DETERMINANTS OF DEPOSIT MOBILIZATION IN PRIVATE COMMERCIAL BANKS OF ETHIOPIA

Abstract

The purpose of this study is to investigate determinants of deposit mobilization in private commercial banks of Ethiopia using panel data of six private commercial banks from year 2002 to 2012. The study used both quantitative and qualitative research approach. Secondary financial data are analyzed using multiple linear regressions models for the six bank‟s deposit. Fixed or random effect regression model was applied to investigate the impact of bank branches, exchange rate, Real Gross domestic product, Capital Adequacy and Liquidity on private commercial banks deposits. Besides, the study used primary data analysis to solicit managers‟ perception towards the determinants of private commercial banks deposit mobilization. The empirical results from regression analysis showed that bank branches, exchange rate, and real gross domestic product affects deposit of the bank positively whereas, capital adequacy and liquidity affects the deposit of the private banks negatively. This implication show that better capitalized banks tend to create less liquidity that leads to mobilize little deposit amount. On the other hand the feedback of respondents depicted that managerial efficiency, government policy, convenience of bank office, technology, bank size and awareness of savings by society affected deposit level of the banks significantly. Thus, management bodies of private commercial banks should strive to strengthen the identified significant factors and government bodies should also see the adverse effect of tight polices imposed on the existing private commercial banks as well as for the new entrant banks.