FACTORS AFFECTING SAVING DEPOSIT MOBILIZATION

(IN CASE OF COMMERCIAL BANK OF ETHIOPIA MEKI BRANCH).

A senior proposal submitted for the partial fulfilment of BA

degree in banking and finance.

JIMMA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF BANKING AND FINANCE

Prepared By: Bizunesh Yilma

Advisor: Muse B.

January, 2017
Jimma, Ethiopia

1
Acknowledgement
First of all we would like to express our deepest gratitude to almighty GOD for helping us to
reach this stage.

Secondly, we would like to express our deepest gratitude and sincerely appreciation to our
advisor Muse B. for providing persistent and guidance for accomplishment of this paper.

Our heart full thank also expanded to Mr.Girma Chibsa who is the manager of CBE, Meki
main branch giving as polite response to every questions.

Our special thanks go to our family who continuously provide moral, financial and material
assistance thought our work.

All other who rendered any assistance, but whose names could not listed her deserve very
much thanks.

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Abstract
The present study deals with factors affecting saving deposit mobilization in case of
commercial bank of Ethiopia. Meki branch. The researchers employed questionnaires and
interviews to obtain primary data. To carry out the study, the researchers used simple random
sampling and judgmental sampling techniques. The data collected through questionnaires
were analyzed using descriptive data analysis method, in the form of tables and percentages.
The data collected through interviews presented in statement form. This study had found
factors that affect saving deposit of commercial banks and these factors include low interest
rate for deposits, market fluctuation, and existence of competitors and lack of public
awareness about saving. Finally, the study had recommended what should be done to
mobilize more saving. To mobilize its saving deposit, the bank should have to make
expansion and diversification of branches in different part of the town and Kebeles. Since,
interest rate paid on saving deposit mobilization affects deposit mobilization since
competitors charge different interest rate in saving deposits, the bank shall revise its interest
rate on deposits. Furthermore, the bank should give more attention to satisfy the customers
according to their requirement and request. This can be possible as that the bank should take
necessary steps to create awareness among people by giving financial educational by talking
with customers directly as about the importance of saving in the bank.

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 Table of Contents

Contents Pages
Acknowledgement.................................................................................................................................2
Abstract.................................................................................................................................................3
LIST OF ACRONYM.................................................................................................................................6
CHAPTER ONE.......................................................................................................................................7
1. Introduction...................................................................................................................................7
1.1. Background of the Study...........................................................................................................7
1.2. Statement of the Problem.........................................................................................................8
1.3. Objectives of the Study..............................................................................................................8
1.3.1. General Objectives.................................................................................................................8
1.3.2. Specific Objective...................................................................................................................8
1.4. Limitation of the Study..............................................................................................................9
1.5. Organization of the study..........................................................................................................9
CHAPTER TWO....................................................................................................................................10
2. Related Literature Review...........................................................................................................10
2.1. Definition of saving Deposit.....................................................................................................10
2.2. Function of Commercial Banks................................................................................................10
2.3. Commercial Bank Deposits......................................................................................................11
2.4. Importance of saving deposit for the bank..............................................................................12
2.4.1. Saving deposit as source of fund for loan............................................................................12
2.4.2. Attracting saving deposit is cheaper than raising equity......................................................12
2.4.3. Fund investment and Project...............................................................................................12
2.5. Factors affecting Commercial Bank Saving Deposits................................................................12
2.4.3. Exogenous Factors...............................................................................................................13
2.5.1.2. Saving interest rate.................................................................................................................13
2.5.1.3. Inflation..................................................................................................................................13
2.5.1.4. Real interest rate....................................................................................................................14
2.5.1.5. Economic Growth...................................................................................................................14
2.4.4. Bank Specific Factors...........................................................................................................14
2.4.4.1. Liquidity of the bank........................................................................................................14
A. The liquidity to solvency..............................................................................................................14
2.4.4.2. Profitability of the bank...................................................................................................15

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2.4.4.3. Security of the Bank.........................................................................................................15
2.4.4.4. Branches..........................................................................................................................15
2.4.4.5. Reserves...........................................................................................................................15
2.4.5. Endogenous Factors.............................................................................................................16
2.4.5.1. Awareness of the Society.................................................................................................16
2.4.5.2. Convenience of Bank Office.............................................................................................16
2.4.5.3. Services in the Bank.........................................................................................................16
CHAPTER THREE..................................................................................................................................17
3. Research Methodology................................................................................................................17
3.1. Area of the Study..........................................................................................................................17
3.2. Target Population........................................................................................................................17
3.3. Sampling Design and Sampling Size.............................................................................................17
3.4. Source of Data and Methods of Data Collection......................................................................18
3.5. Methods of Data Analysis........................................................................................................18
CHAPTER FOUR...................................................................................................................................19
4.1. Data Analysis, Presentation and Interpret on...............................................................................19
CHAPTER FIVE.....................................................................................................................................31
5. Conclusion and Recommendation...................................................................................................31
5.1. Conclusion....................................................................................................................................31
5.2. Recommendation.........................................................................................................................32
Reference............................................................................................................................................33
Appendix I............................................................................................................................................34
Appendix I............................................................................................................................................35

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LIST OF ACRONYM
CBE Commercial Bank of Ethiopia

Govt Government

NO Number

NGO None Governmental Organization

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 CHAPTER ONE
1. Introduction
1.1. Background of the Study
According to international monitory fund (IMF. 2009). Deposit is an act of giving money or
securing in to banks and others who promise to preserve or to use it and return it in kind,
especially in the act of placing money in to bank for safety and convenience and saving
deposits an excellent place to build up an emergency cash funds. According to Bergerand De
young (1997) the emergency fund can be your life line when you are facing with
unemployment or unforeseen expanses.

Saving deposits are accounts maintained by retail financial institutions that pay interest but
cannot be used as money in the narrow sense of a medium of exchange. These accounts let
customers set used as money in the narrow sense of a medium of exchange.These account let
customers set aside portion of their liquid assist while earning a monetary return.

Saving deposit provides the economic security of safety not by transferring resource from the
present to the future via saving; individuals are prepared to face un expected irregular
financial circumstances. Besides, it leads accumulating of wealth that enables individuals to
improve their living standards and to respond to new opportunities. Most people as form of
saving maintain these deposits so as to earn interest from the bank. The saving deposits are
not only held to meet the needs of present or the near further but are also kept by individuals
as part of their total stock of wealth. Heraled Fingran heikoress (2009).

One of the problems in mobilization of saving deposit is that, banking activities in developing
countries are limited to the officially existing marketing activity and the people in general
found well familiar with all banking activities plus, when it comes to saving people in general
and the poor in particular might not be completely rational and completely knowledgeable.
Their financial knowledge of saving now from their daily income for further consumptions.

Mobilization of saving deposit of customers through intensive deposit collection has been
regard as a major task of banking Kelin A.seargent( 2001) state that acceptance of deposit is
the primary function of commercial banks. Maximization of saving of customers can be meet
by using high technologies, training to saving deposit promoting staff, developing high
organizational trust, using high media coverage branch expansion, educating households
about the benefit of savings.

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1.2. Statement of the Problem
Saving deposits are designed to attract funds from customers who wish to aside their money
in anticipation of future or financial emergencies. These deposits generally pay higher saving
deposits are generally less costly for a bank to process and manage (Peters, rose 1994 4 th ed)
even if saving deposit are less costly to process and manage the principal liabilities of its
deposits, representing the financial claims held by business, households and government can
manage by the bank.

Different private and commercial banks provide the saving deposit schemes. Commercial
bank of Ethiopia as the public bank plays an important role for the overall development of the
country such as increase in saving by promoting investment and capital formation. However,
the actual saving deposit customers are less than the estimated saving deposit customers in
commercial bank wants to have each year, besides the trend in saving deposits in commercial
bank of Ethiopia shows an increase in decreasing rate when compare to previous in years.
E.A.show(1995). A number of inter relate problems are believeed to have effects on the
declining pattern of Commercial bank of Ethiopia saving deposits. Some of the problems
(factors) are researchers intended to study the factors that affect mobilization of saving
deposit in case of commercial bank of Ethiopia Meki branch.

1.3. Objectives of the Study

1.3.1. General Objectives

The general objectives of this study is to find out the factors affecting saving deposit
mobilization in case of commercial bank of Ethiopia (Meki branch).

1.3.2. Specific Objective

The specific objective of this study are

 To show the factors affecting saving deposit mobilization in case of (Meki branch)
 To assesses the most influence on mobilization of saving
 To identify major classification of loan period in the bank
 To find out activities that bank will following order to save more and attract customer.

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1.4. Limitation of the Study
Limitation of the study lies on:

o The employees of the bank were not volunteers to fill the questionnaires.
o The manager of the bank was not available at any time.
o High limitation on transportation facilities.

1.5. Organization of the study

The study will be organized in to five chapters. Chapter one deals with introduction of the
study including; back ground of the, statement of the problem, objective of the study,
limitation of the study and organization of the study. Chapter two deals with related literature
review chapter three deals with research methodology, chapter four is about data presentation
analysis and interpretation and final chapter deals with conclusion and recommendation.

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 CHAPTER TWO

2. Related Literature Review

2.1. Definition of saving Deposit

Saving deposit is designed to attract funds from customer who wish to set aside money
anticipation of future expenditure or financial emergencies. These deposits generally pay

Significant higher interest rates than transaction (demand) deposit do. While their interest
cost is higher in saving thrift deposits are generally less costly for bank to process and
manage. Just as a bank for decades offered only basic transaction deposit the regular
checking account, so it was saving plan. Pass book deposits were unlimited. While legally a
banker could insist on receiving prior notice of planning withdrawal from a pass book saving
deposit.

2.2. Function of Commercial Banks

Commercial bank performs Varity of functions which can be divided as:

Saving deposit: these are deposit which the bank pays small interest to the depositors who
are usually small savers depositor’s can withdraw any amount standing in their credit by
check without notice.

Current deposit: a noninterest bearing deposit account that is operated by checks and
depositors in account can it withdraw any amount standing to their credit by checks, without
notice. The bank does not pay any interest on these accounts.

Fixed deposits: savers who o not need money to stipulated period of time from six month to
longer period running up to ten years or more are encouraged to keep in fixed amount
deposits. This type of deposit pays higher interest rate than others do. The bank pays another
rate on such deposit, the interest rate increase with the length of period of fixed deposits.
Early withdrawal all (before the maturity date) are made up giving advance notice.

Advance loan: bank lend certain amount of money to customers as per their request and
charging higher interest than in pays for saving deposit, on such deposits they have given
loan in the following ways.

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Cash credits: bank advance to businessmen against certain specified securities. The
borrower can withdraw money through checks according to his requirement but pays interest
along with principal amount at regular interval.

Cash loan: these are very shorter loans advance to the bull locker for not more than fifteen
days; such bill can be recalled at very short notice.

Over drafts: bank often allows a business man to raw check for sum greater than the balance
lying in their accounts. This business man is charged interest on the amount by which his
current is over drawn.

Financing foreign trade: commercial bank finance foreign trade of its customers by
accepting foreign bill of exchanges and collecting them from foreign banks. It also buy and
sale foreign currencies.

Agency services: the bank acts as an agent of its customers in collecting and paying checks,
bills of exchanges.

Miscellaneous: besides the above services commercial bank act as custodian of valuable of
its customers by providing the locker, where they can keep their jewelries, securities and
valuables documents.

2.3. Commercial Bank Deposits

Commercial bank deposits are major liabilities for commercial banks. Kelvin (2001) said that
commercial banks account 75% of commercial banks liabilities. Due to the fact that
commercial banks are using this liability to lend it and gain return on it, and their deposits are
using for third persons business. Therefore, banks should mobilize more deposits. Deposits
provide limits to the working capital concerned. If bank has accepting more deposits from
customers and can able to lend and through this it can more profit. The higher the deposit the
higher will be funds at the disposal of bank to lend and earn profit. (Desigea, 1975) therefore,
to maximize its profits the banks should increase its deposits. Commercial banking a service
industry with high rate of built in profit potential. The number one expense item for banking
is interest. Commercial banks mainly depend on the fund deposited with them for a bank is
interest. Commercial banks mainly depend on the fund deposited with them by the public to
lend it to other in order to earn interest income (Davinage, 2010)

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2.4. Importance of saving deposit for the bank

2.4.1. Saving deposit as source of fund for loan

Herald (200) saving deposits is one main source of bank to provide loan. These deposits are
mainly provide by people as Mohammad and mashed (2010). However, deposits can also be
provided by business organization, NGO government and so on . Therefore, whether deposits
are from individual, business, NGO government they are important source of fund.

2.4.2. Attracting saving deposit is cheaper than raising equity

Banks as any other business organization funds from debt or equity, in the bank context
raising equity is more expensive or costly than attracting deposits. Lornzetal (2010) states
that if the lending channel plays role, the deposit growth should lead to an increase in supply
of loan due to the traditional source of financing for banks. As demand for loan increase
because of development of work done by individuals, business and government banks creates
a deposit by lending to business men, It is clearly forming function for which it’s untilled to a
return in form interest payment (Harold, 1946).

2.4.3. Fund investment and Project

Debt is largely held by domestic commercial banks which are funded mainly from deposits of
government, demand for bank assets enabled banks to continue to expand their deposit base
rapidly and profitable (herald and herko 2009). Individual investor and government are
mainly depending on the deposit of banks to fund their investment and development.
Generally, the banking system can be viable only it can mobilize deposit at the required rate
and this an be done only by making bank deposit more attractive (V.V hat 1970).

2.5. Factors affecting Commercial Bank Saving Deposits

An important indicator of the success and efficiency of any credit agency, which is also
affecting banking institution is, the extent to which it is able to mobilize saving of community
in the form of deposit. But deposit mobilization is very difficult task. It depends up on
various factors exogenous as well as endogenous, to the banking system (Designa, 1975).

Exogenous factors are the general economic environment of the region, the volume of
business transaction of the region, the confidence of the people on the banking system, the
banking habit of the people and the saving potential of the region. Even when exogenous

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factors are more conductive for deposit mobilization, bank may fail because of unfavourable
endogenous factors such as location and type of building and window dressing (furniture
checks book, vouchers pay slip etc..) which assure the customer about physical fitness of
bank.

As Designa (1975) did the researcher classifies the variable which are claimed to have the
effect on the commercial bank saving deposit in to two namely exogenous and endogenous
factors. Exogenous has further divided in to country specific factors and bank specific factors
for classification purpose. Endogenous factors can be controlled by baking system however
the exogenous factors cannot be controlled by banking system. The bank specific factors are
factors that are specific banking system and country specific factors that are beyond the
banking system.

2.4.3. Exogenous Factors

The country economic social and political factors can affect the commercial banks according
to herald and heiko, (2009) country specific risk such as political and financial risk may
affect the propensity to place funds in the banking system. A bank success in their operation
is mainly depends on the environment where the business is undertaken.

2.5.1.2. Saving interest rate

One of the most effective factors for declining to deposit in the banking system is the interest
rate (Mohammed, 2005 and Mashed, 2010), interest rate in the banking system it held at
investment cost from the investor point of view and opportunity cost from the depositor point
of view. Commercial banks saving deposits are interest rate sensitive there’re, as the interest
rate challenge the saving deposit of commercial bank will change.

2.5.1.3. Inflation
Inflation is seen as an economic problem in developing countries in the second half of 20 th
century. Inflation which affect economic growth employment, income distribution and wealth
as well as social and political condition of the county can influence its entire dignity
(Mohammed and mashed, 2010) with respect to effect of inflation on saving, it can be
mentioned that in general all individuals, who save part f their income in banks diversely
damaged by inflation and their asset decrease in proportion with money value decrease

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(Mohammed and mashed; 2010) Describe people try to change their cash and saving to more
reliable and stable forms such as jewelry, antiques art collection deposits.

2.5.1.4. Real interest rate

Real interest rate is nominal interest rate minus inflation rate. Mohammed and mashed (2010)
said that in negative rate condition; people with draw their resource from banking system.
According to (Mohammed and mashed 2010) some research proposed that decrease in real
interest rate could decrease true demand for money (in its) extensive definition including
saving and time deposit. Therefore, it states that the interest rate deposit of bank have positive
relationships.

2.5.1.5. Economic Growth

Economic performance it generally measured as gross domestic product (GDP) available that
has also become the universal metric for standard of living. According to (herald and heiko,
2009) gross is one of the determining factors for commercial banks deposit. GDP is measured
by adding up the value added at stage of production and deducting the cost of produced input
and material purchased from an industry in supplies (Jim, 2008).

2.4.4. Bank Specific Factors

2.4.4.1. Liquidity of the bank

The concept of liquidity in fiancé principally lies in two areas (ismal, RIFKL, 2010);-

Liquidity of finical instruments in the financial markets

A. The liquidity to solvency

The former related to the liquidity of financial instruments smooth transaction and no
barriers. As imala Rifkl (2010). The later discuss the obligation of the banks, or make
payments to third party (filder, 2000).

An important measure of liquidity is loan to deposit ration. The loan to deposit ration is
inversely related to liquidity and conserve the higher loan to deposit the lower liquidity and
vice versa. (Diving, 2010). Key liquidity indicator such a share of monetary aggregate loans
to deposit ratio are important for market operation and management (sheeks, 2005). The bank

14
liquidity management involves acquiring sufficient liquidity assets to meet the bank
obligation to depositor (von-choosing etal, 2010).

2.4.4.2. Profitability of the bank

Evan and Ekki (2004) find long run relationship between commercial bank deposist and
profitability of the banks. Higher bank profit would tend to signed inversed bank soundness,
which could make it easier for these banks to attract deposit (herald and herko, 2009).
However the effect of bank profitability and bank size is found to be insignificant once
controlling the other variables. So, the effect of bank profitable and bank size are found to be
insignificant once controlling for the other variables.

2.4.4.3. Security of the Bank

Security of banks matter in mobilization of deposits, only paying higher interest rates. The
security of the bank has own important on its attractiveness for depositors. For example, in
the existence of deposit insurance the depositors no longer are concerned about the soundness
of their banks because their deposits are insured in the event of bank failure. The bank should
secure system so as to mobilize more deposit than before and to attract new depositors and
maintain existing depositors.

2.4.4.4. Branches
There are relationships between commercial bank deposit and commercial bank branch
expansion not only is deposit in any area (M.A Baquietal, 1987). It is expanding their
facilities by considering factors such as level of competition, deposit

2.4.4.5. Reserves
Richard good and Richard Thome (1959), said that reserves that are fixed legally influence
the deposits that banks can hold. According to them server requirement determine the
maximum amount of loan and investment that each commercial bank and banking system as
a whole may maintain in relation to deposits. Thus if the reserve requirement is 20 percent of
deposits, loan and investment may not exceed 80 percent of deposits. Therefore, reserve
requirement, limit the total expansion of bank deposits that can occur on the basis of any
primary decrease in deposits. Reserve requirements also have the effect of limiting in the
reduction in bank credit and deposits that is forced up on the banking system by primary

15
decrease in deposits. The commercial bank can obtain currently to payout to customers only
by drawing their money. Till money according to Richard good Richard Thome (959) is
currently that banks on hand satisfying day to day needs. They pointed out that bank deposits
are large part of money supply in virtually all countries.

2.4.5. Endogenous Factors

In the literature of endogenous factors are identified that can affect the growth the of
commercial banks deposits. They are awareness of the society for using banks to deposit their
money convenience of the bank office and services in the bank.

2.4.5.1. Awareness of the Society

According to M.A bequietal (1987) some analysts argue are determine for deposits is
influenced by education level in turn increase the awareness of the rural people of banking
system (Maura, von picks). Some the study of M.A Baquaital (1987) conducted by taking
rural area as its base it is obvious that in consider the awareness as a factor of deposit
mobilization. It was also found that literacy as proxy for awareness about banking, positively
influence deposits.

2.4.5.2. Convenience of Bank Office

Road an vehicles directly influence interest bearing deposit because of the reduction in the
depositor’s transaction costs through reduced time spent in travelling to and from bank (M.A
baquietal 1987). Banks Carr mobilize more deposits when they make their services close to
their customer or depositors.

2.4.5.3. Services in the Bank

Services in the bank should be attractive enough for depositors so as to mobilize deposits. If
banks could offer these services, the saver would be inclined to keep a part of their income in
the form of deposits (V.V abtt, 1970) means to mobilize saving deposit.

1. Door to door collection of small saves in the form recurring deposits.

2. Offering land revenue or insurance premium.
3. An investment service
4. Some person like farmers get their income says once a year, their expenditure is spread
over the whole year. If banks could collect deposits from them at havest season and
assure them regular withdrawals during the years, farmers may be incurred to keep
deposits with the bank.

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 CHAPTER THREE

3. Research Methodology

3.1. Area of the Study

This study will be conducted on the factors affecting saving deposit mobilization of
Commercial Bank of Ethiopia Meki branch. To this end, the present study bounded by the
nature of the study and limited of Meki town which found at 130 km away from Addis
Ababa.

3.2. Target Population

Target population included employees and customers of CBE, Meki branch. There are 60
employees and 8045 customers in commercial Bank of Ethiopia, Meki branch.

3.3. Sampling Design and Sampling Size

Descriptive research design was conducted for this research work. There are 60 permanent
and 14 temporary employees in CBE, Meki branch. For the purpose of the study, the
researcher takes only permanent employees. Census method would be used to collect data
from employees of CBE, Meki branch.

Further, researcher applied probability sampling of simple random sampling ways and
assume that of 90% confidence interval (10% error term) to select the sample from the
customers of the selected bank. There are 8045 customers in CBE, Meki branch and based on
Yemane’s formula the researcher determines following sample size:

n=N/1+N(e)2

where; N=Total population

n=sample e size

e=error

n=8045/1+8045(0.1)2

n=98.47, estimated to 98 sample size

Therefore, the proposal used 98 samples from the total customers from the total customers of
CBE, Meki branch.

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3.4. Source of Data and Methods of Data Collection
For the purpose of the proposal paper, the proposals used both primary and secondary data.
The primary source of data has been collected using questionnaires from employee of CBE,
Meki branch and by asking a list of questions from current customers of CBE, Meki branch.
The proposals use secondary sources of data for the review of related literature and some
required materials.

The data collected from employees and customers of CBE, Meki branch to select samples
from those elements. To collect the data, the researchers have used purposive sampling
method due to the reason researchers prefer to collect the data from these customers who are
willing to give the information’s.. In addition to that, the purposive sampling technique would
be preferable for the researchers to obtain qualitative data from the target population. The
reason why this sampling technique used that was that it matches less complicated to select
data fortunate and it also less time taking, less expensive and it also enables the researchers to
gate a target data from the concern bodies.

3.5. Methods of Data Analysis

The data obtained from primary sources from employees of CBE, Meki branch and from
current costumers of CBE Meki branch presented and analyzed by using descriptive
analyzing system such as tables and percentages. And data obtained from interview with the
bank officials presented in statement form.

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 CHAPTER FOUR

4.1. Data Analysis, Presentation and Interpret on

This chapter deals with analysis, presentation and interpretation of primary data which were
collected through questionnaires and interview.

4.1. Survey data from employees

Fifty six (56) questionnaires have been distributed to employees of the CBE, Meki branch
among the fifty six (56) questionnaires fifty two (52) questionnaires collected, analyzed and
interpreted by using tables and percentages as follows.

4.1.1. Demographics of Respondents (employees)

The general characteristics of respondents sex, age, and educational back ground position are
presented in the table below.

Table 4.1.1. Respondents profile (n=52)

No Description Respondents No of Percentages

respondents
1 Sex Male 37 71.15%
Female 15 28.84%
Total 52 100%
2 Age Less than 20 years 2 3.84%

20-30 years 39 75%

30-40 years 8 15.38%
Above 40 years 3 5.76%
Total 52 100%
3 Educational Certificate - -
background Diploma - -
Degree 50 96.15%
Mrs. and above 2 3.84%
Total 52 100%

19
4 Position Clerk 2 3.84%
Manger 1 3.84%
Accountant 7 13.46%
Officer 42 80.76%
Total 52 100%
S source, Questionnaires 2006

Table 4.1.1. Shows demographic characteristic of all respondents by using frequency and
percentage of each response on each demographic characteristics elements. Sex is one
demographic factor, which shows gender differences. This table shows about 37(71.15%)
respondent were male and the remaining 15(28.84%) respondents were females. From the
table researcher observe that majority of respondents were males.

Table 4.1.1 also indicates that 2(3.84%) of respondent were within the age of less than 20
years, 39(75%) of respondents were within the age of 20-30 years, 8(15.38%) of respondents
were with the age of 30-40 years and 3(5.76%) of respondents were above 40 years. This
shows that highest percentages of respondents lie between 20-30 years. The qualification
respondents shows that respondent within degree are about 50(96.15%), respondents with
qualification of masters are about 2(3.84%). This shows that the majority of respondents were
qualified at degree level, 50(96.15%) were non diploma level and there were no respondents
with the qualification of certificate.

Position of 2(3.84%) respondent were clerk, 1(1.19%) respondents were manger, 7(13.46%)
accountant and 42(80.76%) of respondents were officers.

4.1.2. Factors affecting the degree of saving in banking

Table 4.1.2 Respondents about factors affecting saving

No Items No of responses Percentages

1 Low interest rate for deposits 16 30.76%
2 High limitation on providing loan - -
3 Market fluctuation 10 19.23%
4 Existence of competitors 8 15.38%
5 Lack of awareness of public 18 34.61%
Total 52 100%
S source, Questionnaires 2006

20
From the above table 4.1.2 respondents respond that 16(30.76%) were low interest rate for
deposits, 10(19.23%) were market fluctuation, 8(15.38%) were existence of competitors and
18(34.61%) were the lack of awareness were the indemnified external factors which
influence on the mobilization of saving deposits. Therefore, the researcher observes that lack
of awareness of the public about saving is the most influential factor that affects mobilization
of saving deposits.

4.1.3. Deposit Schemes available in the Bank

Table 4.1.3 Responses about deposit scheme

No Items No of responses Percentages

1 Fixed deposit - -
2 Saving deposits 14 26.92%
3 Current deposits 8 15.38%
4 All of the above 30 57.69%
Total 52 100%

S source, Questionnaires 2006

From the above table majority of the respondents 30(57.69%) said that all of the deposits
saving deposits and current deposit are available in the bank, but no fixed deposits

4.1.4 Deposit schemes providing more mobilization

Table 4.1.4 deposit schemes giving high mobilization

No Items No of responses Percentages

1 Fixed deposit 9 17.30%
2 Saving deposits 38 73.07%
3 Current deposits 5 9.61%
Total 52 100%
S source, Questionnaires 2006

From table 4.1.4 the researchers observes the majority of respondents 38(73.07%) said that
saving deposit gives more mobilization than fixed and current deposits.

21
4.1.5. Degree of interests paid by the Bank in comparison to other Banks

Table 4.1.5. degree of interest paid by the bank in comparison to other banks

Description Responses No of Percentage

respondents
In comparison to other banks, Higher 12 23.07%
what is the degree of interest rate Medium 23 44.23%
paid by the bank? Lower - -%
Similar 17 32.69%
Total 52 `100%
S source, Questionnaires 2006

Table 4.1.5 shows that none of the respondents answer that interest paid by the bank lower
than other banks, while 12(23.07%) of respondents answer that interest paid by the bank is
higher, 23(44.23%) of the respondents said that interest is medium than other banks and
17(32.69%) of the respondent said that interest rate paid by the bank is similar with other
banks. From this the researcher concludes that interest rate paid by bank is medium.

4.1.6. The Interest rate paid the Bank Attracting Customers

Table 4.1.6. Bank paid interest Rate Attract Customers

No Description No of responses Percentages

1 Is the interest rate paid by
The bank attracting customers?
2 Yes 41 78.84%
3 No 11 2115%
Total 52 100%
S source, Questionnaires 2006

From table 4.1.6, 41(78.84%) of respondents said interest rate paid by bank attracting the
customer and 11(21.15%) respondents said it does not customers.

22
4.1.7. Duration of Deposit in the Bank

Table 4.1.7 Period of Deposit in the Bank

Description Responses No of Percentage

respondents
Sort term 13 25%
Medium term 13 25%
Long 11 21.15%
All terms 15 28.84%
Total 52 100%
S source, Questionnaires 2006

Table 4.1.7 shows 13(25%) of respondents were responded short term, 13(25%) were
responded all term duration of deposits.

4.1.8 Purpose of lending money

Table 4.1.8. about purpose of borrowing money from the bank

Description Responses No of Percentage

respondents
For what purpose New business 25 48.07%
customers borrow from Education 8 15.38%
the bank? Construction 13 25%
Personal consumption 6 11.53%
Total 52 100%
S source, Questionnaires 2006

From the above table most respondents 25(48.07%) answered for new business, 8(15.38%)
answered for education, 13(25%) answered for construction and the remaining 6(11.53%) for
personal purpose.

23
4.1.9. Type of beneficiary enjoying more services

Table 4.1.9 about beneficiaries enjoying more services

Description Responses No of Percentage

respondents
Which type of New business 16 30.77%
beneficiary enjoying Education 11 21.15%
your service more? Construction 15 28.85%
Agricultural 10 19.23%
consumption
Total 52 100%
S source, Questionnaires 2006

As the above table indicates that 16(30.77%) of the respondents were respond the business
beneficiaries are enjoying more services in saving deposit, 11(21.14%) of respondents were
responds the education beneficiaries are enjoying services in saving deposit, 15(28.85%) of
respondents were respond construction beneficiaries are enjoying services in saving deposit
and 10(19.23%) of respondents were respond the agricultural consumption beneficiaries are
enjoying services in saving deposit. Therefore, to conclude the majorities of the beneficiaries
are the new business beneficiaries, 16(30.77%) enjoying more services in CBE, Meki branch

4.1.10 Mobilizing of saving deposit

4.1.10 Table about mobilization of saving deposit

Description Responses Frequency Percentage

Is CBE, Meki branch mobilizing Yes 34 65.38%
enough saving deposit currently? No 18 34.6%
Total 52 100%

S source, Questionnaires 2006

As indicated the above table 34(65.38%) of respondents states the CBE, Meki branch is
mobilizing enough saving deposit to the customers of the bank and the rest 18(34.62) states
the CBE, Meki branch has not mobilizing enough saving deposit to the customers of the
bank.

24
Therefore, the researchers concluded as the majority of the respondents decide the CBE,
Meki branch mobilizing enough saving deposits for the customers of the bank. Because CBE,
Meki branch working on saving deposit mobilization effectively and efficiently. The target of
the bank is to get high rate of saving deposit customers, so currently the saving deposits is
mobilizing too enough.

In addition to these questions, the researchers asked questions about factors that initiate
saving deposit customers of CBE, Meki branch. Then the employees of the bank gave some
factors to initiate the customers of saving deposit, the bank must increase interest rate, give a
quality of services to a customers of saving deposit, service delivery with time continuing,
type of service rendered by the employees of the bank, availability of network every working
day, location of the bank, using modernized technology and the like are factors that initiate
saving deposit customers of CBE, Meki branch.

4.2 Survey Data from Customers

Ninety eight (98) lists of questionnaires have been asked to customers of the bank and ninety
eight (98) questionnaires collected successfully. The returned questionnaires were tabulated
and then analyzed in terms of percentage.

4.2.1 General background of the respondents (depositors)

The general characteristics of respondents like sex, age, educational background,

occupational and income level are stated precisely in the table.

Table 4.2.1. About general background of the respondents

No Responses No of Percentage
respondents
1 Sex Male 71 72.44%
Female 27 27.55%
Total 98 100%
2 Age Less than 20 years 13 13.26%
20-30 years 36 36.73%
30-40 years 38 38.777%
Above 40 years 11 11.22%
Total 98 100%

25
3 Educational background Literate 68 69.38%
Illiterate 20 20.40%
Total 98 100%
4. Occupation Farmer 20 20.40%
Government employed 30 30.61%
Business man 15 15.30%
Service man 10 10.20%
Unemployed 23 23.46%
Total 98 100%
10. Income level per a month Less than 1000br 42 42.85%
1000-5000br 45 45.91%
5000-1000br 11 11.22%
Above 10000br - -
Total 98 100%

S source, Questionnaires 2006

Table 4.2 Indicates that 71(72.44%) respondents were male and 10(27.55%) respondents wee
females.

Regarding to their age 13(13.26%) of respondents were less than 20 years, 36(36.73%) of
respondents were 20-30 years, 10(38.77%) of respondents lies between the age 30-40 and
11(11.22%) of respondents lies above the age of 40.

Regarding the educational background of respondents 68(69.38%) of respondents were

farmers, 30(30.61%) were government employed, 15(15.30% were business man,
10(10.20%) were service man and 23(23.46%) were unemployed.

Regarding income level 42(42.85%) respondents are earning less than 1000 per a month,
45(45.95%) respondents earning were lies between Br 1000-5000, 11(11.22%) of
respondents earning were lies between Br 5000-10000. The researcher observers that
majorities of respondent earning were than Br 1000 per a month.

4.2.2 Purpose of depositing money

26
Table 4.2.2 about issues related to deposit of money by customers

Description Responses Frequency Percentage

Why do you deposit your Fore security 42 42.85%
money? To gain interest 40 40.81%
For emergencies 16 16.32%
Others - -
Total 98 100%
Source, Questionnaires, 2016

The above table 4.2.2 indicates that 42(42.85%) of responded that they save for the purpose
of security, 40(40.81%) of respondents respond that they saves their money to gain interest,
16(16.32%) of respondents save their money for emergencies. Therefore, the researchers
observe that majority of respondents their money for security purpose.

4.2.3. Reason for selecting CBE, Meki branch

Table 4.2.3. reason for selecting the bank

Description Responses Frequency Percentage

Why do you select CBE, Meki Pay high interest rate for 2 2.04%
branch deposits
Near to home 24 24.48%
Efficient and effective service 38 38.77%
Government bank 34 34.69%
Total 98 100%
Source, Questionnaires, 2016

Table 4.2.3. show that 2(2.04$) of respondents responded that he/she saves in CBE because
of higher interest rate for deposits, 38(38.77%) of respondents select the bank because of its
efficient and effective services, 24(24.48%) select the bank because the bank is near to home
and easily accessible and the remaining 34(34.69%) of respondents select the bank because it
is the government bank. From this researchers concluded that the reason to select the bank is
mainly the efficient and service provided by the bank.

4.2.4. Motivates to increase deposit amounts

27
Table 4.2.4 about motives for increasing deposit by customers

Description Responses Frequency Percentage

What CBE, is doing for Increase interest rate 15 15.30%
customers to increase their Provide incentives 34 34.69%
Deposits? Improve its services 49 50%
Total 98 100%
Source, Questionnaires, 2016

Table 4.2.4 indicates that 34(34.69%) of respondents answered that the bank motivates its
customers to save their money by providing different incentives, 49(50%) of respondents
responded that the bank motivates customers to save continuous import of its services and
15(15.30%) of the respondents answered that the bank motivate customers by increasing
interest rate on deposits.

4.2.5. Satisfactions of saving deposit services in the CBE, Meki branch by the customers
of the bank

Table 4.2.5. about satisfactions of saving deposit services

Description Responses Frequency Percentage

Have you satisfied by saving Yes 75 76.53%
deposit service of CBE, Meki No 23 23.47%
branch? Total 98 100%
Source, Questionnaires, 2016

As the table above indicated 7576.53%) of respondents stated they are satisfied by the service
of CBE, Meki branch in saving deposit services and 23(23.47%) of respondents states they
are not satisfied by the services of CBE, Meki branch in saving deposits.

Therefore, the researchers concluded that as the majority of the respondents stated ther is
more security in CBE, Meki branch in contrast to other banks. And alos they are increased
the working days. Therefore the majority of the customers are satisfied by the service of
CBE, Meki branch on saving deposits.

28
In addition to the above questions the researchers asked questions the customer of CBE, Meki
branch about the weakness and strengths of CBE, Meki branch. Then the customers of the
bank give an answer about the strengths and weakness of the bank.

Weakness: The interest paid by bank is low in contrast to other banks; availability of
network every working day is low and because of the customers are more to give service to
those customers there is more time keeping to get this service.

Strengths: The CBE, Meki branch use electronic machines like ATM(Automatic teller
machine), use technological material, give service six(6) days a week and 7*24 for ATM
services and has more security to keep money in contrast to other banks.

4.3. Interview Out Comes

4.3.1. Factors Affecting Saving Deposit Mobilization

The researchers made face to face interview with the officials of the bank on the factors
affecting saving deposit mobilization and responses were presented in statement form.

Lack of awareness of public about saving:- it is the most influential factors behind saving
deposit mobilization. The poor culture of saving on society affects the level of saving of the
bank.

Expansion of information saving:- the expansion of informal saving institutions like iqub,
iddir and arata affects the level of saving in bank. People set a side in such a way than banks.

years ago government was providing fertilizers by loan. There were high saving by them in
agricultural sector, but now a day the supply of fertilizer is provided by cash. |Therefore,
instead of saving they prefer to buy the fertilizers.

Inaccessibility of the CBE in kebele level:- this is also a factor that affects saving deposits
mobilization in commercial bank of Ethiopia, Meki branch due to micro finance, because it
has easy accessibility in kebeles.

Existence of competitors:- this is also a factor that affects saving deposit mobilization. Since
there are many private and government banks, there is a strong competition among banks.
These competitions lead money banks to open and extend their branches. Depositor select

29
among those competitors based on the bases of interest rate paid on deposit service efficiency
and site convenience.

Inter rate on saving deposits:- the interest rate set by national bank of Ethiopia a minimum
interest which is 5%, many private banks pays higher interest rate greater than 5%, but
commercial bank of Ethiopia, Meki branch is paying only 5% on saving deposits. As
mentioned above those competitors pay higher interest it attracts customers. Since the interest
rate set by national bank of Ethiopia is a minimum requirement, banks can pay more than 5%
interest rate on deposits for competition purpose. However, a researchers get information
from an interview with branch officials, commercial bank of Ethiopia does not use these
mechanisms ‘to increases its deposits.

Finally the official said that lack of awareness of the society and the expansion of informal
saving institutions is the man factors contributing for the lower saving of society in the bank.

30
 CHAPTER FIVE

5. Conclusion and Recommendation

5.1. Conclusion
Based on the findings of the study and data presented the researchers draw the following
conclusions.

The finding of the study revealed that the existing saving deposit mobilization i affected by
internal as well as external factors.

From the internal actors the low interest rate for deposits affect deposit of the bank since
many private banks pay higher interest for deposits than CBE Meki branch pays.
Inaccessibility of commercial bank of Ethiopia at kebele level affects mobilization of saving
in the bank particular at Meki branch.

The external factors were market fluctuation, existence of competitors, and lack of awareness
public about saving, existence of informal saving institution and expansion of micro finance
at kebel level affects saving mobilization of commercial bank of Ethiopia at Meki branch.

Among all the factors which affect saving affect saving deposits mobilization, lack of
awareness of public about the importance of saving and expansion of informal saving
instructions and micro finance at different part of kebeles and woredas wer the most
influential factors.

The researchers also evaluates what kind of actives of the bank following in order to increase
the amount of saving and made the public a depositors, according to the findings the bank
motivates the public by providing different incentives and improving its service quality.

The researchers also evaluate the major types of deposits. The bank also accepts saving, fixed
and current deposits. Among these saving deposits was the main deposits schemes which
provide more mobilization of fund for the bank

31
5.2. Recommendation
Based on the study conducted the researchers have identified some of the internal and
external factors affecting saving deposit mobilization and possible recommendation has been
forwarded so that it may help commercial bank of Ethiopia Meki branch to approach the
issues accordingly. Generally, for better understanding these factors, and their
interrelationship, that affect saving deposit customers can develop targeted strategies which
impact saving deposit mobilization in commercial banks.

In addition the most obvious requirement for saving deposit mobilization is expansion and
diversification of branch’s in different parts of the town and kebeles. Interest rate paid on
saving deposit was also other factor that affects deposit mobilization since competitors charge
different interest rate in saving deposits. Therefore the bank shall revise its interest rate on
deposits.

Commercial bank of Ethiopia, Meki branch should do more on saving promotion, to increase
saving.

If the bank provide effective and efficient service to the customers more than its competitors,
the bank may also attract more customers and more saving mobilization.

The bank should give more attention to satisfy the customers according to their requirement
and request.

The bank should take necessary step to create awareness among people by giving financial
educational by talking with customers directly as about the importance of saving in the bank.

32
Reference
1. Devin gaga raisal (2010), theoretical framework profitability as applied to commercial
bank on Malaysia.
2. E.A.Shaw(1995), operational results of commercial bank in Jamaica
3. Erna rachamawate & EKK; symsuhakim (2004), factors affecting muderaba deposits
in Indonesia.
4. Esutacius N. Betubiza and Devid J. Jeatham (1995), factors affecting bank lending to
agriculture southern agricultural commercial bank lending to agriculture southern
agricultural economic association.
5. Herald Fingeran heikohess (2009), Lebanon determinants of commercial bank
deposits in regional financial center.
6. Howells peter and Bain Keith (2000), financial market and institution 3rd edition.
7. Kalvin A. sergeant (2001), the role of commercial banks in finacing growth and
economic development in Trinidad and Tobago and the Caribbean.
8. MI.AHushahak (1987), deposits mobilization in Bangladesh.
9. Mark carrson and Kris James matcher (2006), branch credit banking, competition and
financial stability meenaksh: thyagrajan (1992), an analysis of banking and corporate
finance.
10. Mustafak. Mujar; and sayeayoununs (2009), an analysis of interest rate spread in
Bangladesh
11. N.Desgearoa (1994), banking mobilization by co-oprative banks
12. Peters rose (1994), banking and insurance 4th edition.
13. Mohmmed and mashed (2010), factors affecting deposit of financial institutions.
14. Philip Thomas (1968), intrest rate practices in commercial banks.
15. Commercial bank of Ethiopia web site www. Combanketh. Et

33
 Appendix I
Jimma University
College of Business and Economics
Department of Banking and Finance
This questionnaire is designed to collect data from employees of commercial bank Ethiopia
on the factors that affect mobilization of saving deposits a case study in Meki branch. The
data is going to be used as an input for an essay in a partial fulfilment of BA degree in
banking and finance. Your genuine response is only used for an academic purpose and the
data will be treated at most confidentiality. Therefore, your kindly cooperation is appreciated
in advance. Please put a mark ‘’x ‘’ or on space provided and write your appropriate response
on space provided if required.

Personal Information
1. Sex Male  Female 
2. Age <20 years  20-30 years  30-40 years  above 40 years
3. Educational background
Certificate  Diploma  Degree  Masters and above 
4. Designation; clerk  Manager  Account  Officer 
5. What are factors affecting the level of saving in your bank?
Low interest rate for deposits  high limitation on providing loan 
Market fluctuation  Existence of competitor’s Lack of awareness of public 
6. What the deposit schemes available in your bank?
Fixed deposit  Saving deposit  Current deposit  All 
7. From which deposit scheme are you getting more mobilization of fund?
Fixed deposit  Saving deposit  Current deposit  Others 
8. In comparison to other banks what is the degree of saving interest rate paid by the
bank?
Higher  Medium  Lower  Similar 
9. Is interest rate paid by the bank attracting the customer?
Yes  No 
10. Which type of period of deposit it is familiar with your bank?
Short term  Medium  Long term 

34
11. For what purpose customers borrow money?
New business  Education  Construction  Agricultural consumption 
12. From the above question 12 which type beneficiary enjoying your services more?
New business  Education  Construction  Agricultural consumption 
13. Is CBE, Mek branch mobilizing enough saving deposit currently?
Yes  No 
Specify_______________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

14. What are the factors that initiate saving deposit customers of CBE, Mek branch?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

Thank you for your cooperating!!!

Appendix I
Jimma University
35
 College of Business and Economics
Department of Banking and Finance
Dear respondents;

This questionnaire is designed to collect data from employees of commercial bank Ethiopia
on the factors that affect mobilization of saving deposits a case study in Meki branch. The
data is going to be used as an input for an essay in a partial fulfilment of BA degree in
banking and finance. Your genuine response is only used for an academic purpose and the
data will be treated at most confidentiality. Therefore, your kindly cooperation is appreciated
in advance. Please put a mark ‘’ x‘’ or on space provided and write your appropriate response
on space provided if required.

Questionnaires
1. Sex Male  Female 
2. Age <20 years  20-30 years  30-40 years  above 40 years
3. Educational level; Literate  Illiterate 
4. Occupational ; farmer  govt employee  business man service man 
unemployed 
5. Income level per a month; less than 1000 Br.  1000-5000 Br. 
5000-100000Br.  above 10000 Br 
6. Why do you deposit your money?
For security  to gain interest rate  For emergency 
Other (Please specify...) 
7. Why do you select CBE?
Pay high interest rate  Near to home  Give efficient service  government
bank 
8. In the way the bank encourage peoples to increase their saving capacity?
Increasing interest rate  Provide incentives 
Improve service quality  Other (please specify....) 
9. Have you satisfied by the saving deposit services of CBE, Meki branch?
Yes  No 
10. Is there a weakness and strengths in CBE, Meki branch?
_____________________________________________________________________

36
_____________________________________________________________________
______________________________________________________________

Thank your cooperating!

Jimma University
College of Business and Economics
Department of Banking and Finance

37
Interview questions for official
Dear manager:
1. Are there any internal and external factors that affect saving deposit mobilization
in the bank?
2. What are those factors and how do those factors affect saving deposit mobilization
of bank?
3. Which internal and external factors more affect saving deposit mobilization?

Thank your cooperating!

38