Determinants Of Selected Private Commercial Banks’ Deposit Mobilization In Ethiopia

Abstract

Deposit is one of the resources that commercial banks are highly motivated to get it, and the most liquid money that is found in the treasury of a bank. As a result, the survival of every commercial banks is highly dependent on deposit. Poor deposit growth in commercial Banks lead to inability to disburse loans to qualifying members on demand, inability to meet operationcosts, inability to service debts etc. Therefore, managing and controlling deposit is essential for commercial banks to be competitive and attractive. The growth of deposit in Ethiopian private commercial banks is at its infant stage and historically been low and also their deposit is not sufficient to meet the required credit as compared to CBE. The main objective of this study was to empirically examine the macro-economic and bank specific determinants of deposit growth in Ethiopian private commercial banks. A longitudinal/panel secondary dataset was used in this study. This study covers those Ethiopian private commercial banks having available data during the period of 2010/11-2020/21. Explanatory research design, quantitative research approach, post positivism paradigm and OLS estimation technique wereemployed to examine the effect of explanatory variables (real GDP growth, deposit rate, exchange rate, inflation, population growth and branch expansion rate) on the dependent variable (deposit growth). Ten private commercial banks in Ethiopia were selected purposively. The CLRM assumptions such as heteroskedasticity, normality, multicollinearity etc. were tested. The results from the panel multiple linear regression model revealed that real GDP growth, deposit rate, inflation, population growth and branch expansion rate had statistically significant and positive effect on deposit growth, in the contrary exchange rate had positive but insignificant effect on deposit growth. Finally, the researcher recommends that there shall be stable economic growth, stable inflation, competitive and attractive deposit interest rate, aggressive branch expansions, and healthy population growth