FACTORS AFFECTING DEPOSIT MOBILIZATION IN COMERCIAL BANK OF ETHIOPIA: THE CASE OF ADDIS ABABA CITY BRANCHES

Abstract

The study primarily aims at factors that affect deposit mobilization of Commercial Bank of Ethiopia. The study uses both primary and secondary data and uses both descriptive and regression analysis by using SPSS and EViews software’s. The study empirically ascertains that, managing deposits is not possible without knowing and controlling the factors affecting it. For the qualitative analysis a total of 130 respondents answered the entire survey. The overall response rate for survey was approximately 86.09%. The survey find out that the key factors for deposit growth are employees’ skill, awareness, capabilities and commitment, top management cooperation, government rule and regulation, service quality, customers awareness. The student researcher identified one dependent (CBE total deposit) and six independent variables (deposit interest rate, inflation rate, foreign remittance, nominal GDP, exchange rate and branch expansion). The researcher used a twenty three years data for each variable and this data is deeply discussed under chapter four. The student researcher had used the econometric model of multiple regressions. Based on regression analysis result nominal GDP, exchange rate, branch expansion and foreign remittance was found to have a positive relationship with bank deposit growth and the effect on bank deposit is significant. On the other hand deposit interest rate and Inflation are affects positively and can increase CBE’s deposit but these factors are insignificant, since p value of those variables is greater than the significant level. Finally the hypothesis is tested by using wald test and the result shows rejection of the null hypothesis and this shows that the independent variables are positively affects the total deposit of commercial banks. Managing deposits is not possible without knowing and controlling the factors affecting it. Thus CBE should identify the sources of deposit by considering the determining factors of bank deposit. These results have important policy implications for both domestic policy makers and the bankers working in the country and specifically for developing of reliable deposit mobilization policy by the commercial bank of Ethiopia.