Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks

Habtamu Alebachew Legass; Anwar Adem Shikur; Omer Mohammed Ahmed

doi:doi:10.11648/j.jfa.20210906.11

| Peer-Reviewed

Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks

Habtamu Alebachew Legass, Anwar Adem Shikur, Omer Mohammed Ahmed

Published in Journal of Finance and Accounting (Volume 9, Issue 6)

Received: 21 September 2021 Accepted: 28 October 2021 Published: 5 November 2021

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry specific and Macro-Economic variables. The research used secondary data from 2010-2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation were used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicate branch macroeconomic factors such as bank size, broad money supply, and inflation significant positive effect on deposit growth of commercial banks. Contrarily, Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia.

Published in	Journal of Finance and Accounting (Volume 9, Issue 6)
DOI	10.11648/j.jfa.20210906.11
Page(s)	207-215
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Deposit Growth, Panel Data, Fixed Effect

References

[1]	Yakubu, I. N., & Abokor, A. H. (2020). Factors determining bank deposit growth in Turkey: an empirical analysis. Rajagiri Management Journal.
[2]	Teshome, F. (2017). Determinants of Commercial Banks Deposit in Ethiopia. Degree of Master Thesis, Addis Ababa University.
[3]	Adem, S. B. (2015). Determinants of commercial bank deposits in Ethiopia: A case of commercial bank of Ethiopia. Degree of Master Thesis, Addis Ababa University.
[4]	Tenaw, M. S. (2020). Determinants of deposit growth. An empirical study on Ethiopian private commercial banks.
[5]	Getachew, K. (2017). Determinants of Commercial Banks Deposit Mobilization in Ethiopia. Degree of Master Thesis, St. Mary's University.
[6]	Gebre, T. (2019). Determinants of Private Commercial Banks’ Deposit Growth in Ethiopia. Degree of Master Thesis, Addis Ababa University.
[7]	Haron, S., & Azmi, W. N. W. (2008). Determinants of Islamic and conventional deposits in the Malaysian banking system. Managerial Finance.
[8]	Namazi, M., & Salehi, M. (2010). The Role of Inflation in Financial Repression: Evidence of Iran. World Applied Sciences Journal, 11 (6), 653-661.
[9]	Rao, N. D. (1975). Deposit Mobilization by Co-operative Banks: A Comparison with Scheduled Commercial Banks. Economic and Political Weekly, 1098-1100.
[10]	Dereje, H. A. (2017). Determinants of deposit in Ethiopian private commercial banks. MSc. Addis Ababa University.
[11]	Ando, A., & Modigliani, F. (1963). The" life cycle" hypothesis of saving: Aggregate implications and tests. The American economic review, 53 (1), 55-84.
[12]	Haron, S., Azmi, W. N. W., & Shafie, S. (2006). Deposit determinants of commercial banks in Malaysia. Finance India, 20 (2), 531.
[13]	Deaton Angus, S. (1991). Saving and liquidity constraints. Econometrical, 59 (5), 221-248. Degree of Master Thesis, Addis Ababa University.
[14]	Opoku, S. (2011). Mobilizing deposits; the role of commercial banks in Ghana (Doctoral dissertation).
[15]	Benes, E., & Walsh, K. (2018). Measuring employment in Labour Force Surveys: main findings from the ILO LFS pilot studies. ILO.
[16]	Turhani, A., & Hoda, H. (2016). The Determinative Factors of Deposits Behavior in Banking System in Albania (Jan 2005–Dec 2014). Academic Journal of Interdisciplinary Studies, 5 (2), 246-246.
[17]	Al-Qudah, A. M., & Jaradat, M. A. (2013). The impact of macroeconomic variables and banks characteristics on Jordanian Islamic banks profitability: Empirical evidence. International Business Research, 6 (10), 153.
[18]	Kaufman, G. G. (1972). Deposit variability and bank size. Journal of Financial and Quantitative Analysis, 7 (5), 2087-2096.
[19]	Finger, M. H., & Hesse, M. H. (2009). Lebanon-determinants of commercial bank deposits in a regional financial center. International Monetary Fund.
[20]	Ünvan, Y. A., & Yakubu, I. N. (2020). Do bank-specific factors drive bank deposits in Ghana? Journal of Computational and Applied Mathematics, 376, 112827.
[21]	Islam, S. N., Ali, M. J., & Wafik, A. (2019). Determinants of Deposit Mobilization of Private Commercial Banks: Evidence from Bangladesh. International Journal of Business and Management Invention (IJBMI), 8 (10), 26-33.
[22]	Gunasekara, H. U., & Kumari, P. (2018). Factors affecting for deposit mobilization in Sri Lanka. International Review of Management and Marketing, 8 (5), 30.
[23]	Ferrouhi, E. M. (2017). Determinants of bank deposits in Morocco.
[24]	Pitoňáková, R. (2016). Determinants of household bank deposits: Evidence from Slovakia. Journal of Economics, Business and Management, 4 (9), 528-533.
[25]	Mushtaq, S., & Siddiqui, D. A. (2016). Effect of interest rate on economic performance: evidence from Islamic and non-Islamic economies. Financial Innovation, 2 (1), 1-14.
[26]	Larbi-Siaw, O., & Lawer, P. A. (2015). Determinants of bank deposits in Ghana: A cointegration approach. Asian Journal of Economics and Empirical Research, 2 (1), 1-7.
[27]	Osei, L. K. (2016). Determinants of rural banks deposit mobilization in Ghana (Doctoral dissertation).
[28]	Hibret, B. (2015). Determinate of Commercial Bank‟ s Deposit Growth in Ethiopia: Case Study on the Commercial Bank. MSc, AAU.
[29]	Cincotta, R. P., & Engelman, R. (1997). Economics and rapid change: the influence of population growth.
[30]	Al-Qudah, A. M., & Jaradat, M, A. (2013). The Impact of Macroeconomic Variables and Banks Characteristics on Jordanian Islamic Banks Profitability: Empirical Evidence, International Business Research, 6 (10) 153-162.

Cite This Article

Plain Text BibTeX RIS

APA Style

Habtamu Alebachew Legass, Anwar Adem Shikur, Omer Mohammed Ahmed. (2021). Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. Journal of Finance and Accounting, 9(6), 207-215. https://doi.org/10.11648/j.jfa.20210906.11

Copy | Download

ACS Style

Habtamu Alebachew Legass; Anwar Adem Shikur; Omer Mohammed Ahmed. Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. J. Finance Account. 2021, 9(6), 207-215. doi: 10.11648/j.jfa.20210906.11

Copy | Download

AMA Style

Habtamu Alebachew Legass, Anwar Adem Shikur, Omer Mohammed Ahmed. Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. J Finance Account. 2021;9(6):207-215. doi: 10.11648/j.jfa.20210906.11

Copy | Download

@article{10.11648/j.jfa.20210906.11,
  author = {Habtamu Alebachew Legass and Anwar Adem Shikur and Omer Mohammed Ahmed},
  title = {Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks},
  journal = {Journal of Finance and Accounting},
  volume = {9},
  number = {6},
  pages = {207-215},
  doi = {10.11648/j.jfa.20210906.11},
  url = {https://doi.org/10.11648/j.jfa.20210906.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20210906.11},
  abstract = {The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry specific and Macro-Economic variables. The research used secondary data from 2010-2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation were used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicate branch macroeconomic factors such as bank size, broad money supply, and inflation significant positive effect on deposit growth of commercial banks. Contrarily, Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks
AU  - Habtamu Alebachew Legass
AU  - Anwar Adem Shikur
AU  - Omer Mohammed Ahmed
Y1  - 2021/11/05
PY  - 2021
N1  - https://doi.org/10.11648/j.jfa.20210906.11
DO  - 10.11648/j.jfa.20210906.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 207
EP  - 215
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20210906.11
AB  - The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry specific and Macro-Economic variables. The research used secondary data from 2010-2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation were used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicate branch macroeconomic factors such as bank size, broad money supply, and inflation significant positive effect on deposit growth of commercial banks. Contrarily, Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia.
VL  - 9
IS  - 6
ER  -

Copy | Download

Author Information

Habtamu Alebachew Legass

Department of Accounting and Finance, College of Business and Economics, Dire Dawa University, Dire Dawa, Ethiopia
Anwar Adem Shikur

Department of Accounting and Finance, College of Business and Economics, Dire Dawa University, Dire Dawa, Ethiopia
Omer Mohammed Ahmed

Department of Accounting and Finance, College of Business and Economics, Addis Ababa University, Addis Ababa, Ethiopia

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Habtamu Alebachew Legass, Anwar Adem Shikur, Omer Mohammed Ahmed. (2021). Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. Journal of Finance and Accounting, 9(6), 207-215. https://doi.org/10.11648/j.jfa.20210906.11

Copy | Download

ACS Style

Habtamu Alebachew Legass; Anwar Adem Shikur; Omer Mohammed Ahmed. Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. J. Finance Account. 2021, 9(6), 207-215. doi: 10.11648/j.jfa.20210906.11

Copy | Download

AMA Style

Habtamu Alebachew Legass, Anwar Adem Shikur, Omer Mohammed Ahmed. Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks. J Finance Account. 2021;9(6):207-215. doi: 10.11648/j.jfa.20210906.11

Copy | Download

@article{10.11648/j.jfa.20210906.11,
  author = {Habtamu Alebachew Legass and Anwar Adem Shikur and Omer Mohammed Ahmed},
  title = {Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks},
  journal = {Journal of Finance and Accounting},
  volume = {9},
  number = {6},
  pages = {207-215},
  doi = {10.11648/j.jfa.20210906.11},
  url = {https://doi.org/10.11648/j.jfa.20210906.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20210906.11},
  abstract = {The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry specific and Macro-Economic variables. The research used secondary data from 2010-2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation were used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicate branch macroeconomic factors such as bank size, broad money supply, and inflation significant positive effect on deposit growth of commercial banks. Contrarily, Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Commercial Banks Deposit Growth Evidence from Ethiopian Commercial Banks
AU  - Habtamu Alebachew Legass
AU  - Anwar Adem Shikur
AU  - Omer Mohammed Ahmed
Y1  - 2021/11/05
PY  - 2021
N1  - https://doi.org/10.11648/j.jfa.20210906.11
DO  - 10.11648/j.jfa.20210906.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 207
EP  - 215
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20210906.11
AB  - The purpose of this research is to examine major causes of deposit growth in commercial banks in Ethiopia with explicit inference on industry specific and Macro-Economic variables. The research used secondary data from 2010-2019. Macro-economic factors selected under this study consist of age dependency ratio, unemployment rate, population growth, broad money supply, and Inflation. While bank-specific variables included are branch expansion and bank size. Since the study employed panel data in line with the nature and data of the study ordinary least square method estimation were used subsequently after the necessary diagnostic tests and Hausman test performed to determine the appropriateness of fixed effect. The result of the study indicate branch macroeconomic factors such as bank size, broad money supply, and inflation significant positive effect on deposit growth of commercial banks. Contrarily, Age dependency ratio and population growth have a statistically significant negative effect on deposit growth. The unemployment rate, on the other hand, has been found to have a positive but statistically insignificant relationship. The bank-specific factors indicate the branch expansion has a positive significant association while Bank size has a positive but insignificant relationship with deposit growth of commercial banks. Finally, the study suggests there should be a stable macroeconomic environment that reduces the effect of inflation, money supply, population growth, and from a bank-specific perspective aggressive branch expansion is essential for the growth of deposits in commercial banks in Ethiopia.
VL  - 9
IS  - 6
ER  -

Copy | Download