FACTORS AFFECTING DEPOSIT MOBILIZATION ON PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

Deposit mobilization is a fundamental part of banking activity. Thus,the main objective of the study is to examine the factors affecting deposit mobilization of private commercial banks in Ethiopia. The study used balanced panel model in examining the regression model and collect data from six private commercial banks covering the period of Twenty(20) consecutive years, 2000-2019 with a total of 120 observations. To this end, the study employed a quantitative research approach by documentary analysis based on their audited financial statement. The study used panel data techniques specifically fixed effect model on the regression analysis and used E-view8 software. The study used one dependent variable total deposit amount (DEP) and nine independent variables that are Bank’s size, Number of Bank’s Branch, Bank Reserve, Deposit interest rate, Loan to Deposit Ratio, Lending Rate, Exchange Rate, Inflation rate and Gross domestic product (GDP). The regression result of Exchange Rate and Deposit Interest Rate show that positive and significant effect at 5% significance level on deposit mobilization of private commercial bank in Ethiopia and Bank Size, Bank Reserve, Loan to Deposit Ratio, Number of Bank’s Branch and Lending rate show that positive and significant at 1% significance level on Deposit Mobilization.Whereasinflation rate has negative and insignificant impact at 5% significance level on deposit mobilization of private commercial bank and GDP show that positive and insignificant impact at 5% significance level on deposit mobilization. The study recommended that Ethiopian private commercial banks should give attention to Bank Size, Bank Reserve, and Loan to Deposit Ratio, Lending Rate, Exchange Rate, Deposit Interest Rate and Number of Bank’s Branchthat could affect deposit mobilization and significantly enhance their deposit.