ASSESSMENT OF DEPOSIT MOBILIZATION OF

DASHEN BANK (A CASE STUDY IN LAMBERET

BRANCH)

BY: EBRAHIM KAMIL

Senior essay submitted to

The College of Business, Economics and Social Sciences,
Unity University, Department of Accounting and Finance In
partial fulfillment of the requirements for obtaining
Bachelors Art Degree in Accounting and Finance Addis
Ababa
Addis Ababa
Nov, 2024

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 Student’s Declaration

I, undersigned, hereby declare that this senior essay is my original

work prepared under the guidance of Baheru Gebeyehu (MSc).All

sources of materials used for this paper have been duly acknowledged

and this senior essay is not presented by any other party for any

purpose.

Name: _______________________
Signature: ____________________
Date: ________________
 Advisor’s Declaration

This paper has been submitted for examination, by Student Ebrahim Kamil
with my proper advice and approval thereof.

Name of Advisor: ________________________

Signature: ______________________

Date _________________________
 Acknowledgment

First of all, I would like to thank GOD and his mother VIRGIN MARY for helping me this far
and giving me the courage to succeed in my study.

I would also like to express my deep gratitude to Mr. Baheru Gebeyehu (MSc) my research
advisor, for his patient guidance, enthusiastic encouragement, and useful critiques of this
research work. My family without your irreplaceable love, concern, support, and advice I may
not go this far, also my friends thank you for your time and advice. Finally, I thank staffs of
Dashen Bank for their assistance with collection of data.

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 Table of Contents
Acknowledgment..............................................................................................................................i
List of tables.....................................................................................................................................i
List of Abbreviations.......................................................................................................................ii
Abstracts.........................................................................................................................................iii
CHAPTER ONE:INTRODUCTION...............................................................................................1
1.1. Background of the Study.......................................................................................................1
1.2 Statement of the Problem.......................................................................................................2
1.3 Objectives of the Study..........................................................................................................3
1.3.1 General objectives..........................................................................................................3
1.3.2Specific objectives...........................................................................................................3
1.4 Research Questions................................................................................................................3
1.5 Scope of the Study.................................................................................................................4
1.6 Significance of the Study.......................................................................................................4
1.7 Organization of the paper.......................................................................................................4
1.8 Research Methodology..........................................................................................................4
1.8.1 Introduction.....................................................................................................................4
1.8.1 Research design..............................................................................................................5
1.8.3 Sampling Method............................................................................................................5
[Link] Target Population.........................................................................................................5
1.8.4 Sample method and procedure........................................................................................5
1.8.5 Data collection methodology..........................................................................................5
[Link] Data types and source..................................................................................................5
1.8.6 Data Analysis and Interpretation....................................................................................6
CHAPTER TWO:2 REVIEW OF THE RELATED LITRATURE................................................7
2.1 Introduction............................................................................................................................7
2.2 Definition of Deposit.............................................................................................................7
2.3 The concept of Banking.........................................................................................................8
2.4 Bank deposit...........................................................................................................................9
2.4.1 Motive of depositors to deposit in banks........................................................................9

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 2.4.2 Deposit Growth.............................................................................................................10
2.5 Importance of Deposit Growth............................................................................................10
2.6 Definition of depository institutions....................................................................................11
2.7 Types of depository institutions...........................................................................................11
2.7.1 Commercialbank...........................................................................................................11
2.7.2 Thrift institution............................................................................................................11
2.8 The function of banks in financial system...........................................................................12
2.9 Bank specific Factors of Deposit Growth............................................................................13
2.9.1 Product Differentiation.................................................................................................13
2.9.2 Branch Expansion.........................................................................................................14
2.9.3 Service Quality.............................................................................................................14
2.9.4 Appropriate Technology...............................................................................................15
2.9.5 Bank Liquidity..............................................................................................................18
2.9.6 Profitability (Financial Performance).........................................................................18
2.9.7 Market strategy.............................................................................................................19
2.9.8 Bank Cross-Selling.......................................................................................................20
2.10 Deposit Behaviour of Commercial Banks.........................................................................20
2.11The Determinants of Commercial Banks Deposits.............................................................20
2.11.1External determinants..................................................................................................20
2.12 Deposit...............................................................................................................................23
2.13 Types of Deposit................................................................................................................23
2.13.1 Demand Deposits........................................................................................................23
2.13.2 Saving Deposit............................................................................................................23
2.13.3 Time Deposit..............................................................................................................23
2.13.4 CheckableDeposit.......................................................................................................24
2.14 Purpose of deposit..............................................................................................................24
2.15. Empirical Review..............................................................................................................25
CHAPTER THREE:DATA PRESENTATION, ANALYSIS AND INTERPRETATIONS........27
3.1 Demographic Characteristics of Respondents.....................................................................27
3.2Analysis of Deposit Mobilization.........................................................................................29
3.2.1 Respondents opinion about the Deposit Mobilization..................................................29

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 3.3 Analysis of interview questions...........................................................................................34
CHAPTER FOUR:SUMMARY, CONCLUSION, AND RECOMMENDATION......................36
4.1 Summary of major Findings....................................................................................................36
4.2 Conclusions..............................................................................................................................37
4.3 Recommendations....................................................................................................................38
Reference.......................................................................................................................................39
Annex...............................................................................................................................................I

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 List of tables
Table 3.1 personal information of employees...............................................................................27
Table 3.2 Deposit Mobilization.....................................................................................................29
Table 3.3 Deposit Mobilization Techniques.................................................................................31
Table 3.4 challenge of deposit mobilization..................................................................................33

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 List of Abbreviations
Automated teller machines (ATMs)

Certificates of deposit (CD)

Electronic fund transfer (EFT)

National bank of Ethiopia (NBA)

Money market deposits account (MMDA)

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 Abstracts
This study intends to assess the deposit mobilization practice of Dashen Bank and to what extent
Dashen Bank we’re exercising deposit mobilization strategies and what tools and techniques
were being practiced since there is no research of the same type has been done in the past at
Bank of Abyssinia. Descriptive design was adopted for the study. Those having two years and
above experience on Lamiberet branch employees and customers were selected for data
collection. Accordingly, one branch was selected from the total number of 20 employees were
selected from unknown population. The non-probability censustechniques were also customers.
The main instrument collection for primary data was questionnaire and interview, while
secondary data was collected from annual report of the company, published document. The
finding of the study shows that, Dashen Bank is expand branch’s, provided different products,
doesn’t offer gifts to new customers, and does not provide necessary training for staff about
deposit mobilization, marketing strategy of the bank increases the deposit amount, highly
competitor from other banks, poor technology regarding customer satisfaction. Finally, the gap
identified shows that there is faller to train staff about deposit mobilization, offering gifts to new
customer, using poor technology, lack of marketing skill among employees, high computation
from other banks so the researcher were recommended Dashen Bank needs to provide training
package consistently for their employees, to improve its technology for create customer
satisfaction by promoting new technology, create awareness among unbanked society, create
techniques for customers to express their dissatisfactions.

Key word: deposit mobilization, branch expansion, technology,

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 CHAPTER ONE
INTRODUCTION

1.1. Background of the Study

Deposit mobilization is a fundamental aspect of banking operations that can significantly impact
a bank's financial stability and growth. According to Lee and Devos (2016), deposit mobilization
plays a crucial role in determining a bank's liquidity levels, as deposits are a primary source of
funds for banks to meet their financial obligations. Additionally, Gupta et al. (2018) emphasize
that an increase in deposit mobilization can also enhance a bank's profitability by providing a
lower cost source of funds for lending activities.

Various factors influence deposit mobilization, including interest rates on deposits, economic
conditions, and customer preferences. According to Raheem et al. (2017), interest rates on
deposits play a significant role in attracting deposits, as higher interest rates can incentivize
depositors to save more money in their accounts. Economic conditions, such as inflation rates
and income levels, also influence deposit mobilization by affecting consumers' ability and
willingness to save money in banks (Yang et al., 2015).

Furthermore, banking regulations, customer demographics, and technological advancements in

the banking sector also impact deposit mobilization efforts. According to Fathi et al. (2019),
banking regulations, such as reserve requirements and deposit insurance schemes, can influence
depositors' confidence in banks and their willingness to deposit funds. Customer demographics,
such as age, income level, and financial literacy, can also affect deposit mobilization by
influencing individuals' savings behavior (Ozili, 2017). Additionally, technological
advancements, such as online banking and mobile banking services, have made it easier for
customers to access and manage their deposits, thereby affecting deposit mobilization strategies
(Alfaro-Martinez et al., 2016).

Dashen Bank is one of the leading commercial banks in Ethiopia, offering a range of financial
products and services to its customers. One of the key functions of a commercial bank is deposit
mobilization, which involves attracting funds from customers and effectively managing those
deposits to generate [Link] this assessment, we will analyze Dashen Bank's strategies and

1
performance in deposit mobilization. We will evaluate the bank's ability to attract and retain
deposits, as well as its effectiveness in utilizing these funds to generate income through lending
and other investment [Link] examining Dashen Bank's deposit mobilization practices, we
can gain valuable insights into the bank's overall financial health and competitiveness in the
banking industry. This assessment will help us understand the bank's strengths and weaknesses
in this crucial aspect of its operations, and identify opportunities for improvement.(Annual
report,2023).

Overall, Understanding the factors that drive deposit mobilization will be essential for banks and
policymakers to develop effective strategies to attract and retain deposits. By analyzing the
impact of various factors on deposit mobilization, this study will aim to provide valuable insights
for banks to enhance their deposit mobilization efforts and improve their financial health and
stability.

1.2 Statement of the Problem

Deposit mobilization is a critical aspect of banking operations as it determines the availability of
funds for lending and investment activities. However, the effectiveness of deposit mobilization
strategies varies among banks and financial institutions. Therefore, the problem to be addressed
is the assessment of deposit mobilization techniques and their impact on the overall financial
performance and stability of banks,(Babajida,2020).

Commercial banks in Ethiopia have a critical need to gather resources without any restrictions.
Deposits, which are highly liquid funds held in a bank's treasury and available for borrowing
when needed, are a key resource that banks prioritize mobilizing. The success of deposit
mobilization can be influenced by various factors, and deposits are a crucial liability for banks. It
is important for banks to carefully manage and evaluate their deposit mobilization efforts, as it is
a central activity for all commercial banks (Daniel, 2018).

According to National bank of Ethiopia report of 2021/22, indicate that commercial banks only
mobilize deposit 15.8% which is indicate that from the money that should be deposit in the bank
84.2% of not mobilized. This shows that the deposit mobilization practice among banks in the
country is not developed and there should be mechanisms to mobilize such deposit rather than
sitting and waiting for depositors to come and deposit their money.

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Dashen Bank is performing well in the industry, particularly in mobilizing high amounts of
deposits. However, preliminary studies and day-to-day observations suggest that the bank's
current deposit performance strategic plan may not be effectively implemented. There are also
restrictions in Ethiopia that impact deposit mobilization for banks. Deposits are a crucial
resource that banks are highly motivated to attract, as they represent the most liquid funds
available for lending. Various factors can affect a bank's ability to attract deposits, making it
essential to understand these factors and their relationships.

Dashen Bank is facing challenges in effectively implementing its deposit performance strategic
plan and navigating the restrictions in Ethiopia that impact deposit mobilization. The researcher
aims to identify the factors influencing deposit growth and analyze the relationship between
these factors to improve the bank's deposit performance.

1.3 Objectives of the Study

The researcher also tries to attain both general and specific objectives of the study in order to
Assessment of deposit mobilization in case of Dashen Bank.

1.3.1 General objectives

The general objective of this has beento investigate the deposit mobilization in case of Dashen
Bank.

1.3.2Specific objectives
The specific objectives of this research are:-

1. To assess deposit mobilization strategies of Dashen Bank.

2. To evaluate the deposit mobilization techniques performed by Dashen Bank.
3. To assess the challenge of deposit mobilization ofDashen Bank

1.4 Research Questions

To examine the problem, the researcher tries to address the following research questions:

1. What deposit mobilization strategies and activities performed by the bank?

2. Have the deposit mobilization technique of the bank successful?
3. What are the challenges of deposit mobilization of Dashen Bank?

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1.5 Scope of the Study
The study has beenfocused specifically on the deposit mobilization practices at Dashen
Banklamberet branch. It not addresses deposit mobilization at other branches of the bank, as it
would be logistically challenging to involve all branches. The research has beenlimited to the
operations and practices of a single branch in this geographical [Link] study has
beenprimarily address the sources of deposits, major customer types, classifications of loans, and
deposit mobilization strategies at the lamberet branch ofDashen Bank. The research not delves
into broader theoretical concepts related to banking or economic principles beyond the context of
deposit mobilization. It was focused on practical aspects and operations within the specified
branch.

1.6 Significance of the Study

In addition to its academic importance, the researcher hopes the study have the following
impacts: The researcher has beenable to identify the problems and solutions regarding deposit
mobilization thoroughly and has beenable to present them. It show the major tools and
techniques used by banks in accordance with deposit growth. This study has been shed some
light for banks to have further awareness in the area of deposit growth. It has beenused as an
input for future reference for further studies in the area of deposit growth.

1.7 Organization of the paper

The study wasconsisted of four chapters. The first chapter has beenaddress the background of the
study, statement of the problem, objective of the study, significance of the study, scope of the
study, and research methodology. The second chapter covers a review of related literature. The
third chapter deals with the presentation, analysis, and interpretation of data gathered from
primary sources. Lastly, the last chapter was covered a summary, conclusions, and
recommendations.

1.8 Research Methodology

1.8.1 Introduction
The researcher used both qualitative and quantitative approach. The researcher wasused two
types of data sources in conducting this research study: primary and secondary data sources. The
primary data for this study has beencollected from the Dashen Bank staff, from their manager of

4
the bank. Regarding the secondary sources, the data has beencollected from the depositors
(customers) records of Dashen Bank, internal documents, report papers, and journals of the bank.
As the sources are identified above, both primary and secondary data has beencollected
systematically to obtain realistic information from concerned parties. In the collection of primary
data, structured questionnaires have beendistributed. The questionnaires have been close-ended
questions, which have beenprovided specific questions for the respondents to answer accurately.

1.8.1 Research design

The researcher wasused a descriptive research design because of the nature of the study to assess
the deposit mobilizationat Dashen Bank. The design has been help to achieve the stated research
objectives and answer the research questions of the study. Descriptive research design is one of
the most widely used methods in social science research, and it is used to obtain information
concerning the current status of the phenomena to describe ''what exists'' with respect to variables
identified by the researcher or conditions in a situation. It provides the number of times
something occurs, frequency, and lends itself to statistical calculations such as the average
number of occurrences or central tendency (C.R. Kothari, 2005).

1.8.3 Sampling Method

[Link] Target Population

The population of this study are 1 branch manager, 20 employees of the bank staff, in the sample
to be used. Because they have better experience in operation of the bank, and believed to be
better source of information for the study, for this reasons, staff of the bank taken as target
population for the study.

1.8.4 Sample method and procedure

The researcher used non probability sampling among which census sampling method using for
employees has been used.

1.8.5 Data collection methodology

[Link] Data types and source

The researcher used both questionnaires and interviews to gather data. The questionnaires mainly
contain close and open ended questions using a scaling/ranking technique, which present an

5
option for respondents to rank their answers to the questions on a scale of values ranging from 1
to 5. The other instrument that used was an interview. During the interviews, the researcher has
been used a semi-structured interview technique with the branch manager. This technique
involves conducting unstructured interviews where the researcher prepares a list of questions to
ask during the interview but can also ask follow-up questions to obtain deeper details or
explanations from the respondents based on their responses. The interview was conducted with
the manager of Dashen Bank.

1.8.6 Data Analysis and Interpretation

The researcher has been analyzed the data that had been collected through survey to statistical
population concerning the practice of deposit mobilization. The quantitative data which have has
beencollected from respondents who are clerical staffs of Dashen Bank have be present or
interpret using frequency and percentage to address the deposit mobilization. In regards to
qualitative data, information gathered from the interview has beenanalyzed narrative and present
in combination with the quantitative information.

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 CHAPTER TWO
2 REVIEW OF THE RELATED LITRATURE
2.1 Introduction
The literature review is prepared in two parts, i.e. the theoretical review and the empirical review
part. In the theoretical review part the theories that states about the commercial bank deposit
mobilization are discussed. The empirical literature parts discussed on matters concerning the
deposit mobilization of commercial banks, and they elaborated as follows;

2.2 Definition of Deposit

There are articles, journals and different information on the issue of the commercial banks
deposit and the factors which controls the commercial banks deposits. Some author’s had
classified the factors and explain their relationship with commercial banks deposit mobilization.
Commercial bank’s deposits are dependents on depositor’s moneys as a source of funds.
According to the Keynesian theory of demand for money, there are three main motives why
peoples hold moneys; transactions, precautionary and investment motives. In order to cost for
these motives, commercial banks offer many categories of deposit facilities that are; demand,
saving, time, recurring deposit accounts and many others are there. Demand deposit account
facility is the most commonly referred to as a current and is designed for those who need moneys
for transaction purposes. This motive can be looked at from the viewpoints of customers who
want income to meet their household expenditures and on the viewpoints of businessmen who
require money and want to hold it in order to carry out their business activities. Hence, the
purpose of deposit facility is for convenience or for making daily commitment (Sergent, 2001).

Banks deposits represent the most significant components of the money supply used by the
public, and changes in money growth are highly correlated with changes in prices of goods and
services in the economy. Bank’s deposits are made to deposit accounts at banking. Institutions,
such as saving account, checking account, time deposit account and money market account. The
account holder has the right to withdraw any deposited funds, as set forth in the terms and
conditions of the account. The ‘deposit’ itself is liabilities owned by the bank to the depositors
and refer to these liabilities rather than to the actual funds that are deposited (Bargicho S, 2015).

7
Banks led theories; this model offers a distinct alternative to conventional branch-based banking
in that customer conducts financial transactions at a whole range of retail agents instead of at
banks branches or through banks employees. The banks are the ultimate providers of financial
services and it’s the institutions in which customers maintain account. Retails agents have face-to
face interaction with customers and performs cash-in/cash-out function much as branches based
teller would takes deposit and process withdrawal (Staschen Et al.2006).

2.3 The concept of Banking

Banking is one of the eldest careers in human history, it also succeeded with civilizations.
Meanwhile humans happening, using money bank facilities were in use throughout history. Up-
to- date banking as we know it nowadays was recognized in Italy and Greece in the15th century.
Today, banks are one of the supreme vital organizations for a modern bargain to work in any
country,(Gedey, 1990). Different ancient foundations states that the first basics of the banking
facility in the world were put by goldsmiths and silver smiths. They have a safe box to put &
they were the most trusted. They used to accept gold, silver and various jewelries to put with
them. Therefore an individual or a wholesaler places his wealth under their supervision, for their
facility they charge a small extent of money and stretch the client a receipt to assurance their
approval. Then they started using, money paying device what we now call this document as
‘check’. However as time goes by , the gold smiths and silver smiths observed that their
customers wouldn’t take their jewelry soon, and those clients, whenever they face the deficiency
of money, they started loaning to this people and started to grow revenue from their facility.
They stimulated putting and providing and rather than creation the clients to fee a custody for
depositing, they started to fee them interest and announced the public to work with money. It is
assumed that, ancient Assyrians, Babylonians, Athenians, Romans and Abyssinians also used the
banking service (Gedey, 1990).

Banks play a precise significant role in the economic growth of every state. They have control
over a great part of the supply of money flow. Banks are the central stimulus of the economic
improvement of a nation. The financial segments involvement to progress lies in the vital role it
acting in mobilizing savings and allotting these resources competently to the most creative uses
and investments in the actual sector (Ayalew, 2009).

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2.4 Bank deposit
Bank deposits are an amount of money held at a financial institution on behalf of account holders
for safekeeping. Most banks deposit is insured by organization to reduce their risk. Bank deposits
are made to deposit account at a bank institution, such as saving account, checking account and
money market accounts. The account holders have the right to withdraw any deposited funds, as
set forth, in the term and conditions of the account. The deposit itself is a liability owned by the
bank to the depositors and refers to this as liability rather than to the actual funds that are
deposited (Adam, 2005).

2.4.1 Motive of depositors to deposit in banks

Customers deposit money in banks due to various reasons. One motive is the desire for safety.
People feel safe if they keep their money within banks where there is more secure location than
their homes. The other reason is that the need for convenience. Payment by check is more
convenient than payment by money. The use of checks saves the bother and expense of counting
and of shipment; checks are relatively safe against theft and loss in transit; they are payable only
to the payee or endorsee; the voucher becomes a receipt; and large sums may be paid with the
same ease as small ones.

The third motive may be the receipt of interest on the deposits. In communities where the
competition for accounts is intense, banks offer interest on the average balance carried by the
depositor; this is especially likely in the case of large accounts, as of the governmental units,
corporations, or other banks. The interest paid varying with the account and the bank.

The fourth and the most important motive is bank "accommodation," as it is called. The
depositor wishes to be assured that he will have someone from whom he can get loans in case of
need, and a bank which has enjoyed the use of a good balance from a worthy customer assumes
an implicit responsibility to accommodate that depositor with loans when appeal is made. In this
sense the relations between customer and bank are mutual. In the depositor's daily business
transactions, occasions frequently arise when he wishes to procure loans on his own note or by
the discount of paper in his portfolio, and the bank stands ready to provide customers with its
own credit in exchange for their credit or that of other persons. The bank offers a market for
procuring and selling credits and so facilitates business in this incomparable way. (Westerfield
1921)

9
2.4.2 Deposit Growth
Deposit Growth said to means campaigning and collecting customer’s deposit. The banks would
have special campaigning where they would interact with a lot of people and invite them to make
deposit with their banks. Mobilizing saving involves overcoming the transaction costs associated
with collecting saving from different individuals and the information asymmetries, associated
with making, savers feel comfortable in relinquishing control of their saving (Maimbio, 2003).
Deposit mobilization has various role on financial system, it can accumulate capital improves
resource allocation and boost technological innovation (Tufano Et al. 1995).

2.5 Importance of Deposit Growth

There has recently been an upsurge of interest among development economists, governments and
international donors in programs to increase financial saving in developing country, particularly
in rural areas and from non-wealthy house holder. This upsurge is in part a reaction to the
failures of sub seized credit program, especially for the agricultural sectors, to achieve their goals
of increasing output and transferring income to the rural poor. These failures have been
attributed to recourse waste, regressive credit rationing and decreased viability of financial
intermediaries resulting from attempt to influence resource allocation and income distribution
through the provision of credit, at below equilibrium interest rate. In addition to the failure of
subsidized credit, the myth that the poor have no margin over consumptions for saving and in
any case do not respond to economic incentives are increasingly being questioned.

A growing number of successful saving mobilization program in developing country together

related studies, indicate that safe, liquid deposit of reasonable yield can be crucial in raising the
incomes of non-wealthy households. This is especially true under the inflationary conditions so
common in developing countries were the value of cash balance is rapidly eroded, thereby
forcing on wealthy house holders to save in the form of inflation hedges that often entail high
transaction and storage costs. Although some dissent continues there is growing recognition that
adequate yields on deposit at FLS and other financial assets are essential. (1986 by Western
Illinois University)

10
2.6 Definition of depository institutions
Depository institutions are financial intermediaries that accept from individual and make loans.
Depository institutions are the most important source of credit to customers and small business
are financial intermediaries that issues debt instrument they call deposit. Among these deposit
such as demand deposit or negotiable order of withdrawal. These function as money. Therefore,
a particular important feature of depository institution is that they issues debt instrument that
functions as medium of exchange and are included in common measures of money (Frederic M,
1997).

2.7 Types of depository institutions

2.7.1 Commercialbank
Are the most important of the entire depository’ financial institution, by far it’s the largest
depository institution. Commercial banking definitions focused on commercial banks assets and
liabilities. It is depository institutions that is relatively unrestricted in its ability to make
commercial loans and that is legally permitted to issue checking accounts. Commercial bank is
the only that legally could issue checking account as liabilities. The Commercial banks are major
buyers if debt securities issued by federal, state and local government. However commercial
banks have significantly expanded their offering of financial service to customers and units of
government. They accept deposit, make business loan and offer related services. These
institutions are to make a profit owned by a group of individual yet some may be members of the
Federal Reserve System (Peter H, Et al. 2000).

2.7.2 Thrift institution

Thrift institutions are specialized types of depository institutions. Traditionally, thrift was not
permitted to accept deposits transferable by check through checking accounts. They obtained
funds primary by tapping the saving of households There are three types of thrift institutions’
such as credit union, saving and loan associations, and saving banks: Credit union: is institutions,
which are household oriented intermediaries, offering deposit and credit service to individual and
families their long run survivals stem from mainly being able to offer low loans rates and high
deposit rates to their customers (Dr.N. Radhakrishna,2004).

11
Saving and loans associations: as credit union they extended financial services primary to
household. In their heavily emphasize on long-terms lending rather than short-terms. They are a
financial institution that specialized in accepting saving deposit and making mortgage and other
loans. They are often mutual held, meaning that the depositors and borrowers are members with
voting right and have ability to direct the financial and managerial tools of the organization like
the member of credit union. Saving banks: are financial institutions which primary purpose is
accepting saving deposit and paying interest on those deposit saving accounts. They are an
account maintained by retail financial institutions’ that pay interest, but cannot be used directly
as money in the narrow sense of a medium of exchange. Technically, saving banks are owned by
their depositor (Wikipedia the free Encyclopedia, 2010).

2.8 The function of banks in financial system

Understanding the many roles that banks play in the financial system is one of the fundamental
issues in theoretical economics and finance. The efficiency of the process through which saving
are channeled in to productive activity is crucial for growth and general welfare. Banks are one
parts of this process. Lenders of funds are primarily households and firms. These lenders can
supply funds to the ultimate borrowers, who are mainly firms, government and households in
two ways. The first is through financial market, which consist of money market, bonds markets
and equity market. The second is through banks and other financial intermediaries, such as
money market funds, mutual funds, insurance companies and pension funds. Financial sector is
broods which are consist of the banking sector and other financial institutions, such as insurance
corporations and pension funds, brokers, public exchange and securities markets etc.

However in the context of Africa’s continent the banking industry carries the grater share on
their financial system (Sheku, 2005).

Banks have historical been viewed as playing a role in financial market for two reasons. One is
that they perform a critical role in facilitate payments. Commercial banks as well as other
intermediaries provides services in screening and monitoring borrowers and by developing
experts as well as diversifying across many borrowers, banks reduce the cost of supplying credit
to customer (Samolyk, 2004).

12
Banks are often not merely buying someone’s debt, rather they are providing significant financial
service associated with extending credit to their customers and to the extent that investors want
to hold banks can fund borrowers directly. The main providers of additional financing are
commercial banks (Heraled and Heiko, 2008).

Banks perform various roles in the economy; - they improve information problem between
investor and borrowers by monitoring the latter and ensuring a proper use of the depositor funds,
they provide inter temporal smoothing of risk that cannot be diversified at a given point in time
as well as insurance to depositor against unexpected consumption shock. Because of maturity
mismatch their assets and liabilities, however banks are subject to the possibility of runs and
systematic risk. Banks also contributes to the growth of the economy of the country (Franklin
and Elena, 2008).

2.9 Bank specific Factors of Deposit Growth

2.9.1 Product Differentiation

According to Tomola (2013) said “Banks have used various strategies and most increasingly
adopt a marketing approach for deposits mobilization which focuses on the identification of
customer needs and offering of product accordingly. “ Financial institutions provide variety of
saving products to mobilize deposits through attraction of customers. These deposit accounts are
arranged to meet the test and preference of customers. The deposit accounts are, saving deposits,
current account or demand deposits account, interest free deposit accounts and fixed time
deposits. Although, saving deposit is one the interest bearing accounts to depositors, commercial
banks provide alternative savings deposit schemes to attract more customers based on customers’
test and preference, because service innovation is considered as a source of competitive
advantage. Interest bearing deposits include but not limited to Women saving account, Student
saving account, Youth saving account, and Hybrid saving account. Moreover, banks facilitate
interest free savings accounts to satisfy the test and preference of Muslims communities or other
interested people. Banks further closely study the needs of customers and arrange various
interests on deposits based on the volume of deposits.

13
2.9.2 Branch Expansion
Commercial banks use different strategies to strengthen the level of deposits and number of
customers. One of the strategies is branch expansion at different location of home country as
well as opening of multinational banks at host country. Branch expansion is opening new
branches or service outlets inside and outside the country. (Carlson and Mitchener, 2005),
Commercial banks in Ethiopia expend huge investment budget for branch expansion in and
outside Addis Ababa yearly, because branch expansion play significant role for resource
mobilization and customer attraction. Opening bank branches at different locations facilitate for
proximity to customers, supports the bank mobilize deposit and attract more customers.
However, before opening branch at a certain location the marketing department of a bank
conducts feasibility study and identify the target market. Then assignment of employees and
customer attraction endeavor will take place. Therefore branch expansion to banks is very crucial
with regard to deposit mobilization and customer attraction.

2.9.3 Service Quality

Service quality has been viewed as a significant issue in the banking industry, and it becomes
imperative for banks to strive for improved service quality if they want to distinguish themselves
from the competition. Service quality has five major dimensions that distinct one bank from
other. Customers who receive quality service from commercial bank stay longer, spend more,
and become loyal. Hence, a bank should implement comprehensive service quality to outshine
the competition and attract more deposits. After extensive research, Zeithaml, Parasuraman and
Berry (1988) found five dimensions customers use when evaluating service quality. They named
their survey instrument SERVQUAL. In other words if providers or banks get these dimensions
right, customers will hand over the keys to their loyalty, because, they are receiving service
excellence. According to the researchers what is important to them is, the five SERVQUAL,
namely: reliability, responsiveness, assurance, empathy and tangibles.

A) RELIABILITY

It is the ability to perform the promised service dependably and accurately. Customers want to
count on what is actually done by their providers or banks. They value that reliability. Banks
want to do what customers value. It is three times more important to be reliable than have shiny
new equipment or flashy uniforms.

14
B) RESPONSIVENESS

Customers of banks deserve prompt. Service providers benefit by establishing internal SLAs for
things like returning phone calls, emails and responding on-site.

C) ASSURANCE

It is knowledge and courtesy of employees and their ability to convey trust and confidence. If a
service provider is highly skilled, but customers don’t see that, their confidence in that provider
will be lower. And their assessment of that provider’s service quality will be lower. Hence,
service providers must communicate their expertise and competencies – before they do the work.
By communicating competencies, providers can help manage customer expectations. And
influence their service quality assessment in advance.

D) Empathy

Banks are expected to give kind, individualized attention to customers, as much as the service.
Even where are performed completely as per the specifications, customers may not feel satisfied
if the service provider’s employees fail to care about them during delivery. And this hurts
customers’ assessments of providers’ service quality. To avoid such misunderstanding bank
employees should be trained how to interact with customers and their end-users. Even a brief
session during initial orientation helps.

E) Tangibles

The appearance of physical facilities, equipment, personnel, and communication materials of

banks matter in customer positive perceptions even though this is the least important dimension,
in service quality. Service providers will still want to make certain their employees appearance,
uniforms, equipment, and work areas on-site (closets, service offices, etc.) look good. The
danger for banks is to make everything look sharp, and then fall short on reliability or
responsiveness.

2.9.4 Appropriate Technology

Commercial banks ensure sustainable financial performance based on resources that are backed
by strong stable deposits. However, mobilization of deposits is determined by a number of

15
factors that include adoption of appropriate technology, such as, availability of ATMs with low
service fees, Direct deposits (on line service), Debit card purchase, prepaid cards, mobile and
internet banking. According to Marganet Kane (2005), “Distribution of excellence drives brings
customer choice, loyalty and profitability.”

A. Electronic Banking

Technology is developing faster than ever, and as banking and money management becomes
increasingly electronic, it is important to understand new capabilities. Not only convenience, but
also help for security. Since, deposit mobilization is an integral part of banking activity promptly
adopting Electronic banking is the responsibility of bank management.

Electronic banking, which is also known as electronic fund transfer (EFT), refers to the transfer
of funds from one account to another through electronic methods. As electronic banking
becomes increasingly widespread, you will likely encounter instances where it is preferable to
make payments or transfer money electronically.

Customers understand how electronic banking benefits them and their finances. Using electronic
banking to customers’ advantage not only will improve convenience, but can also help them
track their transfers and payments. Hence, customers prefer to mobilize their deposits to bank
that facilitate Electronic banking. There are three key aspects of electronic banking: automated
teller machines (ATMs), direct deposits and debit card purchases.

[Link]

Most people are familiar with ATM as a method for depositing and withdrawing money quickly
and easily. ATM gives you the flexibility to withdraw cash at almost any time. What you might
not know is that many ATMs will also let you transfer funds between your accounts and make
deposits, providing the quick and easy convenience of 24/7 banking.

C. Direct Deposit

One of the most useful features of electronic banking is direct depositing, which allows you to
authorize deposits as well as withdrawals from your accounts. If you are paid regularly, your
employer may deposit your paychecks directly into your bank account. Similarly, for recurring

16
bills like mortgages or insurance payments, electronic banking enables you to pay the necessary
expenses on a regular basis with ease, and without missing payments.

D. Debit Card Purchases

In many ways, debit card purchases are similar to credit card transactions. With electronic
banking, you can make debit card purchases in person, online or over the phone. A debit card
purchase provides the convenience of a credit card, but the money is taken directly out of your
linked account and you can't spend more than you have. Here, you can use your debit card to get
cash back when making purchases, to avoid ATM fees, You also receive free, automatic alerts or
SMS alerts to protect your account, If you plan on using your debit card across state and
international lines, let your bank know ahead of time, to prevent fraud or security alerts and use
it.

E. Prepaid Cards

Unlike debit cards, prepaid cards are not tied to a bank account. When you make a purchase with
a prepaid card, the amount is subtracted from the balance of the card. Here, what you can do with
it is; Make purchases in person, online or by phone, you can reload the card with additional
funds, give gifts to friends and family, withdraw cash from ATM or bank, receive wages or
funds by direct deposit to the card and make Pay bills. in its Money 101 Student Workbook
confirmed that “From a security standpoint, one of the best qualities of online banking is that it
allows you to transfer funds electronically.”

F. Mobile Banking

Recent mobile technology makes easy banking accessible to almost all card and account holders
through downloading bank’s app. It will improve convenience and make banking easier for
customers to manage their money. With mobile banking, customers can check their balance,
track spending, review account history or bank statement, locate ATMs, deposit checks, transfer
funds, pay bills and receive text message notifications or SMS alerts about their account.
Commercial banks should shift to this technology in order to attract customers and mobilize
deposits. VISA Inc.(©2018) in its Money 101 Student Workbook confirmed that “From a

17
security standpoint, one of the best qualities of online banking is that it allows you to transfer
funds electronically.”

2.9.5 Bank Liquidity

Liquidity is another factor that determines the level of bank performance. Liquidity refers to the
ability of the bank to fulfill its obligations, mainly of depositors. According to (Dang &Uyen,
2011) adequate level of liquidity is positively related with bank profitability. The most common
financial ratios that reflect the liquidity position of a bank according to the above author are
customer deposit to total asset and total loan to customer deposits. Other scholars use different
financial ratio to measure liquidity. For instance (Ilhomovich, 2009) used cash to deposit ratio to
measure the liquidity level of banks in Malaysia. However, the study conducted in China and
Malaysia found that liquidity level of banks has no relationship with the performances of banks
(Said &Mohd, 2011). In the Ethiopian context there seems clear measure of the liquidity: the
liquid asset to deposit ratio, which the National Bank of Ethiopia, has set the minimum liquid
asset of the Bank not to be less that 15% of the Bank’s net current liability. Out of this the
directive obliged banks to hold 5% of them in primary reserve assets (NBE Directives
[Link]/9/95).

2.9.6 Profitability (Financial Performance)

The financial sector is vast field, which comprises of banks, cooperatives, insurance companies,
financial companies, stock exchange, foreign exchange markets, mutual funds etc. These
institutions collect idle and scattered money from the general public and finally facilitate
investment in different enterprises of national economy. Thus, today’s concept, the financial
institutions and commercial banks have become one of the bases for measuring the level of
economic development of nations. (Mitali Gabra,2009-2011).

Commercial Banks should maintain their competitive position by resource mobilization and
deployment of same to various shot, medium and long term financing. The more the loans the
banks disburse the more profit they could make. Banks do not have a lot of their own money to
give as a loan. They depend on customer deposits to generate funds for granting loans to other
customers. So a deposit mobilization scheme would encourage customers to deposit more cash
into bank and this money in turn will be used by bank to disburse more loans and generate

18
additional revenue. Kazi (2012) also confirmed that “Banks depend on customer deposits to
generate funds for granting loans to other customers”.

Moreover, commercial banks play their pivotal role in the economy through facilitating financial
payment system, granting loans to existing and potential investors, facilitating financial and
economic integration between different nations through import & export and above all support
the economic growth in industrialization, unemployment reduction and inflation regularization.
(Richard Tuyishime, Dr. Florence, MEMBA and Dr. Zenon MBERA 2015) said “the growth of
any economy depends on capital accumulation, which in turn depends on investment and an
equivalent amount of saving to match it.”

2.9.7 Market strategy

Deposit is a pillar for bank financial performance, and the major portion of commercial banks
assets that used for financing come from customers deposit. To attract these financial assets
banks have used various marketing strategies and most increasingly adopt a marketing approach.
The marketing strategy focuses on the customer identification, product creation or product
differentiation, offering services based on customers’ needs and preference, & retains them
through maintaining strong customer relationship, and through advertisement & promotion.

These alternative marketing approaches highly contribute for huge deposit mobilization.
According to Tomola M. Obamuyi (2013) “The banks were found to have performed credibly
well in deposit mobilization, as well as in granting loan and advance.”

Customer service based on priority assist is crucial in retaining profitable customers. To make
this effective commercial banks marketing section conduct regular study on the banks customers
in terms of the number of transactions, the minimum and maximum amount of deposits,
transaction turn over, customer loyalty, stability of deposits and then segment them to provide
service on the bases of priority. Also conduct attractive advertisement & promotion to recruit
new customers. Ahmed Aftabi, Soroush Deneshvar, Amir Karimbakhsh, Roudabeh&Mortezaei
(2013) confirmed that “The highest priority in terms of customer service is the most important
factor in attracting resources.”

19
2.9.8 Bank Cross-Selling
Commercial banks in order to increase deposit mobilization and improve their financial
performance use cross selling and up selling strategies as alternative means through attracting
new and existing customers. Jim Marous (2018) published seven ways to increase cross-selling.

Every financial institution needs to generate a stable stream of new customers, yet one of the
easiest and most sound sources of new business and related revenue is to reach out to current
customers for additional business. The cost of acquiring new retail, small business or commercial
customers being five to ten times the cost of retaining an existing one, and with the average
repeated spending of existing customer is 50% – 100% more than a new one, financial marketers
need to remember that the most efficient investment of marketing funds is to market to
customers that already bank with you or existing customer. Published by (Jim Marous, © 2018).

2.10 Deposit Behaviour of Commercial Banks

Different types of deposits have different features having different and divergent costs
implications. Strategies of deposit growth therefore undergo changes from time to time.
According to Shettar (2014) Deposit growth is depending on the cost of deposits. Mobilization of
deposits for a bank is as essential as oxygen for human being. In the post liberalization scenario,
the number of players in banking industry has increased considerably which developed
competition in bank marketing. „The survival of the fittest‟ has made applicable for the banks.
To enhance profitability, banks take steps to minimize the expenditure and are forced to mobilize
low cost deposits

2.11The Determinants of Commercial Banks Deposits

The determinants of commercial banks deposit is classified as macroeconomic factors and
micro economic factories that can affect the growth of commercial banks deposits. These are
discussed as follows: -

2.11.1External determinants
The external determinants are variables that are not related to bank management but reflect the
economic environment that affects the operation and deposit positions of Banks. The
external factors that can affect bank’s deposit include factors such as; Deposit interest
Rate, Growth per capita GDP, Broad money supply and Inflation.

20
A) Inflation

According to Solomon [Link] (2016) inflation is a major problem of most economies in the world
and it influences countries, both negatively and positively. Zou, [Link]. (2011) stated that inflation
is an important factor contributing to social and economic instability and disorder and is one of
the main observed and tested economic variables both theoretically and empirically. It is one of
the main problems of developing countries in the world. Inflation is the general increase in the
level of prices of goods and services in an economy over a period of time. When the general
price level changes; each unit of our currency value comes down and therefore buys less goods
and services. The day to day increase in prices of commodities especially of non-food items like
oil and gas snatch money from savings of consumers and the uncertainty of prices for both food
and non-food items, generate enthusiasm among people to earn more and more. People therefore
prefer working over recreation undermining their health, and seeking for loans of which they are
sometimes unable to save (Cardoso, 1992). Nevertheless, Fischer (1993) and Barro (1996) found
a very small negative impact of inflation on growth. Fischer (1993) however concluded that,
“however weak the evidence, one strong conclusion can be drawn: inflation is not good for
longer-term growth”. Barro (1996) also preferred price stability because he believed it is good
for economic growth. Inflation influences the standard of living of people, for that matter
mobilization of funds and issue of loans by financial institutions. As the rate of inflation
increases, there is a reduction in the real value of money, (i.e. the purchasing power of people)
and an increase in the price of goods and services introduces some difficulty in achieving basic
necessities therefore leading individuals to depend on loan facilities to sustain their standard of
living. These loans are paid back with a higher interest which is a burden on the family economy,
because all things being equal, it is the same money that circulates in the economy. Hence most
fixed income earners, especially those belonging to middle and lower class, crush in such
circumstances. Financial institutions on the other hand are faced with the problem of mobilizing
funds leading to the difficulty in issuing loans. A growing theoretical literature describes
mechanisms where predictable increase in the rate of inflation interferes with the ability of the
financial sector to allocate resources effectively. There is a significant, and economically
important negative relationship between inflation, banking sector development and equity market
activity. As inflation rises, the marginal impact of inflation on banking lending activity and stock
market development diminishes rapidly,

21
According to Brealey and Myers (2003, cited in Jembere 2014) it is a fall in the market value of
money (purchasing power) as a result of persistent rise in prices. Real value of money declines
resulting in benefit to debtors and loss to creditors. From the monetarist point of view inflation
is demand pull and an exogenous rise in money supply is the causality. In the short run an
increase in money supply induces demand above supply of goods and services which causes
prices to rise until the market adjusts to the equilibrium. The study undertaken by Mohammad
and Mahdi (2010, cited in Jembere 2014) showed that in Latin America the effect of inflation on
saving and time deposit to GDP was significantly negative. In this case the classical belief is that,
because bank assets and liabilities are expressed in monetary terms and because these assets will
normally grow in line with growth in money supply, banks are relatively immune from the
effects of inflation. In brief, monetary policy works by controlling the cost and availability of
credit. During inflation, the Central bank can raise the cost of borrowing and reduce the credit
creating capacity of banks.

According to Devinaga, (2010, cited in Jembere 2014), this will make borrowing more costly
than before and thereby the demand for funds will be reduced. Similarly with a reduction in their
credit creating capacity, the banks will be more cautious in their lending policies. The banks
demand for fund decreases obviously the deposits will decrease. High inflation rates reduce the
real value of deposits; inflation technically did not decrease deposit; however it decreases the
value of deposit.

B) Deposit Interest rate

According to Dereje (2017) the main focus of every financial system is financial intermediary
that is, mobilizing financial resources from the surplus sector and lend to the deficit outlets to
facilitate business transactions and economic development based on the monetary and fiscal
policy of the nation. The attraction for getting the deposit from the surplus sector is interest
payment, which must be reasonable and acceptable to the owner of the money.

According Tafirei [Link] (2014) Domestic savings comprise of public and private savings. To
encourage private savings, the real interest rates should be positive. Furthermore, innovative
saving schemes and investment bonds should be introduced to mobilize resources. Higher
interest rates lead to increased savings and financial intermediation in improving the efficiency

22
of savings and investment. The higher real interest rates increase the extent of financial
intermediation which in turn raises the rate of economic growth in developing countries.

C) Money Supply

According to Al-Qudah&Jaradat (2013, cited in kibebe 2016), Money supply is a measure of the
total amount of money in an economy. Money supply (M2) is the summation of currency in
circulation, demand deposit, time deposit and saving deposit

2.12 Deposit
Deposit constituted major liabilities on bank balance sheet. Amount of profit depends on the total
deposits received from the public deposits is the act of giving money or securities to a bank. The
main purpose of deposit is safety for money. Deposits create banks customers relationship.
Deposit is the act of giving money or other properties to other who promises to preserve it or to
use it and return hit in kind; specially, the act of placing money in a bank for safety and
convenience (Fredric S, 1997).

2.13 Types of Deposit

To carry out their extensive lending and investing operations banks drown on a wide variety of
deposit and non-deposit source of fund. The bulk of commercial bank funds almost three fourth
of the total comes from deposits. There are the main types of deposit:- demand, saving and time
deposits. (Peter S. Rose 6th Edition, P: 93)

2.13.1 Demand Deposits

More commonly known as checking account are the principal means of making payment because
they are safer than cash and are widely accepted. (Peter S. Rose 6th Edition, P: 93)

2.13.2 Saving Deposit

Saving deposit generally are in small dollar amount they bear a relatively low interest ret but
may be withdrawn by the depositors with no notice. (Peter S. Rose 6th Edition, P: 93)

2.13.3 Time Deposit

Time Deposits carry affixed maturity and usually offer the highest interest rates a bank can pay.
Time deposit may a be divided into non-negotiable certificates of deposit (CDs), which are

23
usually small consumer type account and negotiable CDs that maybe traded in the open market
in million-dollar amount and are purchased mainly by corporations. (Peter S. Rose, 6th Edition, P:
93)

2.13.4 CheckableDeposit
Are bank accounts that allow the owners of the account to write check to third [Link]
deposits include all account (demand deposit).

Interest bearing notes (negotiable order of withdrawal) accounts and money market deposits
account (MMDAS). One’s checkable deposit were the most important source of bank funds
(over 60% of bank liabilities in 1960), but with the appearance of new, more attractive financial
instruments, such as money market mutual fund the share of checkable deposits in total bank
liabilities has shrunk over time. Checkable deposit and money market deposits accounts are a
payable on demand. That is, if a depositor shows up at the bank and request payment by making
a withdrawal, the bank must payment by making a withdrawal, the bank must pay the depositor
immediately.

Checkable deposits are an asset for the depositor because it is a part of his/her wealth.
Conversely it is a liability for the bank. They are usually the lowest cost source of bank because
depositors are willing to forgo same inters in order to have access to a liquid asset than can be
used to make purchase. The bank cost of maintaining checks, preparing and sending out monthly
statements, proving efficient tellers maintain an impressive building and marketing to entire
customers to deposits there funds with the given bank and conveniently located branches, and
advertisings. In recent years, interest paid on deposit (checkable and time) has accounted for
around 48% of total bank operating expenses, while the cost involved in serving accounts
(Employee’s salaries, building rents and so on) have been approximately 50% of operating
expenses. (Frderic S. Mishkin 5th Edition P: 228)

2.14 Purpose of deposit

From depositor point of view, the key purpose to use deposit in bank are safety of their money,
easy access and a possible real return. In generally depositor keep their money in bank for a
motive to undertake e same activates in the future. According to author (Bhatt, 1970), there are
motives to save money , the following are the example of same motive are as follow:-to own

24
house, to provide for children’s education and marriage, to provide for old age, to bequeath
property to children, to provide for emergency expenditure.

2.15. Empirical Review

According to Abraham (2019) focused on assessment of determinants of deposit mobilization of
financial sectors in Ethiopia in the case of commercial banks in Ethiopia. The study used a
crosssectional design by collecting financial data of the years 1981- 2012 on the independent
variables (Income, expense, asset, liability, reserve, loans and advances and consumer price
index). Descriptive and econometric analyses are done by using E-views 5and Excel 2007. The
study identified that CBE‘s main source of capital is deposit; demand deposit remained to be
dominant; the bank‘s total deposit is related positively with income, its asset, liability, its loans
and advances granted and Consumer Price Index. However, the bank‘s deposit is negatively
related to its reserve requirement and its expense. Also, almost by 25% all the endogenous
variables will affect a one year lag in the short run to reach the equilibriums position in the long
run. Then, it is recommended that there is a need to remove obstacles on the depositing road by
awareness creation efforts tailored to its employees, stakeholders and customers; improving bank
service accessibility and consumption.
According to Mamo(2017) an investigation on determinants of deposit mobilization in
commercial banks of Ethiopia. As determinants of customer deposit mobilization in the bank five
explanatory variable such as , loan , existence of competitors , interest rate , branch expansion
were included .The result of the econometric result indicate that loan provision , branch
expansion and number of customers are found to have significant positive impact for the growth
of deposit mobilization . However the emergence of new competitors and interest rate is not
found to have positive impact to induce deposit mobilization in the bank. The study recommends
expansion of banks in different areas as well as enhancing the number of the customers via
different incentive provision and coping up with emerging competitors as potential means of
promoting deposit mobilization.

According to Daniel (2018) the study aims to assess deposit mobilization of commercial banks in
Ethiopia by concentrating the case on Dashen Bank S.C. Descriptive method and particularly
survey design approaches were adopted for the study. The study uses structured review of
documents and records held by DB and NBE. The finding shows that Dashen bank is operating

25
in a dynamic and highly competitive environment and there is high possibility of catch-up and by
pass among these banks. Then it is recommended that Dashen bank should prepare for the
inevitable stiff competition that will arise from local and with the eminent future entrant of
foreign banks.
2.16 Theoretical and Empirical Gap
Based on the above theoretical as well as empirical review, deposit mobilization is the major
activities for all banks especially for commercial banks since their function is mobilizing deposit
to meet the required liquid it for credit customer of banks. According to the review, most of the
empirical studies done on the area of factors affecting and determinant of deposit. All studies
cited above suggest that commercial banks deposit is determinant both by bank specific factors
and macroeconomic factors some of the studies give more attentions to macro determinants
rather that bank specific and significance of determinants identified by the studies are completely
different. To the knowledge of the researcher there is no theoretical and empirical study done
regarding to deposit mobilization practices in the case of Dashen Bank. most of the research
were conducted in Ethiopian the area such as, Abreham (2019), Mamo (2017) ware focused on
the determinant and factor affecting deposit mobilization in commercial banks in Ethiopia and
also Daniel (2018),were also reviewed on assessment of deposit mobilization but the current
deposit mobilization practice and activities of Dashen Bank were not analyzed by researcher. It
is essential of assessing the current practices of deposit mobilization strategies of Dashen Bank.
And finally, this study is different from previous works done by others; specifically it assesses
the deposit mobilization practice of Dashen Bank.

26
 CHAPTER THREE
DATA PRESENTATION, ANALYSIS AND INTERPRETATIONS
This chapter is focused on the presentation, analysis and interpretation on data collected from
questioners and interview of the respondents who are employees, and manager of Dashen Bank.
The total number of questioners distributed was 20 and an interview was conducted for the 1
branch manager. Out of the 20 questionnaires distributed to employees of the Dashen Bank
18(90%) questionnaires were returned with full information. Hence, the data presented, analyzed
and interpreted in this paper is based on these successful filled and returned responses of the
participants and the interview made with the branch managers.

3.1 Demographic Characteristics of Respondents

In this section, the personal profiles of respondents are presented. This includes gender, age, year
of serves i and educational qualification of the respondents of the Dashen Bank.

Table 3.1 personal information of employees

Item Description Response
freq Per
1 sex Male 11 61
Female 7 39
Total 18 100
2 Age 19-25 3 17
26-30 10 56
31-45 3 17
Above 46 2 11
Total 18 100
3. Educational background Certificate - -
Diploma 2 11
Degree 13 72
Masters degree and above 3 17
Total 18 100
4 Work Experience Less than 2years 4 22
3-5years 8 44
6-10years 5 28
Above 10 years 1 6
Total 18 100
Source; survey data 2024

27
As it can be seen from table 3.1, from the total respondents, 11(61%) were female respondents
and the remaining, 7(39%) are males. From this study the researchers noticed that number of
male respondents is much greater than female counter parts.

According to the above table, from the total respondents, 3(17%) of the respondent were age
ranges between 19_25, 10(56%) were age range between 26-30, 3(17%) of the respondents age
ranges between 31-45 the remaining 2(11%) were age ranges between above 46. From this
information the researchers understand that, most employees are the age between 26-30.

Considering educational level of respondents from the above table 3.2, 2(11) of the respondents
are diploma holders 13(72%) of the respondents are first degree holders. The remaining 3(17%)
of the respondents are master’s degree holders. From this information the researchers understand
that, most respondents are first degree holders.

As it can be seen from table3.4, from the total respondents, 4(22%) of the respondents are for
less than 2years employees of Dashen Bank, 8(44%) of the respondents are for 3-5 years
employees of Dashen Bank, 3(17%) respondents are for 6-10years employees of Dashen Bank
the remaining 1(16%) of the respondents are for greater than 10 years employees of Dashen
Bank. From the analysis we can conclude that most respondents are for 6-10 years employees of
Dashen Bank.

28
3.2Analysis of Deposit Mobilization

3.2.1 Respondents opinion about the Deposit Mobilization

Table 3.2 Deposit Mobilization
No Item SA A N D SD TT

f( % f(n % f(n) % f( % f( % f(n) %

n) ) n) n)

1 The bank is aggressively 9 5 6 33 - - 2 11 - - 18 100

expand its branch 0

2 The bank offers different 9 5 6 33 - - 2 11 1 6 18 100

products to mobilize 0
deposit
3 The bank mostly offer gift 2 1 5 28 2 1 6 33 3 17 18 100

for new depositor 1 1

4 The bank trains its staff to 3 1 3 17 2 1 8 44 2 11 18 100

mobilize deposit 7 1
5 The bank fairly distribute 8 4 5 28 3 1 2 11 - - 18 100

its loan to attract deposit 4 7

6 The branch manager gets 9 5 6 33 2 1 2 11 - - 18 100

the necessary support from 0 1

the management
7 Account mangers contact 1 5 5 28 1 6 2 11 - - 18 100

customers to reactive their 0 6

inactive account

8 Relation managers and 1 6 4 22 3 1 - - - - 18 100

branch managers visit the 1 1 7
selected customers

Source questionnaires’ (2024)

As shown on tables 3.2. Item 1, Employees response rate regarding to the statement of the bank
is aggressively expand its branch the response rate was 9(50%) and 6(33%) of respondent are

29
strongly agree and agree, 1(6) disagree respectively and the other 2(11) were neutral. This shows
that the majority of the respondents 15(83%) believe that bank is aggressively expand its branch.
As shown on tables 3.2 item 2, regarding the statement that the bank offers different products to
mobilize deposit 6(33%) agree and 9(50%) of respondents strongly agree 2(11%), 1(6%) of
respondent disagree and strongly disagree respectively and the other none of respondents were
neutral. this show that the Majority of respondent 15(83%) think that bank offers different
products to mobilize deposit.

According to table 3.2 item 3, show that 2(11%) strongly agree and 5(28%) agree on the
statement of bank mostly offer gift for new depositor the other 6(33%), 3(17%) disagree and
strongly disagree respectively the rest of the respondent 2 (11%) were neutral. It indicate that
Majority of respondent 9(50%) don't believe that the bank mostly offer gift for new depositor.

As can be seen on Table 3.2 item 4, show that 3(17%) strongly agree and 3(17%) agree. and
8(44%), 2(11%) disagree and strongly disagree respectively the other 2(11%) were neutral on the
statement of bank trains its staff to mobilize deposit. we can see that most of the respondent
10(55%) believe that the bank trains its staff to mobilize deposit.

As shown on tables 3.2. Item 5, Employees response rate regarding to the statement of the bank
fairly distribute its loan to attract deposit the response rate was 8(44%) and 5(28%) of respondent
are strongly agree and agree, 2(11) disagree respectively and the other 3(17%) were neutral. This
shows that the majority of the respondents 13(72%) believe that bank fairly distribute its loan to
attract deposit.

As shown on tables 3.2 item 6, regarding the statement that the branch manager gets the
necessary support from the management 6(33%) agree and 9(50%) of respondents strongly
agree, 2(11%), none of respondent disagree and strongly disagree respectively and the other 2
(11%) were neutral. this show that the Majority of respondent 15(83%) think that branch
manager gets the necessary support from the management.

30
According to table 3.2 item 7, show that 10(56%) strongly agree and 5(28%) agree on the
statement of Account mangers contact customers to reactive their inactive account the other
2(11%) disagree and none of respondents strongly disagree respectively the rest of the
respondent 1 (6%) were neutral. It indicate that Majority of respondent 15(84%) believe that the
Account mangers contact customers to reactive their inactive account.

As can be seen on Table 3.2 item 8, show that 11(61%) strongly agree and 4(222%) agree. and
none of respondents disagree and strongly disagree respectively the other 3(17%) were neutral
on the statement of Relation managers and branch managers visit the selected customers. we can
see that most of the respondent 15(83%) believe that the Relation managers and branch managers
visit the selected customers.
3.3.2 Respondents opinion about the Deposit Mobilization Techniques
Table 3.3 Deposit Mobilization Techniques
No Item SA A N D SD TT

f( % f(n) % f(n) % f( % f( % f(n) %

n) n) n)

1 Marketing strategy of the 9 5 6 3 2 1 1 6 - - 18 100

bank increase the 0 3 1
depositor number and
deposit amount
2 The current deposit 9 5 6 3 1 6 2 11 - - 18 100
mobilization practice of 0 3
the bank is effective
3 The bank staffs are eager 1 5 5 2 3 1 - - - - 18 100
to mobilize deposit 0 6 8 7

4 The branch manager and 4 2 11 6 2 1 1 6 - - 18 100

customer relation manager 2 1 1
are attracting new
depositors to the bank
5 The bank uses 3 1 3 1 2 1 8 44 2 11 18 100
technologies to mobilize 7 7 1
deposit

Source questionnaires’ (2024)

31
As Table 3.3 item 1, show that 1(6%) of the respondent disagree and none of respondents
strongly disagree, 2(11%) were neutral and the other 6(33%) and 9(50%) of the respondent were
agree and strongly agree on the idea of Marketing strategy of the bank increase the depositor
number and deposit amount. This implies that majority of respondents 15(83%) believe that the
Marketing strategy of the bank increase the depositor number and deposit amount.

As Table 3.3 item 2, show that 6(33) agreed and 9(50) strongly agree, to the idea that the current
deposit mobilization practice of the bank is effective. Other 2(11%) disagree and none of
respondents strongly disagree in addition to this 1(6%) were neutral. This implies that largest
part 15(83%) of the respondent think that the current deposit mobilization practice of the bank is
effective.

As can be seen on table 3.3 item 3, which is bank staffs are eager to mobilize deposit none of
respondents disagreed and none of respondents strongly disagree the other 10(56%), 5(28%),
3(17%) were strongly agreed, agree and neutral respectively. This implies that most of the
respondent 15(583%) didn't believe that the bank staffs are eager to mobilize deposit.

As we see in table 3.3 item 4, 4(22%) strongly agree, 11(61%) agree on that branch manager and
customer relation manager are attracting new depositors to the bank. Other 1(6%) and 2(11%)
were disagree and neutral respectively. as we can see most of the respondent 15(83%) believe
that branch manager and customer relation manager are attracting new depositors to the bank.

Table 3.3 above shows that in item no 5, 2(11%) of respondents are neutral, 3(17%) agree,
2(11%) strongly disagree, 8(44%) disagree and 3(17%) strongly agree to the statement that says
bank uses technologies to mobilize deposit. This shows that the most of respondents 10(55%) did
not think that bank uses technologies to mobilize deposit.

32
3.2.3 Respondents opinion about the challenge of deposit mobilization
Table 3.4 challenge of deposit mobilization
No Item SA A N D SD TT

f( % f(n) % f( % f( % f( % f(n) %
n) n) n) n)

1 The competition from 8 44 6 33 2 11 2 1 - - 18 100

other bank is the main 1

challenge to mobilize
deposit

2 The government law and 1 56 7 39 1 6 - - - - 18 100

regulation is the challenge 0

to mobilize deposit
3 The deposit habit of the 1 61 4 22 2 11 1 6 - - 18 100
society in private banks is 1
the challenge to mobilize
deposit

Source questionnaires’ (2024)

As Table 3.4 demonstrates 2(11%) disagree and none of respondents strongly disagree with the
idea that the competition from other bank is the main challenge to mobilize deposit while 6(33%)
and 8(44%) of the respondent agreed and strongly agree respectively the other 2(11%) are
neutral. This show that most of the respondent 14(77%) believe that the competition from other
bank is the main challenge to mobilize deposit.

Above Table 3.4 item 2, show that none of respondents are disagree that statement of
government law and regulation is the challenge to mobilize deposit and none of respondents
strongly disagree, 10(56%) strongly agree, 7(39%) agree, the rest of 1 (6%) of the respondents
was neutral. This implies that majority of the respondent 17(94%) believe with the government
law and regulation is the challenge to mobilize deposit.

Table 3.4, item 3, which is deposit habit of the society in private bank, is the challenge to
mobilize deposit. 11(61%), 4(22%) of the respondents were strongly agree and agree. The rest

33
none, 1(6%) and 2(11%) of the respondents was strongly disagree, disagree and neutral
respectively. This implies that majority of the respondents 15 (83%) think that deposit habit of
the society in private banks is the challenge to mobilize deposit.

3.3 Analysis of interview questions

1. What specific measures or initiatives has Dashen Bank implemented to increase deposit
mobilization in recent years?

The Dashen Bank has implemented various measures and initiatives to increase deposit
mobilization in recent years. This includes offering competitive interest rates on savings
accounts, introducing promotional campaigns to attract new depositors, and expanding our
branch network to reach more potential customers.

2. How does Dashen Bank differentiate itself in the market to attract more deposits
compared to other banks in the region?

Dashen Bank differentiates itself in the market by focusing on personalized customer service,
innovative digital banking solutions, and strong relationships with our customers. We also offer a
wide range of banking products and services to cater to the diverse needs of our clients.

3. What role do the branch managers play in the deposit mobilization process at Dashen
Bank?

Branch managers play a crucial role in the deposit mobilization process at Dashen Bank. They
are responsible for leading their teams to actively promote deposit products, educate customers
about the benefits of saving with the bank, and drive deposit growth at the branch level.

4. How does Dashen Bank assess the effectiveness of its deposit mobilization efforts?

Dashen Bank assesses the effectiveness of its deposit mobilization efforts through regular
monitoring of key performance indicators such as deposit growth rates, customer feedback, and
competitive analysis. We also conduct regular internal reviews to identify areas for improvement
and implement strategies to enhance our deposit mobilization activities.

34
5. What challenges or obstacles does Dashen Bank face when it comes to deposit
mobilization, and how does the bank address these challenges?

Some of the challenges that Dashen Bank faces in deposit mobilization include increasing
competition from other banks, economic factors that impact customer savings behavior and
regulatory requirements that govern deposit-taking activities. To address these challenges, the
bank focuses on building strong customer relationships, improving product offerings, and
providing comprehensive training and support to branch staff to enhance their deposit
mobilization skills.

35
 CHAPTER FOUR
SUMMARY, CONCLUSION, AND RECOMMENDATION
4.1 Summary of major Findings
Based on the result of the study, summary of findings were presented as follows:-

Deposit Mobilization

 Majority (83%) of the respondents believe that bank is aggressively expand its branch
 Largest parts of respondent think that bank offers different products to mobilize deposit
 9(50%) of respondent don't believe that the bank mostly offer gift for new depositor
 Most of the respondent believe that the bank trains its staff to mobilize deposit
 Largest parts of the respondents believe that bank fairly distribute its loan to attract
deposit
 Most of respondent think that branch manager gets the necessary support from the
management
 Majority of respondent believe that the Account mangers contact customers to reactive
their inactive account
 15(83%) of the respondent believe that the Relation managers and branch managers visit
the selected customers

Deposit Mobilization Techniques

 Majority 15(83%) of respondents believe that the Marketing strategy of the bank increase
the depositor number and deposit amount
 Largest part of the respondent thinks that the current deposit mobilization practice of the
bank is effective
 Most of the respondent didn't believe that the bank staffs are eager to mobilize deposit
 Majority of the respondent believe that branch manager and customer relation manager
are attracting new depositors to the bank
 Most (55%) of respondents did not think that bank uses technologies to mobilize deposit

36
Challenge of deposit mobilization

 Most of the respondent 10(83.3%) believe that the competition from other bank is the
main challenge to mobilize deposit
 Majority of the respondent believe with the government law and regulation is the
challenge to mobilize deposit
 Largest parts of the respondents think that deposit habit of the society in private banks is
the challenge to mobilize deposit

4.2 Conclusions
Based on information analyzed from chapter three the following conclusions are drawn

 Based on the above statement, it can be concluded that most respondents do not believe
that banks mostly offer gifts for new depositors. It is important for banks to focus on
providing transparent and valuable services to customers rather than relying on gimmicky
offers to attract new business.
 The gap identified is that the majority of respondents do not believe that the bank
adequately trains its staff to mobilize deposits, suggesting a need for improvement in this
area.
 The gap identified is that a significant portion of respondents do not believe that the bank
effectively utilizes technology to mobilize deposits, indicating a potential deficiency in
the bank's technological capabilities in this area.
 The survey results indicate that a majority of respondents do not believe that the bank
offers loan and advance products that adequately satisfy customer needs. This suggests a
potential gap in the bank's understanding of customer preferences and requirements when
it comes to lending products.

37
4.3 Recommendations
 Banks should focus on delivering excellent customer service, competitive interest rates,
and innovative financial products to attract and retain customers. Offering valuable
rewards programs or personalized financial advice can also help differentiate a bank from
its competitors and build long-term customer loyalty.
 To address this gap, the bank should prioritize implementing a comprehensive training
program focused on deposit mobilization. This could involve developing specific training
modules, conducting regular workshops or seminars, and providing ongoing coaching
and support to staff. By investing in staff training and development in this area, the bank
can improve its ability to effectively attract and retain deposits, ultimately leading to a
stronger financial performance and overall customer satisfaction.
 To address this issue, the bank should conduct further market research and gather
feedback from customers to identify specific gaps in its loan and advance offerings. This
information can then be used to develop and tailor loan products that better meet the
needs and expectations of customers. Additionally, the bank could consider offering more
flexible terms, competitive interest rates, and streamlined application processes to
enhance the overall customer experience. By proactively addressing customer needs and
preferences, the bank can improve customer satisfaction, loyalty, and ultimately, its
bottom line.
 To address this gap, the bank should prioritize leveraging technology for deposit
mobilization. This could involve implementing online and mobile banking solutions,
offering digital deposit products, utilizing data analytics to target potential depositors,
and integrating technology into the overall deposit mobilization strategy. By embracing
technology-driven approaches, the bank can enhance its efficiency, reach a wider
customer base, and improve its overall competitiveness in the market.

38
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Mitali Gabra, 2009-2011. Deposit Mobilization.
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NoSBB/53/2012, Credit Exposures to single & Related Counter Parties.

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40
Annex

I
 UNITY UNIVERSITY

DEPARTMENT OF ACCOUNTING AND FINANCE

Questionnaire to be filled by the employees of Dashen Bank.

Dear Respondents, this questionnaire is designed to gather data on an assessment of deposit

mobilization case of Dashen Bank. The data to be collected through the questionnaire is highly
valuable to meet the objectives of this study. The information you supply is used for academic
purpose only and will be kept confidential. Therefore, you are thoughtfully requested to fill in
and return the questionnaire. Kindly answer the items as honestly on the space provided. Please
do not leave any item unanswered as much as possible. Thank you in advance.

N.B

No need of writing your name.

Please put √ mark for the answer in the given space.

I General questions

1 Gender:

Male [ ] Female [ ]

2 Age (in years) :

19 – 30 [ ] 31 – 40 [ ] 41 – 50 [ ] 51 – 60 [ ]

3 Highest level of education. Please tick (√)

Master’s Degree [ ] Diploma [ ] First Degree (Bachelors) [ ] Certificate [ ]

Other …………………………………………………………………….

4 Work Experience:

Less 2 years [ ] 2-5 years [ ] 6-10 years [ ] more than 10 years [ ]

II
Section II: Questions related to deposit mobilization activities performed by
the bank

Please give your opinion by rating as; strongly agree (SA) agree (A) neutral (N) disagree (D)
strongly disagree (SD)

No SA A N DA SDA

1 The bank is aggressively expand its branch

2 The bank offers different products to mobilize deposit

3 The bank mostly offer gift for new depositor

4 The bank trains its staff to mobilize deposit

5 The bank fairly distribute its loan to attract deposit

6 The branch manager gets the necessary support from the

management

7 Account mangers contact customers to reactive their inactive

account
8 Relation managers and branch managers visit the selected
customers

9. Have you ever been approached by a bank to open a deposit account? If so, what factors
influenced your decision to open an account?

10. What do you think are the key factors that influence customers to deposit their money in a
bank?

III
11. How important are interest rates and other incentives in persuading you to deposit your
money in a bank?

Section III: Questions related to evaluate the deposit mobilization techniques

performed by the bank

No SA A N DA SDA

1 Marketing strategy of the bank increase the depositor number

and deposit amount

2 The current deposit mobilization practice of the bank is

effective

3 The bank staffs are eager to mobilize deposit

4 The branch manager and customer relation manager are

attracting new depositors to the bank

5 The bank uses technologies to mobilize deposit

6. What are the key deposit mobilization techniques used by the Bank?

7. How effective do you think these techniques are in attracting deposits from customers?

IV
8. What specific strategies does the Bank employ to encourage customers to deposit their
money?

9. How do you think the Bank can continue to attract and retain depositors in an increasingly
competitive market?

Section III: Questions related to the challenge of deposit mobilization.

No SA A N DA SDA

1 The competition from other bank is the main challenge to

mobilize deposit

2 The government law and regulation is the challenge to

mobilize deposit

3 The deposit habit of the society in private banks is the

challenge to mobilize deposit

4. in your opinion, what are the main challenges faced by the Bank in mobilizing deposits from
customers?

V
5. How do external factors such as economic conditions or regulatory changes impact the Bank's
deposit mobilization efforts?

6. What internal factors within the Bank could be hindering the success of deposit mobilization?

7. Can you identify any specific customer behaviours or preferences that pose challenges to
deposit mobilization?

THANK YOU FOR YOUR COPERATION!!!

VI
 UNITY UNIVERSITY

DEPARTMENT OF ACCOUNTING AND FINANCE

Interview check list

This interview is designed to gather relevant data from the management. This interview guideline
is intended to be answered by the Branch manager of Dashen Bank. Since the research will assist
the researcher in preparing the study, sincere responses are anticipated to strengthen the study's
credibility.

VII