Determinants of Commercial Bank Deposits in Ethiopia: A Case of Commercial Bank of Ethiopia
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Date
2015-06
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Addis Ababa University
Abstract
The survival of every commercial bank highly depends on bank deposit because deposit
mobilization is a major activity of all commercial banks. As the result, the issue of banks
deposit and its determinants is crucial to the financial sector of developing country like
Ethiopia. Therefore, this study aimed to identify and evaluate those factors affecting bank
deposit in general by taking Commercial Bank of Ethiopia as evidence. Accordingly, the
researcher adopts mixed research approach. The rationale of using such a mixed approach is to
gather data that could not be obtained by adopting a single method.Regarding to the qualitative
data; questionnaire is used to gather information from the employees of commercial bank of
Ethiopia particularly for those employees who actively participated in deposit mobilization
tasks in CBE city branches. Regarding to the secondary data; time series data covering 1998 -
2014 was analyzed. First, the time series data were assessed using descriptive statistics for the
variables as well as the test for heteroskedasticity, autocorrelation and normality testing to
know if the assumptions of CLRM violated or not. Second, estimated model was a single
regression equation with deposit as the dependent variable and explanatory variables as deposit
interest rate, overall inflation rate, number of branch opening, gross domestic product,
individual foreign remittance and dummy variable. Estimation was done using Ordinary Least
Squares technique by E-views7 statistical package. The results from economic analysis showed
that all the explanatory variables were positively correlated with the explained variable.
Among these variables, branch opening is an important strategy for deposit mobilization, it is
highly significant than others. Individual remittances from diasporas is also next to branch
opening is significantly affects CBE’s deposit. The others are affects positively and can
increase CBE’s deposit. And finally, the study had recommended what should be done to
encouraging deposits growth by Commercial bank of Ethiopia for the benefit of the domestic
deposit mobilization.
Key words: Commercial Banks, Bank Deposits, Determinants of bank deposits
Description
Keywords
Commercial Banks, Bank deposits, Determinants of bank deposits