Impact Assessment on Deposit Mobilization of Banks: A Study on Selected Commercial Banks in Ethiopia

Abstract

The objective of commercial banks in Ethiopia is to make profits and thus satisfy the needs of their respective owners (share holders). The making of profits and even staying on board of these conventional banks depend on the strategies adopted by each bank to mobilize deposits from the public that is an input to earn income for most conventional banks. In order to make good strategies, however, the banks should know major impacts of deposit mobilization activity in the real world. This paper then assessed the theoretical as well as empirical analysis of those impacts that determine deposit volume in banks with their significance level. To do the practical investigation in terms of commercial banks in Ethiopia, the researcher collected qualitative and quantitative data from NBE annual reports of eight years (2016/17) and questionnaires and interviews made to senior bank officers and managers of eight banks. The data is analyzed using ordinary excel sheet analysis. The study reveals that branch expansion and competition among banks are the most significant factors of deposit volume. Besides, the other variables–Money supply, non-bank specific factors and deposit interest rate respectively has moderate and smaller power to influence deposit mobilization activity. The study also exposes that the deposit mobilization activity is become challenging due to its associated costs and the competition also becoming stiff, the outcome of the competition favoring the big size state banks. Beyond that, the government policies are also favoring the latter in an effort to mobilize huge fund for a national development activities. The research recommends that banks have to do much in branch expansion by exploring potential deposit areas.