Determinants of the Geographical Distribution of Bank Branches: A Case in Ethiopian Commercial Banking Industry

Abstract

Today banks are performing all kinds of banking transactions and providing various financial services in order to make life easier for people in a given country. Banks should consider the demographic, economic and social characteristics of the geographical regions in branch site selection in order to provide the best financial services in line with their customers' demand. And the main purpose of this study was to gather and analyze the factors that determine the Geographical Distribution of Bank Branches: A Case in Ethiopian Commercial Banking Industry with respect to regions and cities. Both state owned commercial banks and private owned commercial banks were taken for the study. The study used both primary and secondary sources of data which covered from the year 2006-2011.The primary data was collected through unstructured interview and the secondary data was collected through document analysis and analyzed using descriptive and inferential stastics. To examine the influence of economic, socialcultural and demographic variable on decision of bank branch location selection over time, panel regression models were used using Normality of the error term, Heteroscedasticity, Multicollinearity and Model specification test. Accordingly, government capital expenditure, number of employed population, number of firms in all sectors and the Number of Vocational Training School and Undergraduate Students are vital determinants of the geographical distribution of bank branches in Ethiopian commercial banking sector.