FACTORS AFFECTING DEPOSIT MOBILIZATION: A CASE STUDY IN SELECTED ETHIOPIAN PRIVATE COMMERCIAL BANKS

Abstract

Deposits are the primary source of funds for a bank, which facilitates the uses of funds of loans and investments. The higher the deposits amount, the bigger the lending and investments portfolio can be maintained by the banks to sustain its expansion and future growth. Mobilizing deposits is one of the essential issues in developing countries as domestic funds provide cheap and reliable source of funds for development. The objective of this study is empirically investigating factors affecting deposit mobilizations of Ethiopian private commercial banks for the periods 2010 to 2019. The researcher adopted explanatory research design and Quantitative research approach. Endogenous and exogenous variables were analyzed by using the balanced panel data regression model. To check the appropriateness of the model Different diagnostics test were conducted such as test of hetroscedasticity, autocorrelation and Normality. The results explained that Banks Liquidity has a positive insignificant effect, credit risk and exchange rate have positive and statistically significant and inflation has significant negative influences on commercial bank deposit mobilization. Recommendation given to Commercial banks they should have managed high liquidity risk that contributed by increased deposit.