DETERMINANTS OF COMMERCIAL BANKS DEPOSIT GROWTH IN ETHIOPIA

Abstract

The general objective of this study is to examine factor affecting commercial banks deposit growth in Ethiopia. In order to achieve this objective descriptive and econometric analyses were performed. The target population was thirteen Banks in commercial activities, out of twenty-two commercial bank selected with 13 years back in the industry and registered by NBE under operation in Ethiopia and selected purposive sampling technique for the study. The panel data set for the study used secondary source consisted of annual data spanning from2009 to 2021 gathered from the national bank of Ethiopia. the dependent variable used to this study is deposit growth; explanatory variable used in this study were number of bank branch, loan to deposit ratio, deposit interest rate, awareness creation, age of company, exchange rate, profitability of the bank, and inflation rate. Different diagnostic tests were conducted to check the appropriateness of the model. Fixed effect model has been applied to find out of the results of explanatory variable. According to the final result achieved by applying panel data techniques, number of bank branches, exchange rate, and awareness creation had positively and statistically significant influence on commercial bank deposit growth; whereas, age of the bank and loan to deposit ratio are negative and statistically significant influence on commercial bank deposit growth. Whereas inflation rate had negative and insignificant influence on commercial bank deposit growth. And whereas deposit interest rate and profitability of the bank has positively and statistical insignificant. Finally, The study suggest that Ethiopian commercial banks specifically private owned banks have to open more branch in order to more accessible to the society, as the same times to increase their deposit and competition with the public banks. The Ethiopian people have exchange rate to change the currency commercial banks it creates more awareness of the people and also the Ethiopian commercial banks have to work on creating of awareness about banking services by recruit sales persons or promotion, who have an experience in marketing in order to advertise the products and services of the commercial bank through door-to-door activities.