expansion in more geographical areas by opening new branches which has caused an increase in number of branches; resulting in deposit mobilization increase
Loan to deposit ratio has positive significant impact on bank deposit mobilization. This indicates increasing deposit make Commercial bank to increase their loan provision that helps for different economy supports
Summary
According to Zerayehu S. et al, (2013) for a healthy and energetic economy a sound financial system is crucial. Hussein O. et al (2014) in Iran using 10 years panel data, Orji (2012) in Nigeria using 37 years time series data and Ketema (2017) in Ethiopia by using 15 years panel data showed that inflation has a negative influence on the commercial bank deposits These contradictory findings revealed that there is inconsistency among research findings on factors affecting deposit mobilization. Kibebe has used four independent variables through quantitative research approach; Per Capita Income, Investment, Age Dependency Ratio, Money supply and bank deposit as independent variable It couldn’t assess the effect of loan loss provision, loan to deposit ratio, profitability and gross domestic product on determinants of Commercial bank deposits mobilization in Ethiopia. In addition other study conducted by Fisseha (2017) on determinants of commercial banks deposit mobilization in Ethiopia, Fisseha has used six independent variables include number of branch, interest rate, loan to deposit ratio, inflation rate, gross domestic product and midyear population number. The study was hypothesized the following hypothesis that is supported by the empirical literature
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