Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia

Ferede Mengistie Alemu

doi:doi:10.11648/j.jim.20211004.11

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Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia

Ferede Mengistie Alemu

Published in Journal of Investment and Management (Volume 10, Issue 4)

Received: 13 October 2021 Accepted: 1 November 2021 Published: 10 November 2021

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Abstract

Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.

Published in	Journal of Investment and Management (Volume 10, Issue 4)
DOI	10.11648/j.jim.20211004.11
Page(s)	56-61
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

Commercial Banks, Deposit Mobilization, Fixed Effect Model

References

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[5]	Gemedu WE. Factors Determining Commercial Bank Deposit : An Empirical Study on Commercial Bank of Ethiopia. 2012; (2).
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[7]	Jacewitz S, Pogach J. Deposit Rate Advantages at the Largest Banks. J Financ Serv Res. 2018; 53 (1).
[8]	Nahidul Islam S, Nahidul Islam S, Julfikar Ali M, Atif Wafik H. Determinants of Deposit Mobilization of Private Commercial Banks: Evidence from Bangladesh. Int J Bus Manag Invent ISSN [Internet]. 2019; 8 (10): 26–33. Available from: www.ijbmi.org
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[11]	Agama DT. Determinants of Commercial Banks Liquidity in Ethiopia. Manag Today. 2015; 5 (2).
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Ferede Mengistie Alemu. (2021). Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. Journal of Investment and Management, 10(4), 56-61. https://doi.org/10.11648/j.jim.20211004.11

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Ferede Mengistie Alemu. Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. J. Invest. Manag. 2021, 10(4), 56-61. doi: 10.11648/j.jim.20211004.11

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Ferede Mengistie Alemu. Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. J Invest Manag. 2021;10(4):56-61. doi: 10.11648/j.jim.20211004.11

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@article{10.11648/j.jim.20211004.11,
  author = {Ferede Mengistie Alemu},
  title = {Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia},
  journal = {Journal of Investment and Management},
  volume = {10},
  number = {4},
  pages = {56-61},
  doi = {10.11648/j.jim.20211004.11},
  url = {https://doi.org/10.11648/j.jim.20211004.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20211004.11},
  abstract = {Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.},
 year = {2021}
}

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TY  - JOUR
T1  - Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia
AU  - Ferede Mengistie Alemu
Y1  - 2021/11/10
PY  - 2021
N1  - https://doi.org/10.11648/j.jim.20211004.11
DO  - 10.11648/j.jim.20211004.11
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 56
EP  - 61
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20211004.11
AB  - Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.
VL  - 10
IS  - 4
ER  -

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Author Information

Ferede Mengistie Alemu

Department of Economics, College of Business and Economics, Debre Tabor University, Debre Tabor, Ethiopia

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APA Style

Ferede Mengistie Alemu. (2021). Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. Journal of Investment and Management, 10(4), 56-61. https://doi.org/10.11648/j.jim.20211004.11

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ACS Style

Ferede Mengistie Alemu. Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. J. Invest. Manag. 2021, 10(4), 56-61. doi: 10.11648/j.jim.20211004.11

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AMA Style

Ferede Mengistie Alemu. Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia. J Invest Manag. 2021;10(4):56-61. doi: 10.11648/j.jim.20211004.11

Copy | Download

@article{10.11648/j.jim.20211004.11,
  author = {Ferede Mengistie Alemu},
  title = {Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia},
  journal = {Journal of Investment and Management},
  volume = {10},
  number = {4},
  pages = {56-61},
  doi = {10.11648/j.jim.20211004.11},
  url = {https://doi.org/10.11648/j.jim.20211004.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20211004.11},
  abstract = {Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Drivers of Deposit Mobilization in Private Commercial Banks of Ethiopia
AU  - Ferede Mengistie Alemu
Y1  - 2021/11/10
PY  - 2021
N1  - https://doi.org/10.11648/j.jim.20211004.11
DO  - 10.11648/j.jim.20211004.11
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 56
EP  - 61
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20211004.11
AB  - Deposit mobilization is a deep-seated part of banking activity. Banks have a decisive implication in enlightening economic efficiency by creating channel between lender and borrower via transferring funds from resource surplus unit to deficit resource unit that have better productive investment opportunities. Therefore, it is indispensable to examine the drivers of Commercial banks deposit mobilization in Ethiopia. To conduct the study, the panel data type from 2010-2019 has been used. Also, for this study the fixed effect model with the application of some diagnostic tests like langragian test, hausman test, unit root test heteroskedasticity test and autocorrelation tests have been used. The data has been analyzed by the descriptive and econometrics analysis. The descriptive analysis of the study shown that the average rate of commercial banks deposit mobilization in Ethiopia in the last nine subsequent years was growing by 9.7 percent and the rate of growth of branch expansion growing by 1.413 percent. In general, inflation rate rate of risk, the rate of return to asset, and Liquidity ratio altered by 137, 0.39, 0.31&0.003 percent, respectively. The result of fixed effect model indicates that, among seven explanatory variables four variables such as government expenditure, interest rate, and return on asset positively and significantly affect at 5% and 10% deposit mobilization but inflation rate is statistically and negatively affected deposit mobilization at 5% level of significance. Given the result of the study, the following recommendations have been forwarded: the responsible agent shall be increase government expenditure of infrastructure, increase interest rate and decrease inflation rate to raise deposit mobilization in Ethiopia.
VL  - 10
IS  - 4
ER  -

Copy | Download