DETERMINANTS OF DEPOSIT MOBILIZATION EVIDENCE FROM ETHIOPIAN PRIVATE COMMERCIAL BANKS

Abstract

The core objective of this study was to investigate empirically determinants of deposit mobilization in private commercial Banks in Ethiopia. To achieve the study objectives, explanatory research design and quantitative approach was employed by using secondary data. The data was accessed from National Bank of Ethiopia, each Banks website and Ministry of finance. The study used balanced panel data which was random effect model for the year 2011 through 2019 on 12 sampled private commercial banks in Ethiopia. Purposive sampling technique was used to deliberately select sample banks. The dependent variable of the study was deposit mobilization which was measured by deposit growth (DGR) and the independent variables used in this particular study were Branch Expansion, Liquidity, profitability, Real GDP, Inflation, Exchange rate, Government Expenditure, Foreign Remittance and Unemployment rate. The empirical finding shows that bank specific factors play a significant role to affect Ethiopian private banks’ deposit mobilization. Thus, Branch Expansion, Liquidity and Profitability found to have a positive and statistically significant impact. While, from the total six macroeconomic variables, four’s (GDP, Government Expenditure, Exchange rate and Foreign remittance) where found to have statistically significant effect, with GDP and Foreign Remittance being positively related. Finally, Bank managers need to give more focus to bank specific factors in their decision making process. To the other side, Policy makers need to struggle more so as to achieve a stable economic environment that will be conducive enough for banks to operate thereby accelerating banks deposit mobilization.