Determinants of Deposit Mobilization in Ethiopian Commercial Banks

Abstract

The main objective of this study was to identify the determinants of commercial banks deposit in Ethiopia. The data covered the period from 2002-2016 for the sample of seven commercial banks in Ethiopia since the data is secondary in nature, the quantitative approach to research was used. Besides Hausman test was employed. Under this study, both internal and external factors were included. The internal factors used in this study include loan to deposit ratio, loan loss provision, capital adequacy, profitability, and branch expansion whereas inflation rate was from the external factor. This study runs an unneeded random effects test using Hausman specification test. Hence based on the result fixed effect model was adopted. The data were collected from the commercial banks’ financial statements and national bank of Ethiopia, Both internal and external variables were analyzed by employing the balanced panel fixed effect regression model and the result of the study revealed that loan loss provision and loan to deposit ratio have negative and statistically significant impacts on deposit of Ethiopian commercial banks while profitability, capital adequacy ratio and branch expansion have positive and statistically significant impact on deposit.