Determinants Of Deposit Mobilization: The Case Of Commercial Bank Of Ethiopia

Abstract

Deposit mobilization is the process of public cash or funds accumulation by the financial institutes via its different routes, for instance, savings, current, fixed deposit accounts and other specialized schemes. The main objective of this study was to study the determinant of deposit mobilization in commercial bank of Ethiopia through multiple linear regression analysis by using the quarterly time series data in the year 2012-2021. To study the determinants of deposit mobilization in commercial bank, inflation rate, Number bank branches, Economic growth rate, political instability rate, return on equity, and capital adequacy rate are incorporated. Before going to fit the multiple linear regression models, all model assumption likes autocorrelation, homoscedasticity, absence of multicollinearity and normality of error term have checked. From the results analysis of variance the result indicates that at least one independent variable is statistically significant for the deposit mobilization. Based on the result of coefficient of determination, about 71.15% of the variation in deposits mobilization explained by the incorporated independent variables in the model while about 65.90% of the variation of deposit mobilization explained by the independent variables when unnecessary variables removed from the model in general. From the result of regression coefficient, Number of Bank Branch, Capital Adequacy Ratio, and Return on Equity were statistical significant and positive effect for the deposit mobilization in commercial bank of Ethiopia, while Political Instability rate affect the deposit mobilization in commercial bank of Ethiopia negatively and significantly. Since this study focus only on commercial bank with some selected variables, it strongly recommended that further study should be carried out using different sets of variables and appropriate mathematical models to overcome its’ impact deposit mobilization in commercial bank and others in Ethiopia