FACTORS AFFECTING DEPOSIT MOBILIZATION IN COMMERCIAL BANKS OF ETHIOPIA

Abstract

The main objective of the study was examining factors affecting deposit mobilization of commercial banks in Ethiopia for the periods 2009-2018. From total of 16 Commercial Banks which are engaged in commercial bank activities, eight selected based on the historical time formation of banks. The researcher adopted Quantitative research approach. Bank specific and by using the balanced panel fixed effect regression model. Different diagnostic tests (test for assumption of Homoscedasticity, Autocorrelation, Normality, were conducted to check the appropriateness of the model. The results reveal that number branch, age, and Bank Profitability are positively and statistically significant on bank deposit growth; whereas, Deposit to total asset was negatively and statistically insignificant on bank deposit growth. The researcher recommends that the deposit mobilization will increase if the commercial banks are profitable and have adequate asset return so commercial banks should sustain their profitability to increase their amount of deposit. Commercial Banks should also decrease their outstanding loan and advance to reduce their credit risk and decreases their liquidity by mobilizing more fixed time deposit instead of individual and demand deposit since credit risk had a positive and significant effect on bank deposit.