ANALYSIS OF FACTORS AFFECTING DEPOSIT MOBILIZATION OF PRIVATE COMMERCIAL BANKS IN ETHIOPIA

Abstract

The aim of this study is analyzing factors affecting deposits mobilization of private commercial banks in Ethiopia. In doing so, the study used Pearson correlation analysis, ordinary least squares (OLS) technique, Granger causality analysis and descriptive statistics using secondary data. The data are collected from national bank of Ethiopia (NBE) and sampled private commercial banks from the year 2002 up to 2017. The collected panel data also, regressed based on random effect model. Econometric view version 8 (Eview 8) and stata version 13 statistical software has been used to perform the analysis. The result of correlation analysis showed that, deposit interest rate and lending interest rate strongly correlated, while the inflation weakly correlated with bank deposit. As per the Granger causality analysis, the variables included in the estimation model have a unidirectional relationship in the long run. In addition to, the results of regression analysis showed that, deposit interest rate; the lending interest rate and return on asset were positively and significantly influence the bank deposit. However, inflation affects bank’s deposit negatively and significantly during the study period. Finally the study has recommended that, the private commercial banks should give due emphasis to deposit mobilization tasks and its determining factors by considering mobilizing deposit is a way to sustain in the banking industry.