Determinants of Deposit Growth in Ethiopia: A Case of Selected Commercial Banks

Abstract

The study assessed the determinants of deposit growth in selected commercial banks of Ethiopia from 2014-2023. Consequently, explanatory research design and quantitative research approach have been used.  Data has been collected from National Bank of Ethiopia and Ethiopian Statistical Agency. Seven commercial banks were selected based on purposive sampling technique. Furthermore, the secondary data has been analyzed using both descriptive and inferential statistics. The study employed balanced panel data models particularly fixed effect. The finding of the study revealed that bank size, broad money supply, and return on assets have a positive and significant effect on deposit growth. On the other hand, inflation rate has a negative and significant effect on deposit growth. Other explanatory variables—age dependency ratio, branch expansion growth, capital adequacy ratio and real Gross Domestic product (RGDP) growth rate and loan to deposit ratio—have insignificant effect on deposit growth. In light of the study's findings, the researcher recommends that the banks’ management should strive to increase profitability by cutting expenses and making effective use of invested assets; the National Bank of Ethiopia should continuously monitor the money supply by determining the banks' reserve requirements; and policymakers should continuously control inflation to encourage the expansion of deposits through Ethiopia's commercial banks.