DETERMINANTS OF COMMERCIAL BANKS DEPOSIT: IN THE CASE OF PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

The survival of every commercial bank highly depends on bank deposit because deposit mobilization is a major activity of all commercial banks. As the result, the issue of banks deposit and its determinants is crucial to the financial sector of developing country like Ethiopia. Therefore, this study aimed to identify and evaluate those factors that determine deposit in general by taking Private Commercial Bank of Ethiopia as evidence. Accordingly, the researcher adopts Quantitative research approach and Explanatory research design. Regarding to the secondary data; time series data covering 2007- 2016 was analyzed. First, the time series data were assessed using descriptive statistics for the variables as well as the test for errors equal zero mean test, heteroskedasticity, autocorrelation, multicollinearity and normality testing to know if the assumptions of CLRM violated or not. Second, estimated model was a single regression equation with deposit as the dependent variable and explanatory variables as deposit interest rate, overall inflation rate, number of branch , gross domestic product,. Estimation was done using Ordinary Least Squares technique by E-view8 statistical package. The results from economic analysis showed that three of the Independent variables were positively correlated with the explained variable. Among these variables, Deposit Interest Rate is an important strategy for deposit mobilization, it is highly significant than others. Gross domestic product is also next to DepositInterest rate significantly affects Private Commercial Banks deposit. The others factor Inflation Rate is affects negatively and insignificantly deposit. And finally, the study had recommended what should be done to encouraging deposits by Private Commercial bank of Ethiopia for the benefit of the domestic deposit mobilization