Determinant Factors of Deposit Mobilization In Commercial Bank of Ethiopia

Abstract

The objective of commercial banks is to make profits and thus satisfy the needs of their respective stockholders. The making of profits and even staying on board of these, banks adopt strategies to mobilize deposits from the public that is an input to earn income for Commercial bank. In order to make good strategies, however, the banks should know what factors determine the deposit mobilization activity in the real world. This paper then explores the theoretical as well as empirical analysis of those factors having an impact on deposit volume in banks and even assesses which ones are more significant or less significant by taking CBE as evidence. To do the practical investigation, the researcher collected both primary and secondary data. The primary data was collected by a means of questionnaire from management and staff of CBE regarding the skill, motivation, commitment and the banks new products. The secondary data for the study were the values of dependent and independent variables of eleven years (2006 up to2015 GC),which were collected from commercial bank of Ethiopia, national bank of Ethiopia and central statistics authority . The study had found four variables that can affect the total deposit of commercial banks. These Four variables are regressed with the dependent variable, i.e. total deposit; these variables include inflation rate, loan disbursements, per-capita income and bank branches.The data analysis was done using SPSS software. Different diagnostic tests are tested to know whether the model is valid or not, having the model is valid the regression analysis is performed using OLS method. The study reveals that all the four variables can affect total deposit. Branch expansion had positive and significant effect on total deposit whereas inflation rate had negative and insignificant effect on total deposit. And the remaining two variables loan provision and per-capita income has positive but insignificant effect. The research recommends that banks have to do much in branch expansion studying potential deposit area.