HE DETERMINANT FACTORS OF DEPOSIT MOBILIZATION: EVIDENCE FROM COMMERCIAL BANKS IN ETHIOPIA

Abstract

The primary function of commercial banks in Ethiopia is to collect deposit from small severs and providing it to investors who need the fundsin the form of loan. For making of sound profit for their respective owners and mantaining competative advantages with in the industry the convential banks are highly depended on the strategies that employed by individual banks to mobilize depsoit from public. So as to make the core competence deposit mobiliziation strategies plan, the banks have to identify cretical that factors significantly affect the deposit mobiliziation activities of the banks in the Ethiopia context.

The aim objective of this study is to identify those factors having an impact on the volume of deposit in the banks and evaluat them which one is more significant factorsevidenced from commercial banks inEthiopia. Those factors were analized based on theoretiacal and emperical aspect. Accordingly, the resarecher’s adopted mixed research approche because gathering the relevant data which could not be obtained by adopting a single research approche. For qualitiative data, questionnsaire and interview were used to gather information from employees from the selected commercial banks who are directly involved in the deposit mobilization activites. However, the researcher highly depended on the secondary data, which used time series data covering from 2006 to 2015 G.C of annual audited financial statements of the respective banks which obtained from NBE data base.The time series data were analized througth the economic analysis which is known as ‘‘STAT’’ and assessed them using discriptive statstics for the variables. So as to know weather the assumptions of CLRM had been violted or not, the researcher’s made diagonestic tests of heteroscidaicity, muliticollinarity, normality and outcorrelation with in the study and also formulated a multiple liner regeression model for which the total deposit volum of the selected banks as the dependent variable and deposit interest reat, inflation rate, GDP(per capital income), branches expanstion, bank size, average foreign exchange rate Birr to USD, profitability of the banks, loan and advance granted to customers, as an explanatory variables.

The economics analysis result indicated that, some the explanatory variables were the most significant factors on the total deposit volume of the banks ,however; deposit interest rate, profitability of the banks, average foreign exchange rate Birr to USD, inflantion rate had less significant power to influence on the depsoit volume of commercial banks. Among those factors, branches vi

expantion is the vital strategy for the banks to mobilize sound deposit from public because it is supriour from others. In this resarch, some result were devated from the conivinational economic theories, as the deposit interest rate brought a negative influence on the total of deposit for the period under the study. At the end, the study had recommended that, the banks have to do more effort encouraging deposit growth by considering different factors