Factors Affecting Deposit Mobilization In Ethiopia: The Case Of Selected Commercial Banks In Ethiopia

Abstract

In the world of finance, deposit mobilization refers to the process employed by banks and other financial institutions to encourage people to deposit their money. This study investigates the factors affecting deposit mobilization in commercial banks in Ethiopia using panel data for the period of 2019-2023 on selected ten banks through purposive sampling based on the availability of data required for this study in which More banks have this period data . The research employs a multiple linear regression model to identify the key drivers and potential roadblocks for the deposits’ expansion. The analysis identifies variables which positively and negatively influences deposit mobilization. Increases in return on asset, return on equity, net interest rate, capital and service, gross domestic product are all correlated with positively. This suggests increasing these variables has a crucial role in propelling the forward bank growth. However, Inflation and exchange rate are negatively impacting the deposit mobilization. This highlights the need for measures to control inflation and exchange rate. Based on these findings, the study offers valuable recommendations for policymakers aiming to accelerate and sustain the banks’ deposit mobilization. These recommendations focus on mitigating inflation rate as well as exchange rate and increasing gross domestic product, return on asset, return on equity, net interest rate and capital and service. More study is advised to establish a causal relationship in order to reinforce the relationship between deposit mobilization tactics and financial institution attributes. Ultimately, this will facilitate the development of a more robust and efficient deposit mobilization landscape by enabling policymakers to create more focused and effective actions that directly address the unique strengths and limitations of various institutions.