DETERMINANTS OF DEPOSIT GROWTH IN ETHIOPIAN PRIVATE BANKS

Abstract

This purpose of this study was to find out the determinants of deposit growth in private banks of Ethiopia; the research specifically intends to identify important factors that influence private bank deposit and examine to what extent the factors determine bank deposit. The research employs quantitative research approach and design; and 52 observations coming from 13 year panel data of four banks ranged from 2005 to 2017. The research employs a regression model of ordinary least square model to estimate deposit growth of private banks. Totally, seven variables were identified; however, two of the variables were removed due to multicollinearity problems. The findings of the study revealed that private banks on average had annual deposit of 8.95 billion Birr deposit and contribute a yearly total deposit of 35.77 billion birr. The findings of the study revealed that bank deposit determined by different factors; accordingly, number of banks branch and the banks spending on advertising had a positive and significant effect on banks deposit; particularly number of branches were highly significantly determine bank deposit than the other factors; likewise, the bank’s profitability also had a positive and significant effect of bank deposit which implies the banks the more they become profitable the more will be their deposit. Apart from these, the exchange rate also determine the banks deposit positively, as the national official exchange rate increases the banks deposit also responds positively. Therefore the bank should give due emphasis to its deposit mobilizing tasks by considering mobilizing deposit and banks should invest on create working and promote them for aggressively. In addition private banks should expand their branches in order to increase their deposits and the bank should give priority for branch opening than other determinants.