Abstract:
Financial institutions, especially the banking sector plays a crucial role in models of economic
growth. It is an essential component of investments; bank Profit/Loss, banks deposits, banks
advances and Interest Earning have considerable effect on economic activity and long-term
economic growth. The view that, strong financial sector performance has the key to economic
growth was reflected in the development strategies and plans in many countries. In Ethiopia, the
development of the financial sector is limited, the contribution to GDP is also very low, and most
of the banks attention is on similar services and commercial activities in the domestic banking
areas rather than diversified and international banking services. The general objective of this
study is to evaluate the Effect of the banking sector development for the growth of Economic
growth of the Ethiopia, it evaluate or measure the effects of indicators of commercial banks
development more specifically deposits, Asset ,loan and advances and profitability on GDP. To
achieve the objectives of the study quantitative research approach were used. Secondary source
of data was employed through panel data analysis for the total number 10 years of commercial
banks covering from 2011 - 2020 G.C. The collected data were analyzed with the use of the SPSS
(statistical package for the social sciences) program 20v and STATA. The percentage, mean,
standard deviation, coefficient of variation, correlation and multiple regressions were utilized.
The finding of The fixed effect model result of Profitability (ROA) of commercial banks
(p=0.233) is significantly associate with level of GDP . The result of Loan and advance (p=0.00)
in the research also significantly associate with GDPAs per the study the size of the banking
sector (Asset) (p=0.000) this also significantly associate GDP. The result of Deposit of
commercial banks (p=0.000) really associate with the GDP.
