DEPOSIT MOBILIZATION

OF

SANA KISHAN BIKASH BANK LIMITED

A project reports

Submitted BY:

Mandip Kumar Labh

T.U. Registration No: 7-2-927-109-2016

Exam Roll No: 9270037

Shwoyambhu International College

New Baneshwor Kathmandu

Submitted To:

The Faculty of Management

Tribhuvan University

Kathmandu, Nepal

In the partial fulfillment of

The requirement of the degree of Bachelor of Business studies (BBS)

Kathmandu, Nepal

Jan, 2021
 DECLARATION

I hereby declare that the project work entitled “DEPOSIT MOBILIZATION OF

SANA KISAN BIKASH LIMITED “submitted to the Faculty of Management,
Tribhuvan University , Kathmandu is an original piece of work under the supervision
of RAJU RAUT, faculty member, SHWOYAMBHU INTERNATIONAL
COLLEGE, NEW BANESHWOR KATHMANDU, and is submitted in partial
fulfillment of the requirements for the award of the degree of Bachelor of Business
Studies (BBS). This project work report has not been submitted to any other
university or institution for the award of any degree or diploma.

Signature
Date: January 2021

i
 SUPERVISOR’S RECOMMENDATION

The project work report entitled DEPOSIT MOBILIZATION OF SANA KISAN

BIKASH BANK LIMITED submitted by Mandip Kumar Labh of Shwoyambhu Int'l
College, Kathmandu is prepared under my supervision as per the procedure and
format requirements laid by the Faculty of Management, Tribhuvan University, as
partial fulfillment of the requirements for the degree of Bachelor of Business Studies
(BBS). I, therefore, recommend the project work report for evaluation.

Signature:
Name of Supervisor: Raju Raut
Date: January 2021

ii
 ENDORSEMENT

We hereby endorse the project work report entitled DEPOSIT MOBILIZATION OF

SANA KISAN BIKASH BANK LIMITED submitted by Mandip Kumar Labh of
Shwoyambhu Int'l College, Kathmandu, in partial fulfillment of the requirements for
the degree of Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:

…………………………. …………………………
Dr. Hari Sharan Chakhun Suman Prasad Chaudhary
Management Research Committee Shwoyambhu International College
Date: Date:

iii
 ACKNOWLEDGEMENT
My project shows my declaration and I have done full justice to this title. This a
course designed by Tribhuvan University for Bachelors Student of commerce.
Likewise all the fellow student I also extended a lot of pragmatic knowledge while
devising this task. I feel the excitement in each and every span of time while creating
this report.
I would like to express mu gratitude to all supports that provided me very informative
and precious as well as proper information on penmanship this report. I would like to
thank Shwoyambhu International College for providing a chance and allowing for this
study. I am highly appreciative to Lectures Mr. RAJU RAUT and Mr. SUMAN
PRASAD CHAUDHARY principal of SHWOYAMBHU INTERNATIONAL
COLLEGE for this assignment and proper instruction without his help my assignment
would not complete at the time. I cannot entire this assignment without giving thanks
to the Manager/Officer of the SANA KISHAN BIKAS BANK LTD.

Thank you !

MANDIP KUMAR LABH

SHWOYAMBHU INTERNATIONAL COLLEGE
NEW BANESHWOR, KATHAMNDU

iv
 TABLE OF CONTENTS
Title
Page………………………………………………………………………………………….
Declaration.....................................................................................................................i
Suprevisor's Recommendation.......................................................................................ii
ENDORSEMENT..........................................................................................................iii
Acknowledgement.........................................................................................................iv
Table of Contents...........................................................................................................v
List of Tables................................................................................................................vii
List of Figures.............................................................................................................viii
Abbreviations................................................................................................................ix
CHAPTER-I : INTRODUCTION..............................................................................1
1.1 Background of the study..........................................................................................1
1.2. Profile of Sana Kisan Bikas Bank Limited.............................................................3
1.3 Rationale of Study....................................................................................................6
1.4 Review......................................................................................................................6
1.5 Methods..................................................................................................................20
1.6 Study Limitations...................................................................................................23
1.7 Organization of Study............................................................................................23
CHAPTER II : RESULTS AND ANALYSIS..........................................................25
2.1 Data Presentation.................................................................................................25
2.1.1 Total deposit position of Sana Kisan Bikas Bank Limited............................25
2.1.2 Investment in different sectors........................................................................26
2.1.3 Total loan and advances and their collection.................................................27
2.1.4 Total assets position......................................................................................28
2.1.5 Interest expenses on Deposit...........................................................................29
2.1.6 Average interest income and expenses during five years period...................30
2.1.7 Interest rate on different loans Products..........................................................30
2.1.8 Trend of Loans and Advances.........................................................................32
2.1.9 Trend of Investment........................................................................................33
2.2.0 Reason for Growing Deposit...........................................................................34
2.2.1 Determinants of Deposit Volume....................................................................35
2.2.2 Composition of Deposit...................................................................................36

v
2.2 Analysis.................................................................................................................37
2.3 Findings..................................................................................................................37
CHAPTER III : SUMMARY AND CONCLUSION..............................................39
3.1 Summary................................................................................................................39
3.2 Conclusions............................................................................................................40
Bibliography.................................................................................................................41
Appendix......................................................................................................................43

vi
 LIST OF TABLES

Table Title Page

no
2.1.1 Total deposit position 25
2.1.2 Total investment in different sector and growth In investment 26
2.1.3 Loans and advances and their collection 27
2.1.4 Total assets and increase in total assets 28
2.1.5 Interest expenses and percentage increase In interest expenses 29
2.1.6 Average interest income and expenses during Five year period 30
2.1.7 Interest rate on different loans Products 31
2.1.8 Trend of Loan and Advances 32
2.1.9 Responses associated with the trend of Investment 33
2.2.10 Responses associated with the Reason for growing Deposit 34
2.2.11 Responses associated with the Determinants of Deposit Volume 35
2.2.12 Composite of Deposit 36

vii
 LIST OF FIGURES

Figures Title Page

no.
2.1.1 Total deposit position 25
2.1.2 Growth in investment 26
2.1.3 Loans and advances and their collection 27
2.1.4 Total assets and increase in total assets 28
2.1.5 Interest expenses and percentage increase in interest expenses 29
2.1.6 Average interest income and expenses during five year period 30
2.1.7 Interest rate on different loans Products 31
2.1.8 Trend of Loan and Advances 32
2.1.9 Responses associated with the trend of Investment 34
2.2.0 Responses associated with the Reason for growing Deposit 35
2.2.1 Responses associated with the Determinants of Deposit Volume 36
2.2.2 Composite of deposit 37

viii
 ABBREVIATIONS
CA Chartered Accountant
CEO Chief Executive Officer
Fig. Figure
F/Y Fiscal year
NEPSE Nepal Stock Exchange
SEBON Securities Board of Nepal
SFACLs Small Farmers Agriculture Cooperative Ltd
Vol Volume

ix
 1

CHAPTER-ONE
INTRODUCTION
1.1 Background of the study
Deposit is one of the important domestic capital formation factors that lead to increase
in the size of national output income and employment, solving the problems of
inflation and balance of payment and foreign debts. Domestic capital formation helps
in making a country self-sustainable. According to classical economists, one of the
main factors which helped capital formation was the accumulation of capital. Profit
made by the business community constituted the major part of saving in the
community and the saved on e has been assumed to be invested. They thought capital
formation indeed plays a device role in determining the level and growth of national
income and economic development (Bendix,1915). In the view of many economists,
capital occupies the central and strategic position in the process of economic
development in an underdeveloped economy that lies in a rapid expansion of the rate
of its capital investment so that it attains a rate of growth of output which exceeds the
rate of growth of population by the significant margin. Only with such rate of capital
investment will the living standard begin to improve the developing countries. In
developing countries, the rate of saving is quiet low and existing institutions are half
successful in mobilizing the saving as most of people have incomes so low that
vertically all current income must be spent to maintain a subsistent level of
consumption. Investment is an essence o the national economy. Banking system is the
integral part of the investment system in productive sectors (Mikkelson and Ruback,
1985).It involves the sacrifice of current rupees for future prospect. It is concerned
with the allocation of present fund for later reward, which is uncertain. When people
deposit money in saving account, for example in a bank, the bank must invest the
money in new factories and equipment to increase their production. In addition
borrowing from the banks most issues stocks and bonds that they sell to investors to
raise capital needed for the business expansion (Sharpe wt al.1998). Government also
issues bond to obtain funds to invest in projects such as the construction of dams,
roads, and schools. All such investment made by individuals, business and
government, a presto sacrifice of income to get and expect future benefits. As a result,
investment raises a nation’s standard of living.
 2

For the development of any country, the financial sector of the country is responsible
and must be strong. The financial sector is the vast field, which comprises of banks,
cooperatives, insurance companies, financial companies, stock exchange, foreign
exchange markets, mutual funds etc (Shanmugam, 1989). These institutions collect
idle and scattered money from the general public and finally invest in different
enterprises of national economy that consequently help in reducing poverty, increase
in life style of people, increase employment opportunities and thereby developing the
society and country as a whole. Thus, in today’s concept, the financial institutions and
microfinance banks have become one of the bases for measuring level of economic
development of nation.

Micro Finance banks are the main sources which motivate people to save their
earnings. Banks mobilize, allocate and invest much of society‘s saving (Bergere et al.
2004). Households and business are mainly using banks to save their money to get
loan for their project undertakings. Blanco and Meyer (2001) said that microfinance
banks are important financial intermediaries serving the general public in any society.
In most cases commercial banks hold more assets than any other financial institutions.
Apart from their many functions, microfinance banks facilitate growth and
development. Banks lend in many areas or sectors of the economy.

Bank deals in accepting the saving of people in the form of deposit collection and
invest in the productive area (Fischer, 1989). They provide loan to the people against
real and financial assets. They transfer the monetary sources from savers to users. In
other words, they are intermediate between lender and receiver of fund they mobilize
the depositor fund. Bank 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 the prices of goods and services in the economy ( Aredo, 2004).
Development banks are critical to the development process. By granting loans in areas
such as agriculture, manufacturing, services, construction and energy sectors, banks
contribute to the development of the country.

The development bank has been a vital ingredient for economic development of the
country. Capital accumulation plays an essential role of the economic growth of
nations, which in turn is basically determined among others by saving and investment
 3

propensities (Brennan, 1970). But, the capacity of saving in the developing country is
quiet low with relatively higher marginal propensity of consumption. As a result,
developing countries are badly trapped into vicious circle of poverty. The basic
problem of these countries is raising the level of saving and thus investments (Khalily
et al.,1987). In order to collect enough saving and put them into productive channels,
financial institutions like banks are necessary. It will be utilized within the economy
and will either be diverted abroad or used for unproductive consumption.

Microfinance is not simply banking for the poor, it is a development approach with a
social mission and a private sector-based financial bottom line that uses tested and
continually adjusted sets of principles, practices and technologies. The key to success
microfinance lies in the ability of the provider to cost-effectively reach a critical mass
of clients with systems of delivery, market responsiveness, risk management and
control that can generate a profit to the institution. Typically, this profit is ploughed
back to ensure the long term survival of institution, i.e. the continuous provision of
services demanded by its clients. The two long term goal of microfinance are thus
substantial outreach and sustainability. Financial services enable the poor to increase
and diversify incomes, build human, social and economic assets, and improve their
lives in ways that reflect the multidimensional aspects of poverty.
1.2. Profile of Sana Kisan Bikas Bank Limited
Small Farmers Development Bank (Sana Kisann Bikas Bank); as an apex
microfinance bank emerged on July 2001 to provide wholesale credit along with the
technical support services mainly to the Small Farmers Agriculture Cooperatives Ltd.
(SFACLs) and similar types.

The banks is incorporated under the company Act and licensed under the Bank and
Financial Institutions Act (BAFIA) 2006 as a “D” class bank. Currently, this bank has
started providing wholesale credit to other cooperatives and Microfinance institutions
(MFIs) too in order to expedite access to microfinance services for the low income
people especially living in hills and mountains of the country.

Ownership Structure
The Government of Nepal, the Agriculture Development Bank, Nepal Bank Limited,
 4

Nabil Bank and 21 Small Farmers Agriculture Cooperatives were its initial promoters.
The Bank established for Small Farmers Agriculture Cooperatives, a major portion of
shares of the Agriculture Development Bank and entire share holding of the
Government of Nepal, been divested to 231 SFACLs. The ownership structure as of
April, 2017 is shown in table.
S.N Name of shareholder Amount in Millions
1 Agriculture Development Bank Ltd. 50.66
2 Nepal Bank Ltd 13.96
3 Nabil Bank Ltd. 6.98
4 SFCLs 89.40
5 Public 69.67
Total 230.68

Its central office is in Kathmandu, 9 regional offices incorporating all geographical

regions. To provide financial and technical services with convenience and ease,
regional offices in Birtamod (for Mechi), Itahari, Sunshari (Koshi), Janakpur,
Dhanusha (for Janakpur and Sagarmatha), Hetauda, Makwanpur (for Narayani),
Gajuri, Dhading (for Bagmati), Butwal, Rupandehi (for Lumbini), Pokhara, Kaski (for
Gandaki and Dhaulagiri) , Nepalgunj (for Rapti, Bheri, and Sheti) and Attariya (for
Karnali and Mahakali ) have been established. Regional offices provide financial and
technical assistance to SFACLs and other microfinance institutions.

Board of Directors
The board of directors, comprises of one representatives from Agricultural
Development Bank Ltd. , one from Commercial Bank, an independent expert , three
SFCLs and two from general Public Shareholder. The Board consists of eight
members including a chairperson. The current Board of directors of SKBBL are ;
 Mr.Khem Bahadur Pathak : Chairman, Represent SAFCL
 Mr. Dilip SinghThapa: Member, Represent from Agriculture Development Bank
 Mr.Rabindra Yadav : Member, Represent SAFCLs
 Mr.Umesh Lamsal :Member , represent, General Public Shareholder
 Mr.Bhupesh Chhatkuli : Member, Represent General Public Shareholder
 5

Management Hirarchy.

Board of Directors

Credit Committee Managing Director Audit committee

Internal Audit

Assistant general Chief Financial Chief Operating Company

Manager (Credit) Officer (CFO) Officer (COO) Secretary

Credit Marketing Treasury and Account and Share Department

and Sanction Forex Department Admin. Department
Department

Credit Documentation Reconciliation System Department Law Department

Follow up supervision Department
and NPA Department

Branch Credit Control Business Development Human Resources

Department
Department

Premises Procurement and

General Addmin. Department

Branches and Extension Counters

Source:- Annual report of SKBBl

Objective of Study
The general objective of the study is to examine relationship between the amount of
total deposit and amount of total credit and investment granted by the micro finance
banks.
The specific objectives of the study are as follows:
i. To assess the trends of deposit, investment , loans, and advances, and asset
purchased
ii. To assess the relationship between deposits and loans and advances,
investment and assets purchased.
iii. To analyze the movement of deposits with respect to loans and advances,
 6

investment and asset purchased from portfolio analysis.

iv. To analyze the management views and opinions regarding the funds
allocation and deposit mobilization in the context of SKBBL.
1.3 Rationale of Study
Banks and other financial institutions play an important role to increase economic
standard for the development of the country. Economic development becomes slow if
there are incomplete and unfair banking facilities. Especially, Microfinance banks
provide different economic and technical facilities to the people who involve in
business activities. Microfinance banks play a major role in collection of scared small
saving depositors and transfer these funds into productive sectors for the economic
development.

As the research done in any field, there are several key factors that cannot be avoided,
in which significance of study also occurs. Mainly this study covers the deposit and
credit position of microfinance banks, so it helps to reveal the financial position of
banks and study occupies an important role in the series of the studies of microfinance
banks. The significance of the study is:
i. Importance to know how well the bank is utilizing its deposits.
ii. Importance to policy formulator and also be useful academic professionals,
students particularly those involves in commerce, CA and financial institutions
to formulate policies and plans on the basis of the performance of the bank.
iii. Importance to the management party of selected banks for the evaluation of the
performance of their bank and comparison with other banks.
iv. Importance for the investors, customers, (Depositors and loan takers) and
personal of bank to take various decisions regarding deposits and loan advances.
1.4 Review
Microfinance institutions around the world serve different types of clients. These
institutions offer various services including loans, saving account, insurance products
and various combinations of these services. While microcredit refers to the act of
providing loans of small amounts to the poor and other borrowers that have been
ignored by commercial banks, microfinance is the act of providing borrowers with
financial services such as savings institutions and insurance policies (Sengupta and
Aubuchon, 2008).
 7

More broadly, microfinance is “a word in which as many poor and near-poor

households as possible have permanent access to an appropriate range of high quality
financial services, including not just credit , but also savings, insurance and fund
transfers” (Robert et al, 2004). The institutions that carry out these activities in
Nigeria is construed to mean “any company licensed to carry on the business of
providing microfinance services, such as savings, loans, domestic funds transfer, and
other financial services that needed by the economically active poor, micro, small,
and medium enterprises conduct or expand their business” (CBN,2005). Micro
finance activities can be available in the form of micro credit, micro savings, and
micro insurance, other “micro” financial services. The idea of microfinance started in
Bangladesh with the establishment of the Grameen Bank.

Conventional banks across the world ordinarily find lending to the poor very difficult
and unprofitable. Difficult because they lack the skills or the expertise needed to put
the borrowed funds to their best possible use; and unprofitable because most of the
loans may go bad and may consequently have to be written off. New thinking now
centers on micro financing with rural poor as the focus. Dupas and Robinson (2009)
in an assessment of the effects of micro savings in Kenya finds access to saving
accounts by micro enterprises in microfinance banks had several positive effects on
the business fortune of the savers. This fact seems interesting because the saving
accounts were not only interest-free, but also featured substantial withdrawal fees.

Also, research in Thailand shows that microfinance institutions, particularly those

targeted at women, promoted asset growth, consumption smoothing, mobility across
occupations and industries, and also reduced reliance on money lenders (Kaboski and
Townsend,2005). Microfinance, according to Otero (1999,p.8) is “ the provision of
financial services to low income poor and very poor self employed people”. These
financial services according to Ledgerwood (1999) generally include saving and
credit but can also include other financial services such as insurance and payment
services. Schreiner and Colombet (2001,p.339) define microfinance as “ the attempt
to improve access to small deposits and small loans for poor households neglected by
bank”. Therefore, microfinance involves the provision of financial services such as
savings, loans and insurance to poor people living in both urban and rural setting who
are unable to obtain such services from the formal financial sector.
 8

In the literature, the term micro credit and microfinance are often used
interchangeably, but it is important to highlight the different between them because
both terms are often confused. Sinha (1998,p.2) states “microcredit refers to small
loans, where as microfinance is appropriate where NGOs and MFIs supplement the
loans with other financial services (savings, insurance)”. Therefore microcredit is the
component of microfinance in that it involves providing credit to the poor, but
microfinance also involves additional non-profit financial services such as savings,
insurance, pensions, and payment services (Okiocredit, 2005).

The History of Microfinance Microcredit and microfinance are relatively new terms
in the field of development, first coming to prominence in the 1950s, according to
Robinson (2001) and Otero (1999). Prior to then the 1950s through to the 1970s, the
provision of financial services by donors or governments was mainly in the form of
subsidized rural credit programmers. These often resulted in high loan defaults, high
lose and an inability to reach poor rural households (Robinson, 2001).

Robinson states that the 1980s represented a turning point the history of microfinance
in that MFIs such as Grameem Bank and BRI2 began to show that they could provide
small loans and savings services profitably on a large scale. They received no
continuing subsidies, were commercially funded and fully sustainable, and could
attain wide outreach to clients (Robinson, 2001). It was also at this time that the term
“microcredit” came to prominence in credit programs of the 1950s and 1960s was that
microcredit insisted on repayment, on charging interest rates that covered that cost of
credit delivery and by focusing on clients who were depended on informal sector for
credit. It was now clear for the time that microcredit provide large-scale outreach
profitably.

The 1990s “Saw accelerated growth of number of microfinance institutions created

and an increased emphasis on reaching scale”.(Robinson,2001,p.54). Dichter
(1999,p.12)refer to the 1990s as “ the microfinance decade”. Microfinance now turned
into an industry according to Robinson (2001).Along with the growth in microcredit
institutions, attention changed from just the provision of credit to the poor
(microcredit), to the provision of other financial services such as savings and pensions
 9

(microfinance) when it became clear that the poor had a demand for these other
services (MIX,2005).

Using the multiple regression method, Agu (1984) concluded a study on the role of
banks in mobilization and allocation of resources for development in the context of
Nigeria. This study had used the variables

Such as saving rate, income, interest rate and wealth. The data was based on
secondary data and the annual data from the period from 1960 to 1980 have been
used. The data employed was extracted from the population Bureau Office Lagos,
annual report and account of CBN, Monthly Report, PNC Okigbo Nigeria’s Financial
System.

The major finding of the study was that the Nigeria banks have potential scope and
prospects for mobilizing financial resources and allocating them to productive
investments which have to be exploited quickly by enlarging the number of banks
offices and also by the banks branching into the rural areas where a lot of saving lie
idle or dissipated and where productive investment projects do not take off because
lack of financial institution to mobilize and channel the funds so mobilized into
productive activities. The strength of the research was that role and scope of the
microfinance banks as financial intermediaries in mobilizing domestic financial
resources for development and the constrains in the efficient performance of this role
was explored in the light of past trends.

The term microfinance was not used in earlier part of the history of rural
microfinance. It has been found used in Nepal only in the part of 1990s. Rural credit
in Nepal began in 1956 with the opening of Credit Cooperatives in Chitwan Valley to
provide loans to the re-settlers coming from the different parts of country. The
government through the creation of the Cooperative Development Fund (CDF)
arranged some credit support to the re-settlers through these cooperatives. In 1963, the
government established the cooperatives Bank, which was later, converted into
Agricultural Development Bank in 1968.The cooperative faced problems of shortage
of fund for credit disbursement to their members on the one hand and
misappropriation of borrowed fund for personal uses by some of their officials on the
 10

other. Hence, the government commissioned a fact –finding mission in 1968 to probe
the operation of 1489 cooperatives then registered with the department of
Cooperatives and the mission found most of them at defunct stage and recommended
for their liquidation. Therefore, the government introduced the Cooperatives
Revitalization Program in 1971. It authorized the Agricultural Development Bank
Nepal to run cooperatives under its guidance and management. In 1976, ‘Sajha
Program ‘was launched and the Cooperatives were renamed as ‘Shaja Societies’. The
compulsory savings collected under the Land reform program of 1964 (2021 B.S.)
were converted into the share capital of Sajha Societies. The NRB conducted a bench
mark survey in 1983/84 to access the situation of the Cooperatives. The study found
that 94% of cooperatives were dealing with transactions of agriculture inputs and 85%
were also found extending credit. Most of the cooperatives were running at losses
and over 75% of the outstanding loan was overdue for more than one year. ADBN
launched the Small Farmer Development Program in 1975- first pilot project at two
sites, Sakhuwa Mahendranagar of Dhanusha district in Terai and Tupche of Nuwakot
district in hills. The Strategy was to organize small farmers, tenants and landless
laborers into groups and strengthen their receiving mechanism for tapping resources
from services agencies. Credit was provided under the group guarantee. It also
focused on developing a habit of thrift and personal Saving among the group of
members. They also started group saving to realize self-reliance in financial
resources. A total of 142,711 members who were organized into 19,597 groups were
benefited from the program by July 1991/1992. After the reinstallation of multiparty
democracy in 1990, the government appointed a seven-member national cooperatives
consultation committee and dissolved the ‘Sajha Central Committee’.

It also set up a National Cooperative Development Board (NCDB) constituted of 11

members to provide policy directives to the cooperatives. The government enacted a
new Cooperatives Act in 1992 to ease promotion and development of cooperatives as
vehicles of economic development in the rural areas. The government also
emphasized the role of cooperatives for extending credit facilities and other services
to the rural people in its Eight National Plan.

Mrak (1989) carried out a study on role of the informal financial sector in the
mobilization and allocation of household’s savings in the context of Zambia.
 11

Statistical data were used to analyze the important of the informal sector in the
mobilization and allocation of households saving in Zambia and to discuss various
types of informal financial in situations, their historic origin. The study was made on
the basis of study visit to Zambia in the first half of 1987. The analysis of this
research was carried out with the help of secondary data for the period of 1970-1983.

The major finding of this study were that financial sector in Zambia, although
institutionally fairly well develop, has not fulfill its role to mobilize and allocate
households savings. Households’ savings have been largely disregarded due to
availability of external resources and general belief that households, particularly in
rural areas, are too poor to save.

Vogel and Burkett (1986) conceded a study on deposit mobilization in developing

countries: the importance of reciprocity in lending in the context of Thailand, Taiwan,
Mauritius, Tanzania, Sudan, Kenya, Gambai, Singapore, Korea, South Africa, India
and Malawi. Statistical data were used to analyze the situation of deposit mobilization
in the developing countries. This is important not only because of potential through
reciprocity for increasing the amount of savings mobilized and improving the
allocation of these savings by FIs, but also because of the efficiency gains resulting
from economics of scope and group effects involved in lending to depositors.

Bajracharya (1990) performed a study on monetary policy and deposit mobilization in

Nepal. Multiple regression method is used for the study. Primary and secondary data
were used to collect the data. The study has concluded that the mobilization of
domestic savings is one of the monetary policies in Nepal. For this proposes
microfinance banks stood as the vital and active financial intermediary for generating
resources in the form of deposit of the private sector so for providing credit to the
investor in different aspects of economy.

With an objective of analyze the effect of interest rate restriction on the deposit
mobilization of commercial banks in the context of Nigeria, Oyewole (1994) revealed
that implicit interest rates contributed to the observed high cost of banking operation
in the country during the period. The data for this study was obtained from the Annual
Report and Statement of Accounts of 25 Commercial Banks in Nigeria for the period
 12

1980-1986. The number of banks and the period of analysis were determined solely
by the availability of comparable data across the banks.

Pradhan (1996 B.S.) conducted a study on deposit mobilization, its problem and
prospects in the context of Nepalese financial institutions. The study has presented
that deposit is the life-blood of every financial institution, like commercial banks,
finance company and cooperative or non-government organization. Primary and
secondary data were used for the collection of data.

The study further adds in consideration of most of banks and finance companies,
latest figure produces a strong feeling that serious must be made of problems and
prospects of deposit and credit disbursement. The research had recommended for the
prosperity of deposit mobilization by providing sufficient institutional services in the
rural areas, cultivating habit of using rural banking unit, adding services hour system
to bank, organizing training programs to develop skilled manpower by NRB,
spreading cooperative to the rural areas for development of mini-branch services to
these backward areas.

Kafle (1996) conceded a study on NRB and its Polices for Monetary Control opines
and operation efficiently with proper analysis of the project”.

trend o deposit position and investment position of Yeti Finance Company. The study
was conducted on the basis of secondary data and used various financial tools to
analyze the data. The study just covered only period of five years.

The major finding of the study was that the deposit policy is not stale but has highly
fluctuating trend and investment is gradually in increasing trend. The researcher found
there is highly positively correlation between total deposit and total investment the
researcher concluded that Finance Company has been found profit oriented, ignoring
the social responsibility which is not fair strategy to sustain in long run. Therefore, it
is suggested the company should involve in social program which help the derive
people who are depended in agriculture. Agriculture is the paramount of Nepalese
economy so that any finance company should not forget to invest in this sector. In
order to do so, they must open their branches in remote area with an objective of
 13

providing cheaper financial services.

Tennant (2007) carried out a study on a comparison of the mobilization and use of
saving across types of financial intermediaries in the context of Jamaican economy.
The study seeks to compare the performance of different types of financial institutions
in their role as intermediaries. The financial intermediation involves (1) mobilization
of savings, (2) transferred of those savings to the real sector typically through loans
and financial investments: (3) allocation of funds among competing borrowers and
investors; and (4) monitoring of borrowers and investors to ensure that funds are
being used prudently.

The Nepal Rastra Bank (NRB) initiated Small Sector Lending in 1974 directing the
commercial banks to invest 5% of their deposit balance in Small Sector, which was
later designated as the “Priority Sector Lending” in 1976. The NRB subsequently
initiated “Intensive Banking Program” in 1981 to boost up PSL lending to the low
income group and required CBs to raise PSL to 8% of CBs loans and advances, which
was further raised to 12% in 1989. The main partner of PSL were Nepal bank Ltd.
(NBL) and Ratriya Banijya Bank (RBB)-the two state controlled CBs. The share of
NBL and RBB in rural credit supply was 4.1% and 2.4% in the sixth and 12.3% and
6.7% in the Seventh Plan periods. Loans under PSL are classified into agriculture,
cottage industries and services. Target group under PSL are low income families with
Rs 2,511 or less per capita income per year. The beneficiary must contribute 20% of
the project cost if the loan size was more than Rs.15,000. NBL and RBB charged 15%
to 16% interest rates on priority sector loans. They provide loans up to 80% of the
appraised value of the collateral for low income and 70% for the high-income
families. However, these CBs provide loans to the group members of Production
Credit for Rural Women (PCRW) formed by Women Development Section (WDS) of
Ministry of Local Development and the groups formed by the bank staff without
collateral on just group guarantee. The loan limit for such loans was Rs.30, 000. The
Grameen Bank model of Bangladesh was replicated in Nepal with the establishment
of Eastern and Far-western Grameen Bikas Bank in 1992. The target groups included
in Terai the farmer with holding less than 1 Bigha (0.67 ha) and hills with holding less
than 10 ropani (0.5 ha) and landless. It followed group extending credit. Credit
displined was given top priority and loans were extended without collateral security
 14

on group guarantee. The broad of director of the GBBs comprised of the NRB and CB
representatives and is headed by the deputy governor or executive director of NRB.
The share capital of first two GBBs was mainly contributed by the government and
the NRB i.e. 75% and by CBs I.e.25%. The first two GBBs started functioning from
middle of 1993. They charged 20% interest rate and the main source of fund for
lending came from NRB and CBs. In the meantime, two NGOs- the Nirdhan and the
Centre for Self-help Development (CSD) also Launched microfinance programs
replicating Grameen model in 1993 and 1994 respectively. The financial
intermediaries act was enacted in 1998 to regulate the financial intermediaries NGOs
on carrying out microfinance activities. This was claimed to be a breakthrough in
legalizing the operation and activities of NGOs as microfinance operators. With the
enforcement of this Act, two FI-NGOs, Nirdhan and the Centre for self-Help
Development also got registered under it. In 2004 , the government introduced the
Banks and Financial Institutions Ordinance , which has a provision of licensing
microfinance banks also as class ‘D’ banks. As a result, 13 microfinance banks have
been issued by the NRB till the date. In order to make available small wholesale
funds to cooperatives and NGOs providing to loan to low income groups, the
government had create a fund called Rural Self-Reliant Fund in 1991 with Rs.20
million contributed by the government. The government with assist from ADB and
NRB also established the Rural Microfinance Development Centre Ltd (RMDC) In
1998, to provide larger wholesale loan to MFIs through implementation of the ADB
assisted Rural Microfinance Project (RMP). After the operation of RMDC, several
MFIs were added in the microfinance market and the coverage by the microfinance
institutions also increased in faster rate. The government had also instituted another
wholesaler, the Sana Kisan Bikas Bank Limited (SKBBL) in 2001.With all these
initiatives and efforts microfinance has gained a new momentum as an industry.
Besides all these self-help groups also were promoted by several rural and community
development projects of the government and donors to provide small credit to the
self-help group members through grants for seeds funds.

Sylvester (2010), deposit mobilization is considered as key tool in financial

performance of banks, particularly for commercial banks. He argued also those
evaluation of role of deposits mobilization in financial performance of banks generate
mix result. Though most of them supportive to deposit mobilization in financial
 15

performance of banks, they are insufficient, on the side of appropriate ways of

mobilizing more savings, hence the researcher need to apply it in context of
commercial banks and to analyze other strategies of deposits mobilization that are not
considered in the above literature.

In the view of Pradhan Shekhar Bahadur, in his articles, “Deposit mobilization, its
problem and prospects” Pradhan,S.B, (2010,p-9). He has presented the following
problems in the context of Nepal:
1. People do not have knowledge and proper education for saving institutional
manner. They so now know financial organizational process, withdrawal system,
depositing system etc.
2. Financial institutions do not operate and provide their services in rural areas.
Charioneko and Silva (2002) has analyzed the progress toward commercialization
of microfinance industry in Sri Lanka in their report on Commercialization of
microfinance. They have emphasized to explore the remaining challenges and
implications, prospects, and positive approaches to the commercialization of
microfinance. The researcher pointed out the growing realization that
commercialization allowed MFIS greater opportunities to fulfill their social
objectives of providing the poor with increased access to a whole new array of
demanded-driven microfinance products and services. The report considered
commercialization of microfinance at micro as well as macro levels. The
microfinance industry in Sri Lanka was at an early stage of commercialization.
Microcredit market dissemination appeared high at about 80 percent. Based in
household data and the current savings average outstanding microloan amount
$193 and microenterprises estimated to be around $254.9 million with 2.3
millions microloans. At the end of 2000, MFIs had approximately $202.3 million
outstanding in 1.65 million microloans. In Sri Lanka, cooperatives area dominant
microfinance providers and the movement continues to influence how NGOs
deliver microfinance. While many cooperatives wee sustainable and their
performance varies, more than one third of the supply was provided through
government programs, which can be considered supply –led and not
commercially.

Fermando (2006) explained that the MFIs charging high prices to cover costs for
 16

any business was an essential practice. His study report that the highest interest
rates charged by most of the MFIs in the region ranged from 30 percent to 70
percent a year on a reducing balance basis The question arises why microcredit
rates are so high? Because of these four key factors: the cost of funds; the MFIs’s
operating expenses; loan losses” and profit needed to expand their capital base and
fund expected future growth, determined rates. Imposing ceiling on microcredit
interest rates was not the permanent solution of the problem, although lower
microcredit interest rates will help to increase the availability of affordable
finance for poor household. The study has shown in the Asia Pacific region, which
strongly supports the view that liberal interest rate policies fuel the growth of the
microfinance industry. More than 50 million poor people have access to
microcredit from formal and semi-formal institutions in the region. The study has
explained in detail about impact of ceiling of interest rates on microcredit such as ,
short term, medium term and long term effects on supply as well as in demand
side. In those countries in which interest rates ceiling have been a major
characteristic of the market, growth of outreach had been disappointingly low. In
most of the developing economy, the best available investment opportunities for a
majority of poor households involve those with moderate returns. Household in
this category cannot be expected to have same ability to service loan taken at high
rate of interest as those who realize high returns on their investments. Similarly,
poor households need credit to meet expenditure on health, education and many
lifecycle events. Policy makers can oppose requests to impose rate ceiling that
will slow down the growth of MFIs industry and result in reducing the supply of
microcredit and other financial services, harming rather than helping poor and low
income households.

INAFI SAP-Nepal 2004 conducted a thematic research study on the “Impact of

Microfinance Services on Poverty Reduction in Nepal”. The main objective of the
study was to find out the overall impact of microfinance services on poverty
reduction in the country. The study focused on (i) outreach of microfinance, (ii)
access use and contribution of microfinance, (iii) micro-enterprise development,
(iv) managing risks and vulnerabilities by clients, (v) empowerment of women
and (vi) poverty reduction. Both primary and secondary data were used for the
analysis. In the study, both “before and after’ and ‘with and without’ approaches
 17

were used. The major findings of the study were the positive impact of
microfinance on poverty reduction. Microfinance enabled the poor to enhance
their access to financing. For income growth and welfare improvement through
micro-enterprise development and increased ability to address vulnerability and.
Economic empowerment; Microcredit was used for production (66%) and the
remaining for consumption. Microfinance contributed to reduce poverty in client
household’s. Respondents increased their incomes by 56 % after participation in
the microfinance programs. Beneficiaries have increased slightly more financial,
physical and human capital than non-clients; Microcredit has served to lessen their
dependency on moneylenders, reducing the average interest rate burden especially
for the poor lives. Microfinance has promoted micro-enterprise activities, which in
turn have increased wage and self-employment opportunities for beneficiaries and
the community people. There is great need to expand the MFIs in high hills and
mountains, where the majority of poor lives. Bashyal (2005) studied and evaluated
the impact of microfinance program on poverty reduction in her Ph.D dissertation
entitled “Impact of Microfinance Programs on Poverty Alleviation in Nepal : A
case if Rupandehi District”. She gave more emphasis on her study that women
will not be empowered until and unless they get benefited both qualitatively and
quantitatively with the promotion of gender equality. Overall objectives of the
study were to evaluate the socio-economic impact and implications of
microfinance on poverty alleviation through the women empowered and also
evaluate the impact on natural resource management. The Nirdhan Uthan Bank
Limited situated in rupandehi district , Bhairahawa, was selected for the purpose
of case study . This study assumed that microfinance can reduce both income and
human poverty over a period of time.

Shrestha (2010)analyzed the Microfinance and social Mobilization in the context

of ADBL in promoting SFCLs (Small Farmers Cooperative Limited) in his book
titled “Financial Performance of Small Farmers Cooperative Limited in Nepal”.
Considering the positive outcome of SFDP in terms of targeting the poor for their
overall well –being, expansion of the program was highly demanded in rural areas
of Nepal to deliver services to the poor and disadvantaged groups. Social
mobilization is also equally required in order to improve and maintain the better
financial performances of SFCLs . Microfinance and its contribution in the
 18

economy are significant. This sector contributes to reduce poverty, unemployment

and inequality. This sector is self employment generation and tries to raise leaving
standard of people. Very few researchers have been carried out in the case of
developing countries like Nepal. But some effort has made to find put the problem
and these efforts are not sufficient.

1.5 Methods
“Research methodology refers to the various sequential steps to be adopted by a
research in studying the problem with certain objectives in view”.(Kothari,1985)
research methodology is the research method used to test the hypothesis. It
sequentially refers to the various steps to adopt by a researcher in studying a problem
with certain objectives in view. In other words , research methodology describes the
methods and process applied in the entire subject of the study.

Population and Sample

The history of microfinance in Nepal is relatively new. The Nepali government’s
attempt to promote microfinance services dates back to 1975. It was recognized as an
official poverty alleviation tool only in the country’s Sixth plan (1980/81-1984/85).
The sector has, however, gained momentum after the restoration of democracy in
1991. Credit Development Banks in Nepal are licensed by Nepal Rastra Bank in
‘Class D’. Micro credit Development Banks in Nepal are also playing vital roles for
the Development of economy status of Nepal. Nepal has many nationalized and
private Micro credit Development Banks, There are 21 Micro Credit Development
Banks licensed by NRB in Nepal.

Types of Data
Both primary and secondary data have been used for this study. Primary data has been
used in order to assess the opinions of the bank managers on funds allocation and
deposit mobilization of Nepalese Microfinance bank. In addition, the primary data
attempts to reveal other facets regarding funds allocation and deposits mobilization
situation in Nepalese banking sector. At the same time, secondary data has been
employed in order to analyze the relationship between deposit and its explanatory
variables.
 19

Secondary Data
Secondary data were used to test the ability of the micro finance development banks
on the utilization and mobilization of the deposits available and the effects of various
elements such as Loans and advances, Investment and Assets purchased on the
profitability of the bank. The secondary data mainly obtain from office of Security
Board of Nepal (SEBON) and annual report published by banks. The periods of study
has been taken from 2012 to 2017 A.D Data on yearly deposits, investments, loans
and advances and assets purchased are obtain from the financial report of the
microfinance development banks. Data required on accounting figures have been
collection from office of NEPSE, office of respective companies, and SEBON. All
firms their fiscal year end in Ashad; therefore, test did not have deal with matching
the accounting data for all fiscal year ends in every calendar year. Thus, this study has
use panel data to analyze the relationship between deposits and its explanatory
variables.

Primary Data
The basic purpose of primary sources of information is to survey the opinion of chief
executives, financial managers and financial analysts regarding the funds allocation
and deposit mobilization of commercial bank. The primary data are generated form
field study based on questionnaire survey. The survey has been basically designed to
understand the opinion of respondents as how they perceive the fundamental variables
affecting deposits in Nepalese Banking Industry. The primary data have been
collected thorough the questionnaire distributed to the chief executive, manager,
finance officer and operation managers of sample bank. The set of questionnaire were
distributed to all respondents.

Data collection Procedure

Correlation research attempts to determine the extent of a relationship between two or
more variables using statistical data. In this type of design, relationships between and
among a number of facts are sought and interpreted. This type of research is
recognizing trends and patterns in data, but it does not go so far in its analysis to
prove cause or these observed patterns. Cause and effect is not the basis of this type of
observational research. The data, relationships, and distributions of variables are
 20

studied only. Variables are not manipulated; they are only identified and are studied
as they occur in a natural setting. The research is based on balanced panel data.

The study based on primary and secondary source of data. The primary data are
generated from field study based on questionnaire survey. The survey has been
basically designed to understand the opinions of respondents as hoe they perceive the
fundamental variables. The primary data has been collected

Manly through questionnaire distributed to the staffs members and operation

managers of Sana Kisan Bikas Bank. The relevant secondary data has been collected
mainly through the annual report of Sana Kisan BIkas Bank, from the data base of
NRB, various reports and other studies like studies in Tribhuvan University Central
Library, Pokhara University Central Library, different journals, magazines, reports,
Master degree thesis papers, websites articles, books articles have also been referred.
The study is confined only to the specific areas such as impact of various types of
deposit on total deposits, deposits mobilizations by the banks, loans and advances,
investments, liquidity and assets for the five years period starting from 2012/13 to the
year 2016/17.

Techniques to Analysis
A series of actions or steps performed on data to verify, organize, transform, integrate,
and extract data in an appropriate output form for subsequent use. Methods of
processing must be rigorously documented to ensure the utility and integrity of the
data.
The data collected from the above stated sources has been classified, tabulated and
interpreted for easier study.
1.6 Study Limitations
The researcher tries to his best to achieve accurate results. But even if almost care is
taken right form the stage of topic selection through identifying data sources, analysis,
selecting, finding, scope of the study, no research project can achieve 100% accurate
results.
The main limitations of this project are;
1. This study has only focused on deposit mobilization aspect of the bank.
 21

2. This study is based on only five year annual reports.

3. This study only about Sana Kisan Bikas Bank Limited.
4. The researcher was not in a position to conduct an intensive study of the deposit
mobilization of the bank, due to shortage of time.

1.7 Organization of Study

1. The first chapter is about introduction part which contain general background
of the study, profile of organization, objective of study, rationale of study,
organization of study, review of literature and researcher methodology.
2. The second chapter presents the result and findings which is associated with
the presentation of the data in tables and figure and their analysis and major
findings.
3. The last chapter is about the summary, conclusion and recommendations. In
this chapter the researcher summarize the whole study, draw conclusion based
on the findings made earlier and finally make appropriate recommendation to
the concerned parties.
 22

CHAPTER TWO
RESULTS AND ANALYSIS
Presentation and analysis of data is an important stage of research study. The main
purpose of the analyzing data is to change id from an unprocessed form into an
understandable presentation. The analysis of data consists of organizing data by
tabulating and then placing that data in presentable form using figures and tables.

This chapter contains the analysis and interpretation of the available and relevant data
of Sana Kisan Bikas Bank selected as the sample banks. Five years data period
covering from F/Y 2015/16 to 2019/20 have been analyzed and interpreted as per the
research methodology defined in chapter three. In the following section, the relevant
and generated data (i.e., both primary and secondary) relating to the study is presented
in tabular and analyzed it in systematic way.

2.1 Data Presentation

2.1.1 Total deposit position of Sana Kisan Bikas Bank Limited
The following table shows the total deposit position of Sana Kisan Bikas Bank
Limited during five-year period
Table 2.1.1 Total deposit Position
Year Deposit Amount
2015/16 3789310984.86
2016/17 5223543467.89
2017/18 7179830019.0
2018/19 9670194076.47
2019/20 11949550507.34
(Source: Annual financial report of SKBBL)

Fig 2.1.1 Total Deposit Position

Total Deposit Position

1.50E+10

1.00E+10

5.00E+09

0.00E+00
2015/2016 2016/2017 2016/2017 2018/2019 2019/2020
 23

Source : researcher’s own computation from financial statement of SKBBL.

The figure shows the deposit is in increasing trend. The increase in deposit has led to
increase in total investment, loans and advances and assets.

2.1.2 Investment in different sectors

Table 2.1.2 Total Investment in different sectors and Growth in Investment
Year Investment amount Growth in %
2015/2016 3632666000 36
2016/2017 5366226000 48
2017/2018 8096750000 51
2018/2019 11034126000 36
2019/2020 13994935000 26
Source : Annual financial report of SKBBL

The table shows the investment made by Sana Kisan Bikas Bank Limited in different
sectors the economy. The investment is in increasing trend. During five-year period
the highest growth in investment is 51 % in 2017/2018 and lowest is 26% in
2019/2020.
Fig.2.1.2 Growth in Investment

60%

50%

40%

30%

20%

10%

0%
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020

Source: researcher’s own computation from financial statements of SKBBL

 24

2.1.3 Total loan and advances and their collection

During five-year period Sana Kisan Bikas Bank Limited has significant growth in the
amount of loan and advances provided to their costumer. Table 2.1.3 shows total
amount of loan and advances and their collection.
Formula:
Loans and advances to collection ratio = collection of loan and advances made/total
loan and advances provided to their customers by Sana Kisan Bikas Bank Limited.

Table 2.1.3: Loan and advances and their collection

Year Loans and Collection of Loan and Ration in

advances advances Percentage
2015/201 3309091000 2352582000 71%
6
2016/201 5135543000 3401983000 66%
7
2017/201 7483421000 4752902000 64%
8
2018/201 9797915000 6860539000 60%
9
2019/202 11973498000 9012687000 75%
0
Source : Annual financial report of Sana Kisan Bikas Bank Limited

Fig 2.1.3 Loans and advances and their collection

80
70
60
50
40
30
20
10
0
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020

Source: researcher’s own computation from financial statements of SKBBL

 25

The amount provided as loan and advances and their collection is significant in
determining the deposit mobilization of Sana Kisan Bikas Bank Limited. Above
table’s shows amount provided as loan and collection of loan yearly. The highest loan
to collection ration is in fiscal year 2019/2020 i.e. 75% and lowest collection ration is
60% in fiscal year 2018/2019.
2.1.4 Total assets position
Firm resources (Campbell R Harvey, 2012).
A long-term tangible piece of property that a firm owns and uses in the production of
its income and is not expected to be consumed or converted in to cash any sooner that
at least one year’s time. Banks purchases fixed assets such as a land and building,
furniture and fixtures, computer software etc for the commencement of business.
Likewise, banks keep on increasing its assets volume or bases during for the branch
expansions.
Land and building are necessary for establishment of bank. Bank’s funds are used in
buying furniture, vehicles, computer and other concerned instrument, which are
related to banking activities. Bank cannot take direct gain from this asset, but bank
should buy it. A bank has need of fund to purchase fixed assets for new branches of
the bank.
Formula
Increase in assets = (Current year total asset –previous year total assets)/previous year
total asset
Table 2.1.4 Total assets and increase in total assets
Year Total assets Increased Percetage
2015/2016 4894094800.64 23.95%
2016/2017 6606648831.08 35%
2017/2018 8875105052.60 34.34%
2018/2019 11930643552.77 34.43%
2019/2020 14725062295.83 23.42%
Source: Annual report of Sana Kisan Bikas Bank Limited
 26

2019/2020

2018/2019

2017/2018

2016/2017

2015/2016

0 5 10 15 20 25 30 35 40
Source: researcher’s own computation from financial statement of SKBBL

Figure 2.1.4 shows total increased in total assets from fiscal year 2015/2016 to
2019/2020.This shows increased in deposit have led to increase in total assets of the
bank. Here we can conclude that increase in total deposit is directly proportional to
increase in total assets position.

2.1.5 Interest expenses on Deposit

Bank provides interest on deposit. The interest rate varies with the types of deposit.
The bank provides high interest on fixed deposit and lowest interest on demand
deposit. Following tables shows amount of interest expenses and increase in interest
expenses during 5 year period.
Table 2.1.5 Interest expenses and percentage increase in interest expenses.
Year Interest Expenses Percentage Increase
2015/2016 1390 2%
2016/2017 1565 13%
2017/2018 1772 6%
2018/2019 2627 50%
2019/2020 4514 72%
Source: Annual financial report of SKBBL

Fig 2.1.5 Interest expenses and percentage increase in interest expenses

Source: researcher’s own computation from financial statements of SKBBL

The figure shows that the amount of expenses has been drastically increased in fiscal
year 2018/2019 and 2019/2020 which is due to increase in volume of deposits.
 27

80

70

60

50

40

30

20

10

0
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020

2.1.6 Average interest income and expenses during five years period
Banks provides interest on deposit and charge interest on loan and advances. Interest
onn deposit is main expense of bank and interest on loan is main income of bank.
Following table shows the average interest income and expenses in percentage.
Table: Average interest income and expenses during five year period
Year Average interest income in % Average interest Expenses in %
2015/2016 10.35 5.29
2016/2017 9.06 4.64
2017/2018 7.89 2.99
2018/2019 7.59 2.89
2019/2020 8.59 3.88
Source : Annual report of SKBBL

Fig. 2.1.6 Average interest income and expenses during five year period

12
10
8
6
4
2
0
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
 28

Source: researcher’ own computation from financial statement of SKBBL

The figure shows that the bank is well performing as it has income percentage of
income higher than percentage of expenses. The bank successfully mobilized its
deposit to earn higher income.

2.1.7 Interest rate on different loans Products

SKBBL provides loans different headings with different interest rates. Following
table shows interest rates on different loan headings.
 29

Table 2.1.7 Interest rate on different Loans and Products

S.N Loans Products Normal Rebate Effective Effective

Rate Rate Date
1 Livestock Credit 9% 4% 5% Feb 11,2016
2 General Micro Credit 11.25% 0.25% 11% Feb12,2017
3 Tea Working capital Loan 9% 4% 5% July, 2018
4 Renewable Energy Loan 10.25% 0.25% 10% Feb 12, 2019
5 Livelihood Total credit 2% - 2% June 29, 2020
Source : Annual financial report of SKBBl

Fig.2.1.7 Interest rate on different loans Product

12%

10%

8%
Effective Interest Rate
6%
Normal Interest Rate
4% Series 3

2%

0%
11-Feb-16 12-Feb-17 july, 2018 12-Feb-19 29-Jun-20

Source: researcher’s own computation from financial statements of SKBBL

Analysis of Primary Data: Assessment of Management Views
This section is based on the primary data analysis, which mainly deals with qualitative
aspects of the funds allocation and deposit mobilization of SKBBL. This section also
reports the results of questionnaire survey conducted among chief executive officer ,
branch managers, finance officers, and operation officers of SKBBL. Questionnaire
survey was designed to understand the views of the respondents in relation to funds
allocation and deposit mobilization in Nepal. A set of questionnaire including yes/no
types, multiple choices, ranking and liker scale type of questions are provided. The
respondents profile along with their personal characteristics and results of the survey
are presented.

The major aspects of the allocation and deposit mobilization includes trends of loans
and advances and investment, incentives to increase deposit collection, determinants
 30

of deposit volume, deposit mobilization cost, reason for growing deposits, and
situation of deposit volume in the context of SKBBL.

2.1.8 Trend of Loans and Advances

The respondents were asked about whether the loans and advances offered by the
banks to its valuable customers are in increasing trend or not. The responses of the
respondents associated with the trend of loans and advances are presented in the table
2.1.8. Based on the responses of respondents on table 2.1.8 , a majority of respondents
gave the first priority that loans and advances offered by the banks to its valuable
customers are in increasing trend. The result is similar to secondary data analysis
findings of the study that the loans and advances offered by the SKBBL of Nepal to
its customers are in increasing trend.

Table: 2.1.8 Trend of Loans and Advances

Priority Number of Respondents Percentage

Yes 34 56.6%
NO 6 10%
Cannot say 9 15%
Don’t know 11 18.3%
Total 60 100%
Source: Survey

Fig 2.1.8 Trend of Loans and Advances

Number of Respondents

yes
no
cannor say
don't know

Source: Respondents in survey questionnaire in appendix

 31

As evident from table 2.1.8, majority 56.7 percent of the respondents revealed that the
loans and advances are n creasing trend whereas about 10 percent respondents feel
that they do not have an idea about increasing loans and advances. The other 15 %
respondents reply that they cannot say about trend of loans and advances and rest 18.3
percent reply that they don’t know about it.

2.1.9 Trend of Investment

The respondents were asked the interests of all the banks towards mobilizing deposits
through investments are in growing trend or not. The responses of the respondents
associated with the trend of the investment are presented in the Table 2.1.9. Based on
the responses of respondents on Table 2.1.9, a majority of respondents gave the first
priority that the interests of all the banks towards mobilizing deposits through
investment are in growing trend. The result is similar to secondary data analysis
findings of the study that the investment made by SKBBL its customers are in
increasing trend.

As evident from Table 2.1.9, majority 51.7 % of the respondent revealed that the
investments are in increasing trend whereas about 6.7% percent respondents feel that
they do not have an idea about increasing loans and advances. The other 20%
respondents reply that they cannot say about trend of investments and the rest 21.7
percent reply that they don’t know about it.

Table 2.1.9 Responses Associated with the trend of Investments

Priority Number of respondent Percentage

Yes 31 51.7%
No 4 6.7%
Cannot say 12 20%
Don’t know 13 21.6%
Total 60 100%
Source: Respondents in survey questionnaire appendix
 32

Fig. 2.1.9 Responses Associated with Trend off Investments

Number of respondents

Yes
No
Cannot say
Don't know

Source:Responses in survey questionnaire in appendix

2.2.0 Reason for Growing Deposit

The respondents were asked about the reason for growing deposit. The responses of
the respondents associated with the best opinion for the reason for growing deposit
are presented in the Table 2.2.0 with respect to the best option with reason for
growing deposit, 53.3 percent were in favor of societies preference for SKBBL than
other investment, 11.7 percent respondents were in favor of commercial bank of
Nepal have larger market share, 25 percent were in favor of the service given by the
bank and the rest 10 percent were in favor of the other reasons.
Table 2.2.0 : Responses Associated with the Reason for Growing Deposit
Priority Number of Percentage
Respondents
Societies preference for SKBBL deposit 32 53.3
than other investment
SKBBL o f Nepal have larger market share 7 11.7
The service given by the bank 15 25
Other reasons 6 10
Total 60 100
Source: Responses in survey questionnaire in appendix
 33

Figure:2.2.0 Responses Associated with the reason for growing Deposit

Number of respondents

Societies preference for SKBBL

deposit than other investment
SKBBL of Nepal have larger
market share
The service given by the bank
Other reasons

Source: Responses in survey questionnaire in appendix

2.2.1 Determinants of Deposit Volume

The respondents were asked the determinants of deposit volume. The responses of the
respondents associated with best options for the determinants of deposit volume are
shown on Table 2.2.1
Table 2.2.1 Responses Associated with the Determinants of Deposit Volume
Priority Number of Percentage
Respondent
Economic environment of the country 9 15%
The volume of business transaction of the 6 10%
country
The confidence of the people on SKBBL 10 16.7%
The banking habit of people 35 58.3%
Total 60
Source: Responses in survey questionnaire in appendix
 34

Fig. 2.2.1 Responses Associated with the Determinants of Deposit

Number of Respondents

Economic envirnment of
the country
The volume of business
transaction of he country
The confidence of the
people on SKBBl
The banking habit of
people

Source: Responses in survey questionnaire in appendix

2.2.2 Composition of Deposit

The respondents were asked their banks composition of deposits. The responses of the
respondents associated with composition of deposit are shown in table 2.2.2

Table 2.2.2 Composition of Deposit.

Priority Number of Respondent Percentage
Saving deposit 19 48.3
Fixed deposit 6 10
Current deposit 17 28.3
Call deposit 5 6.8
Others 3 6.6
Total 60 100
Source: Responses in survey questionnaire in appendix

As is evidence from Table 2.2.2, saving deposit stands the highest among all other
deposits such as fixed deposit, current deposit, call deposit and others. The Table
2.2.2 shows that the deposit composition of commercial banks shows that the saving
deposit is highest among other deposit with 48.3%, current deposit with 17%, fixed
deposit with 6%, and call deposit with 5% and others with 3% .The result indicates
that the majority of Nepalese banks mobilize the deposit through savings deposits.
 35

Fig 2.2.2 Composition of Deposit

Composition of deposit

Saving Deposit
Fixed deposit
Current Deposit
call Deposit
Others

Source: Responses in survey questionnaire in appendix

2.2 Analysis
The results documentation in this study supports the findings and theories of the
previous study. With respect to the role of deposit, the results demonstrated
consistently strong explanatory power of loans and advances, investment and asset
purchased in funds allocation and deposit mobilization of SKBBL.

All the issues raised in statement of problems are addressed by this study. Among the
reviewed literatures’ findings and conclusions and some are contradicted. To sum up,
most of the findings in this study are not consistent with many of the studies
conducted in big and developed market context around the globe. Therefore, it is
worthwhile to note that nature of data and the specification of the models may
themselves be responsible for the differences in results. Hence, conclusions drawn
should be interpreted within these limitations.

2.3 Findings
The major conclusion of this study is that the investment, loans and advances and
asset purchased shows the positive correlations with deposits. Among the explanatory
variables under the study loans and advances is the most dominant variable which
shows the deposit has the high impact on the loans and advances sector in the context
of Nepal. The result shows that the investment comes on the second most priority for
the deposit mobilization and further has strong positive correlations with the deposits.
 36

The study also concluded that the investment, loans and advances and asset purchased
are in increasing trend in the context of Nepal. By examining the behavior of deposits
for smallest to largest portfolios, it is observed that the deposit increase with the
increase in investment, loans and advances and assets purchased. The model estimate
that the SKBBL mobilizes its resources on two variables such as investment and loans
and advances and out of these two variables, higher priority is given on loans and
advances sector during the period of study. These findings derived from the secondary
data are also consistent with the primary data from questionnaire survey.
 37

CHAPTER THREE
SUMMARY AND CONCLUSION
3.1 Summary
A bank is an institution, which deals in money. A bank is like a reservoir. It draws
surplus money from the people who save and lend to the people who want to use it for
productive purpose. In this process the bank earns the commission. The rate of
interest paid to the depositor is generally lower than the rate charge to the borrowers.
The different between these two rate of interest is the profit for the bank. The present
study has been undertaken to examine and evaluation of deposit mobilization of San
Kisan Bikas Bank. The financial statement of five years that is from 2015/16
2019/2020 have been examined for the purpose the study. The study has resorted
mainly to secondary data that has been first processed and analyzed comparatively.
Individual interview with management personnel has been taken whenever necessary.
Data that I have presented is all from the secondary sources, which are in the annual
reports or other printed matters. A customer can be account holder when he opens
account. There are the numbers of rules and procedures regarding opening different
types of accounts. The interest rates on different accounts are different.

Deposit is the obligation of the micro finance banks. So, micro finance banks must
allocate the funds in different loans and advances and investments and assets
purchase. Deposits mobilization play vital role for the economic development of an
underdeveloped and developing country rather that developed one. It is because a
developed country does not feel the need of deposit mobilization for the capital
formation due developed capital markets in every sector. But in an under developed
and developing country deposit mobilization play an important role.

We can take this in our country‘s present context. Microfinance banks are playing a
vital role for national development. Deposit mobilization is necessary to increase their
activities. It is much more important to analyze the collected deposit in one priority
sectors of a country. In developing country’s we have to promote business and other
sectors by investing the accumulated capital towards productive sectors.

Deposit Mobilization is to utilize its funds in suitable area and right sector. Bank
 38

cannot achieve its goal until and unless it mobilizes its deposits in right sector and by
performing different activities. Micro finance banks need to keep optimum relation
among deposit collection procedure, investment policy and loan policy. The idle
money collected by microfinance bank as deposit should be properly utilized either by
granting loan to the need parties or by making investment in the productive sector to
earn profit.

This research study has been conducted to find out the relationship between deposit,
loan and advances and investment trends. The financial statement of five year
2015/2016 has been examined for the purpose for the study, the study has resorted
mainly to secondary data that has been first processed and analyzed comparatively.
Individual interview with management personnel has been taken whenever necessary.
From the data analysis it can be summarized that is fluctuation between several years.
All the deposit mix is in increasing trend so total deposit is also is in increasing trend.
And with concern to deposit mobilization, the investment, loans and advances and
assets purchased are in increasing trend to total deposit.

3.2 Conclusions
The major conclusions of this study are that investment, loans and advances and asset
purchased shows the positive correlations with deposits. Among the explanatory
variables under the study loans and advances is the most dominant variable which
shows the deposit has the high impact on the loans and advances sector in the context
of Nepal. The result shows that the investment comes on the second most priority for
the deposit mobilization and it further has a strong positive correlation with deposits.
On the hand, asset purchased has positive significant correlations with the deposits.

The study also concludes that the investment, loans and advances and asset purchased
are in increasing trend in the context of Nepal. By examining the behavior of deposits
for smallest to largest portfolios, it is observed that the deposits increases with the
increase in investment, loans and advances and asset purchased. The model estimates
that the SKBBL mobilizes its resources on two variables such as investment and loans
and advances and out of these two variables, higher priority is given on loans and
advance sector during the period of the study.
 39

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Websites

WWW.nrb.org.np

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WWW.investopedia.com

WWW.sanakisanbikasbank.com
 41

Appendix
Survey Questionnaire
Dear Sir/Madam
I would like to inform you that I am undertaking a Graduate Research Project on
“Deposit Mobilization Of Sana Kisan Bikas Bank” to meet the partial fulfillment of
the requirements for the Degree of Bachelor of Business Studies (BBS) from
Shwoyambhu International College, Tribhuvan University. I would also like to
assure you that all information contained in this questionnaire will be kept
confidential and used only at the aggregate level. You kind cooperation will be highly
appreciated.
Thank you.
A. Respondent’s Information
Demography Characteristics
1. Name (Optional :…………………………….
2. Gender : Male [ ] Female [ ]
3. Age of years Completes : Below 25 [ ] 25-35 [ ] 35-45 [ ] above 45 [ ]
4. Academic Qaulification : PhD [ ] Ms/M.Phil [ ] Masters [ ] Bachelors [ ]
5. Department worked ; ……………………………..
6. Years of Experience: Less than 1 [ ] 1-5 [ ] 6-10 [ ]11-15 [ ] above 15
[ ]
B. Information on Deposit Mobilization Decision
1. Which type of deposits stand the highest among all ?
a. Saving Deposit
b. Fixed Deposit
c. Current Deposit
d. Call Deposit
e. Others
2. The Loans and advances offered by the banks to its valuable costumers are in
increasing trend.(please make tick)
a) Yes b) No c) Can’t say d) Don’t know
3. Do the interests of all the banks towards mobilizing deposits through
investments are in growing trend?
a. Yes b) No c) Can’t say d) Don’t know
 42

4. Under what circumstances banks have incentives to increase their deposit

collection effors?
a. Branch Expansion
b. Deposit rate control
c. Mergers and Acquisitions
d. Investment in Financial Markets
e. Creation of Credit
5. Which of the following transaction or intermediation cost affect the volume of
deposit in Microfinance bank of Nepal?
a. The cost of time spent by the bank to mobilize deposit.
b. The cost of time spent by the credit analyst to examine loans.
c. The cost of postage and telecommunication with deposits.
d. The cost of stationary and office supplies.
e. The advertising and publicity cost.
f. Motor vehicle running cost.
6. Does Microfinance Bank of Nepal mobilizing deposits at lower possible costs?
a. Yes b) No c) Can’t say d) Don’t know
7. Which of the following affects the volume of deposits in Microfinance bank
of Nepal
a. Economic environment of the country.
b. The volume of business transaction of the country.
c. The confidence of the people on Microfinance banks of Nepal.
d. The banking habit of people.
8. From the record we knew that the total deposit of Microfinance bank of
Nepal?
a) Economic environment of the country.
b) The volume of business traction of the country.
c) The confidence of the people on Microfinance banks of Nepal.
d) The banking habit of people.
9. Is the volume of deposit different among Microfinance bank of Nepal?
a) Yes b) No c) May be d) Can’t say d) Don’t know
10. Please specify your level of agreement or disagreement associated with
following statements. (please make a tick in appropriate box as per the
following Scheme)
 43

Strongly agree =1, Agree=2 , don’t know =3, Disagree=4 , strongly=5

Statement 1 2 3 4 5
Effective financial intermediation is dependent on
strong performance in mobilizing savings and
transferring these funds to the real sectors
Effective financial intermediation is dependent on the
efficiency with which microfinance banks allocate
resources to their most productive uses.
Investment over deposit is positively related to the
performance of the banking system
The saving deposits have more construction into total
deposits.
Loans and advances is positively related to the total
deposits of the banks
Asset purchased is positively related the total deposit
of the banks.
Saving and Investment are considered to be important
variables I achieving price stability and promoting
employment opportunities and thereby contributing to
economic growth.
Various types of business loans can provide customer
with the spending power and flexibility that one need
for the short, medium and long run.
An increase in deposit will lead to a reduction in the
interest rates promoting investors demand more from
than available funds and therefore to an increase in
investments.
There is a significant relationship between deposits and
loans and advance.
.
11. Do you have any comments regarding funds allocation and deposit mobilization
practices in Nepalese Microfinance banks?
………………………………………………………………………………………
………………………………………………………………………………………
THANK YOU FOR YOUR RESPONSE SANA KISAN BIKAS BANK, ASSET
 44

AND LIABILIIES FOR PERIOD OF FIVE YEAR

LIABILITIES
Liabilitie 2015/16 2016/17 2017/18 2018/19 2019/20
s
Share 173000000 230682300 288352875 503062343.75 628827929.59
capital
Reserve 540312270.64 615935346.93 699201509.63 798803858.72 978122859.03
and
surplus
Deposit 3789310984.8 52235543467.8 7169830016.1 9670194076.47 11949550507.3
7 7 0 4
Proposed 22631579.00 36423521 3035293 5295393.09 6619241.36
cash
dividend
Income 4508590.73 330100.14 5851946.34 2727356.93 9514235.60
tax
Liabilitie
s
Other 364331325.40 499704095.14 698833412.53 950560423.78 1151837522.80
liabilities
Total 4894094800.6 6606648831.08 8875105052.6 11930643552.7 14725062295.8
4 7 3

ASSETS
Assets 2015/16 2016/17 2017/18 2018/19 2019/20
Cash 869623.74 122526.30 146434. 119575.00 -
balance
Mooney 917071310.401 857890663.58 363257619.75 602068766.74 340287220.11
at call and
short
notice
Balance 31466175 31466175 37500000 49500000 62500000
with NRB
Balance 27474053.77 148826336.66 227781264.46 163735482.63 256311304.35
at other
bank and
financial
In.
Investmen 140010000 2010100000 2010100000 192171200 178171200
t
Loans and 35722430702.6 5305812534.3 7981442339.0 10850506566.5 13775825827.2
advances 2 7 3 9 0
Fixed 18823837.20 15207202.17 13584476.10 19929411.47 18028000.99
assets
Other 39678760.76 46313362.30 50682919.26 52512550.34 993938737.18
Asssets
Total 4894094800.64 6606648831.0 8875105052.6 11930643552.7 14725062295.8
8 0 7 3