Siem Habogna

SHEBA UNIVERSITY COLLAGE
Collage of Business and Economics

Department of Accounting and Finance
Degree program
Assessment of deposit mobilization
Dedebit Microfinance
Axum Branch
A senior essay submitted to the department of Accounting and Finance in partial

fulfillment of the requirement for bachelor of art degree (B.A) in Accounting and
Finance.
Prepared By: Siem Habogna Advisor: Mr.

ACKNOWLEDGEMENT
Even if there are no equivalent words to express thanks to GOD First, I would like to thanks almighty
GOD and the interception of his mother saint merry that made me still alive and in helping and leading
me in every microsecond of my life.
I would like appreciate my advisor Pawlos: who played a great role in his continuous and invaluable
advice, comment, and suggestion until the end of accomplishment of the paper. Besides my heart full
appreciation and special thanks goes to my family in the way they helping me moral and financial
support, especially my mother.
Abstract
The purpose of this study is to provide a conceptual framework and determine the factors
influencing deposit mobilization in Ethiopia's commercial banks using the literature that is currently
accessible. The banks yearly incremental deposit plan, which calls for the easy mobilization of a
sizable sum of money from the communities, is no longer the optimum method for undertaking
deposit mobilization. The literature relating to the factors influencing deposit mobilization at
Ethiopia's commercial banks is presented in these overviews of the literature. As a result there are
three sections to the literature review. The introduction linked to overview of deposit mobilization in
Ethiopian commercial banks and factors affecting deposit mobilization are covered in the first
portion of the literature review. The second portion looks at empirical concerns regarding the factors
influencing deposit mobilization. The conceptual framework for deposit mobilization is shown in the
third section, followed by the literature gap of the evaluated literature.
Abbreviation
MFI=============Microfinance Institutions
NGO============ none Governmental Organization
GDP============Gross Domestic Product
ATM============Automotive Teller Machine
S.C. =============Share Company

Table of Contents
ACKNOWLEDGEMENT.........................................................................................................................................i
LIST OF TABLE.....................................................................................................................................................iii
CHAPTER ONE......................................................................................................................................................1
1. INTRODUCTION............................................................................................................................................1
1.1 Background of the Study..........................................................................................................................1
1.2 Statement of the Problem..........................................................................................................................3
1.3 Basic Research Questions.........................................................................................................................1
1.4 Objectives of the Study.............................................................................................................................2
1.4.1 General Objective.............................................................................................................................2
1.4.2 Specific Objectives...........................................................................................................................2
1.5 Significance of the Study..........................................................................................................................2
1.6 Scope of the Study....................................................................................................................................3
1.7 Organization of the Research proposal.....................................................................................................3
CHAPTER TWO......................................................................................................................................................4
2. RELATED LITRATURE REVIEW.................................................................................................................4
2.1 The Development of Microfinance in Ethiopia.........................................................................................4
2.2 The Role of Microfinances in Financial Systems.....................................................................................6
2.3 Microfinance Deposits.............................................................................................................................7
2.4 The Importance of Deposits for Microfinances........................................................................................8
2.4.1 Deposits as a Source of Fund for Loan.............................................................................................8
2.4.2 Attracting Deposit.............................................................................................................................8
2.4.3 Microfinances Make Profit Using their Deposits..............................................................................8
2.4.4 Fund Investment and/or Development Projects................................................................................8
2.5 Factors Affecting Microfinances Deposits...............................................................................................9
2.5.1 Exogenous Factors............................................................................................................................9
2.5.2 Endogenous Factors........................................................................................................................13
2.6 Approaches to Attract Cash Depositor....................................................................................................14
CHAPTER THREE................................................................................................................................................16
3. RESEARCH METHODOLOGY...................................................................................................................16
3.1 The Research Design..............................................................................................................................16
3.2 Sources of Data.......................................................................................................................................16
3.2.1 Primary Source...............................................................................................................................16
3.2.2 Secondary Source...........................................................................................................................16
3.3 Population and Sample...........................................................................................................................17
3.3.1 Sample Size....................................................................................................................................17
3.3.2 Sampling Techniques......................................................................................................................17
3.3.3 Sampling Procedure........................................................................................................................18
3.4 Sources and Tools of Data Collection.....................................................................................................18
3.5 Procedures of Data Collection................................................................................................................18
3.6 Data Analysis and Interpretation............................................................................................................18
CHAPTER FOUR..................................................................................................................................................19
4. DATA ANALYSIS AND INTERPRETATION............................................................................................19
4.1 Personal information of employee..........................................................................................................19
4.1.1 Profile of Respondents....................................................................................................................20
4.1.2 Customer response about customer service of the microfinance.....................................................21
4.1.3 The microfinance offers different products, which satisfy the microfinance customer...................22
4.1.4 Factors Affecting the Deposit Mobilization process of the Microfinance.......................................22
4.1.5 Customer Satisfaction.....................................................................................................................23
4.1.6 Major depositors of Dedebit...........................................................................................................24
4.1.7 The microfinance current commission and service charge dose affect the deposit mobilization.....24
4.2 Presentation of Data from Secondary Sources........................................................................................25
4.2.1 The Performance of Deposit, Loans, and Advances.......................................................................25
4.3 Presentations of Data from Interview.....................................................................................................25
4.3.1 Deposit of the Microfinance...........................................................................................................26
4.3.2 Branch Expansion...........................................................................................................................26
4.3.3 Networking of the Branches...........................................................................................................26
4.3.4 Union for Card Microfinancing System..........................................................................................26
4.3.5 Challenges for Deposit Mobilization..............................................................................................26
CHAPTER FIVE....................................................................................................................................................28
5. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS..................................................................28
5.1 Summary of Findings.............................................................................................................................28
5.2 Conclusions............................................................................................................................................30
5.3 Recommendations..................................................................................................................................31
REFERENCE.........................................................................................................................................................32
APPENDIX............................................................................................................................................................33
LIST OF TABLE
Table 1: Working Position in Dedebit....................................................................................................................20

Table 2: Percentage for Working Position in Dedebit............................................................................................21
Table 3: The Microfinance Offers Different Products Which Satisfy the Microfinance Customer........................22
Table 4: Factors Affecting the Deposit Mobilization Process of the Microfinance................................................22
Table 5: Customer Satisfaction...............................................................................................................................23
Table 6: Major Depositors of Dedebit....................................................................................................................24
Table 7: The Microfinance Current Commission and Service Charge....................................................................24
Table 8: Deposits, Loans and Total Assets in Billon of Birr.................................................................................25
CHAPTER ONE
1. INTRODUCTION
1.1Background of the Study
Deposit mobilization in microfinance refers to the process of collecting and attracting savings from
individuals or groups in the microfinance sector. Microfinance institutions (MFIs) play a vital role in
providing financial services to low-income individuals who have limited or no access to traditional
banking services.
It's important to note that deposit mobilization in microfinance is subject to regulatory frameworks and
supervision by relevant authorities to ensure the protection of clients' funds and maintain the stability of
the microfinance sector [1].
The aim of this study is to examine factors affecting deposit mobilization in Dedebit microfinance which
is found in Axum, Tigray, Ethiopia. This study uses both descriptive and regression analysis. The
researcher used descriptive and explanatory research design, quantitative research approaches, the target
population were 2 branches under Axum district, to select samples branches purposive sampling
techniques were used, the method of data collection were secondary source of data, sample size was 2
branches from 2 branches located under Axum district and used descriptive and inferential statistics
method of data analysis.
Microfinance is a financial institution that provides micro financing and other financial services to their
customers. Microfinance is generally understood as an institution, which provides fundamental micro
financing services such as accepting deposits and providing loans. There are also non-micro financing
institutions that provide certain micro financing services without meeting the legal definition of
microfinance.
Microfinances are a subset of the financial services industry. A micro financing system also referred as a
system provided by the microfinance, which offers cash management services for customers, reporting
[2]
the transactions of their accounts and portfolios, throughout the day . One of the financial institutions
[3]
in the world that give financing services is microfinances . Microfinances are profitable financial
institutions that give financial service to those in need of the service. They accept money from the
depositors and lend it to the borrowers. Thus, for microfinances to lend there have to be deposits in their
treasury.
1.2 Statement of the Problem
The small-scale microfinances that are owned privately were being affected by the provision to buy a
27% National bank of Ethiopia’s Bills based on the amount of loans to be expanded in connection with
the Mega projects in Ethiopia. Due to this, microfinances being in cash or easily convertible to cash
positions have been adversely affected. The profitability issues of microfinances need to have a great
attention through deposit mobilization endeavor has to make them capable to provide loans and
advances facilities to their customers.
In addition to this, Deposit mobilization, the process of attracting and securing funds from individuals
and businesses, poses several challenges for banks and financial institutions. The following problem
statement highlights the key issues surrounding deposit mobilization: Declining deposit growth, lack of
financial literacy, regulatory constraints, intense market competition, trust and reputation concerns,
accessibility and inclusion, changing customer behavior, and economic volatility.
Addressing these challenges requires microfinances and financial institutions to develop effective
strategies that consider customer needs, technological advancements, and regulatory frameworks.
Emphasizing financial literacy initiatives, building trust and reputation, and leveraging digital channels
can contribute to successful deposit mobilization efforts in an increasingly competitive and dynamic
banking landscape.
To the researcher knowledge, there is only few studies of the same type has been done in the past at
Microfinance but there will be some additional research being needed. Hence, filling the knowledge gap,
this study will examine the deposit mobilization in private microfinances, identifies factors affecting the
deposit of private microfinance and suggests the possible way out.
1.3 Basic Research Questions
There are some questions regarding to Dedebit Microfinance. These are listed as the following below:
1. What are the possible factors that can affect deposit mobilization of Dedebit Microfinance Share
Company?
2. What are the possible methods that can help the understudying microfinance to promote their
deposit balance?
3. How does the implementation of the 27% purchase of government bill at lower interest rate affect
the deposit mobilization?
4. What are the main drawbacks of Dedebit Microfinance?
5. What will be the main solution be?
6. What is the effect of the current condominium house construction program and the related
minimum saving requirements on the deposit mobilization process of the microfinance?
1.4 Objectives of the Study
1.4.1 General Objective
The general objective of deposit mobilization is to gather funds from individuals, businesses, and other
entities into deposit accounts offered by banks and financial institutions.
1.4.2 Specific Objectives
The specific objectives of this study are:

1.4.2.1 Analyzing the basic problems of the company.
1.4.2.2 Increasing Deposit Base.
1.4.2.3 Diversifying Deposit Sources.
1.4.2.4 Developing Long-Term Relationships
1.4.2.5 Promoting Specific Deposit Products
1.4.2.6 Enhancing Cross-Selling Opportunities
1.4.2.7 Meeting Regulatory and Prudential Norms
1.4.2.8 Supporting Lending and Investment Activities
1.4.2.9 Increasing Core Deposits.
1.5 Significance of the Study
This research would be focus on the factors that affecting the deposit mobilization. Microfinances
specifically in Dedebit Microfinance Share Company is expected to benefit from this study. The
followings will be the major significance of the study,
The findings of this study would be using an input for various scholars, who are going to make further
studies on similar issues or area. This research would provide the biggest advantage to the customer that
will use in Dedebit microfinance. It would help for the management of Dedebit Microfinance Share
Company and other private microfinances in identifying the deposit mobilization process of the
microfinance and enables them take proper adjustments to alleviate such problems.
1.6 Scope of the Study
This study would limit to the area branches of Dedebit Microfinance Share Company Situated on
Adigrat. Outlying area branches of Dedebit Microfinance share company and other private
microfinances will not include in the study due to budget and time constraints. Hence, the data will
collect from selected area branches of Dedebit Microfinance Share Company.
1.7 Organization of the Research proposal
The research would organize in to five chapters; the first chapter is an introduction for the study, which
introduces the overall study. This part will consist of introduction or back ground of the study, problem
statement, objectives, significance and scope of the study. The second chapter focuses on review of
literatures in which previous study will consult. In this chapter general concepts and definitions, basic
issues and empirical evidences of factors affecting deposit mobilization will discuss in detail. The major
areas and results of previous studies have also been presented. The third chapter deals with research
design and Methodology emphasizes on the design of the study and the methodologies used. In this
chapter; source of data, data collection, sample size & sampling techniques and selection of study
organizations will discuss. The fourth chapter deals with result and discussion of the study. In this
chapter; results of the questionnaires and selection of study organizations will discuss. The last chapter
deals with conclusion and recommendation. In this chapter; the overall concepts of the study will discuss
and some recommendations will be made.
CHAPTER TWO
2. RELATED LITRATURE REVIEW
This chapter would focus on basic concepts and its uses that will discuss by different authors on the
research topic. Basically definitions, historical backgrounds, types, components and regulations, and
concepts that affect deposit mobilization process.
2.1 The Development of Microfinance in Ethiopia
Microfinance is a financial institution that provides micro financing and other financial services to their
customers [1]. Microfinance is generally understood as an institution, which provides fundamental micro
financing services such as accepting deposits and providing loans. There are also non-micro financing
institutions that provide certain micro financing services without meeting the legal definition of
microfinance. Microfinances are a subset of the financial services industry. A micro financing system
also referred as a system provided by the microfinance, which offers cash management services for
customers, reporting the transactions of their accounts and portfolios, throughout the day.
Deposit mobilization is a crucial aspect of banking operations, and extensive research has been
conducted to understand the factors influencing this process. The following literature review provides an
overview of key studies and findings related to deposit mobilization:
 Relationship between Interest Rates and Deposit Mobilization:
Several studies have examined the relationship between interest rates and deposit mobilization. Higher
interest rates are generally found to attract more deposits, as depositors seek to maximize their returns [4].
However, the impact of interest rates on deposit mobilization may vary depending on factors such as
market competition, inflation rates, and regulatory requirements [5].
Studies have also explored the existence of interest rate pass-through, which refers to the extent to which
changes in policy rates are transmitted to deposit rates and subsequently affect deposit mobilization.
Evidence suggests that interest rate pass-through varies across countries and financial institutions [6].
 Customer Behavior and Deposit Mobilization:

Understanding customer behavior is crucial for effective deposit mobilization. Research has examined
factors influencing depositors' decision-making, including risk preferences, income levels, financial
literacy, and demographic characteristics [9].
Studies have highlighted the importance of trust, reputation, and customer satisfaction in deposit
mobilization. Positive customer experiences, personalized services, and strong relationships with banks
contribute to increased deposit retention and referrals [10].
 Technological Advances and Deposit Mobilization:
The advent of technology has significantly impacted deposit mobilization. Research has explored the
role of digital banking channels, such as online banking and mobile banking apps, in attracting and
retaining deposits [11].
Studies have highlighted the importance of user-friendly interfaces, convenience, security, and
personalized experiences in driving deposit mobilization through digital channels [12].
 Institutional Factors and Deposit Mobilization:
Research has examined the influence of institutional factors on deposit mobilization. Regulatory
frameworks, deposit insurance schemes, and prudential norms play a vital role in instilling depositor
confidence and shaping deposit behavior [13].
Studies have also explored the impact of bank characteristics, such as size, capital adequacy, and
profitability, on deposit mobilization. Larger banks and financially stable institutions generally have an
advantage in attracting deposits [14].
 Socioeconomic Factors and Deposit Mobilization:
Socioeconomic factors, including income levels, education, and cultural norms, have been examined in
relation to deposit mobilization. Research suggests that higher income individuals have a greater
propensity to save and deposit their funds [15].
Cultural factors, such as trust in formal financial institutions and prevailing saving habits, also influence
deposit behavior [16].
 Financial Inclusion and Deposit Mobilization:

Research has explored the role of deposit mobilization in promoting financial inclusion. Studies
highlight the importance of accessible and affordable deposit products in bringing unbanked and under
banked populations into the formal financial system [8].
Initiatives such as branchless banking, mobile money, and agent banking have been examined in terms
of their impact on enhancing deposit mobilization and financial inclusion [9].
In conclusion, the literature on deposit mobilization highlights the significance of factors such as interest
rates, customer behavior, technological advancements, institutional frameworks, socioeconomic factors,
and financial inclusion. Understanding these factors can help banks and policymakers develop effective
strategies to mobilize deposits, enhance financial intermediation, and promote economic growth. Further
research is needed to explore emerging trends, such as the impact of digital currencies and open
banking, on deposit mobilization.
2.2 The Role of Microfinances in Financial Systems
Financial sector is broad which consists of the micro financing sector and other financial institution
(such as insurance corporations and pension funds, brokers, public exchange and securities markets
etc.), however in the context of African continent the micro financing industry carries the greater share
of the financial system [6].
Effective communication of the unique features and benefits of deposit products is crucial in capturing
the attention of potential depositors. Microfinances may highlight factors such as competitive interest
rates, flexible withdrawal options, convenience, and personalized services.
Relationship managers and sales teams play a significant role in deposit mobilization. They engage with
customers, provide personalized advice, and address any concerns or questions regarding deposit
products.
[7]
Most of the business relies on micro financing sector as a source of financing . Microfinances have
historically performed a critical role in facilitating payments. Microfinances, as well as other
intermediaries, provide services in screening and monitoring borrowers; and by developing expertise as
well as diversifying across many borrowers, microfinances reduce the costs of supplying credit [8].
Thus, in their role as lenders, microfinances are often not merely buying someone’s debt, rather they are
providing significant financial services associated with extending credit to their customers and to the
extent that investors want to hold microfinances liabilities, microfinances can fund borrowers directly.
The main providers of additional financing are domestic microfinances [9].
2.3 Microfinance Deposits
Depositors keep their money in microfinances for a motive to undertake some activities in the future.
According to Bhatt (1970), there are motives to save money, the followings are the example of some
motives: -
 To own house
 To provide for children’s education and marriage
 To provide for old age
 To bequeath property to children
 To provide for emergency expenditure
Microfinance deposits are major liabilities for microfinances. Deposits of microfinances account for
about 75% of microfinance liabilities [9]. Due to the fact that microfinances are using this liability to lend
it and gain return on it their deposits are using them do their business. Therefore, microfinances will be
[1]
better if they are mobilizing more deposits. However, deposit mobilization is a very difficult task . The
cost of intermediation for mobilizing deposits is also very important part of overall intermediation cost
[10]
of the micro financing system . Despite all these deposits play an important role in the micro
financing system, whether cooperative Deposits provide limits to the working capital of the
microfinance concerned?
The higher the deposits, the higher will be the funds at the disposal of microfinance to lend and earn
[1]
profits . Therefore, to maximize its profit the microfinance should increase its deposit. Deposits are
foundations up on which microfinances thrive and grow and unique items on microfinance’s balance
[3]
sheet that distinguish them from other type of business organizations . Microfinances mainly depend
on the funds deposited with them by the public to lend it out to others in order to earn interest income
[12]
. Deposits are of three kinds, namely:
 Current or demand deposits
 Fixed or Time deposits / Term deposits.
 Savings deposits
Hence, the competition for deposits is really a competition for profits. Microfinances compete for
deposits in order to become profitable and thus to be able to supply more funds to the public. However,
such financial growth is profitable only if the microfinance does not incur additional expenses to obtain
and retain cash [12].
2.4 The Importance of Deposits for Microfinances
2.4.1 Deposits as a Source of Fund for Loan

[13]
Deposits are the main source of microfinances to provide loan . However, deposits can also be
provided by business organizations, NGOs, government and so on. Therefore, whether deposits are from
individuals, businesses and government they are important financial source of microfinances .
2.4.2 Attracting Deposit

Microfinances as any other business organizations funds from debt and/or equity. In the microfinances
context raising equity is more expensive or costly than attracting deposits. If the lending channel plays a
role, the deposit growth should lead to an increase in the supply of loans due to the additional source of
financing for microfinances [14]. As demand for loan increases because of the development work done by
individuals, businesses and government, microfinances should extend their deposit base. When
microfinance creates a deposit by lending to a businessperson, it is clearly performing a function for
which it is entitled to a return in the form of interest payments [15].
2.4.3 Microfinances Make Profit Using their Deposits
Mahindra (2005) said that deposits provide most of the raw materials for microfinance loans and thus
represent the ultimate source of the microfinance’s profits and growth. Microfinances make profit by
using their deposits; therefore, it is said that depositors can disciple microfinances. Maria and Sergio
(2001) found that depositors discipline microfinances by withdrawing deposits and by requiring higher
interest rates. For depository corporations mainly deposit money microfinances, their principal
objectives are undertaking financial intermediation to make profit and increase their shareholders value
[7]
.
2.4.4 Fund Investment and/or Development Projects
Debt is largely held by domestic microfinances, which are funded mainly from deposits, the government
demand for microfinance assets enabled microfinances to continue to expand their deposit base rapidly
[8]
and profitably . Individual investors and government are mainly depending on the deposits of
microfinances to fund their investments and/or development projects.
2.5 Factors Affecting Microfinances Deposits
An important indicator of the success and efficiency of any credit agency, which is also a micro
financing institution is, the extent to which it is able to mobilize the savings of the community in the
form of deposit. However, deposit mobilization is very difficult task. It depends up on various factors
exogenous as well as endogenous, to the micro financing system [1].
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 micro financing system, the micro
financing habit of the people and the saving potential of the region. Even when exogenous factors are
more conducive for deposit mobilization, microfinances may fail because of unfavorable endogenous
factors such as location, type of building and window dressing (furniture, cheque books, vouchers, pay
slips etc.), which assure the customers about the physical fitness of a microfinance [1]. Variables which
are claimed to have effect on the microfinance’s deposits are classified into two, namely exogenous and
[1]
endogenous factors . Exogenous has further divided into country specific factors and microfinance
specific factors for clarification purpose. Endogenous factors can be controlled by the micro financing
system; however, the exogenous factors cannot be controlled by the micro financing system. The
microfinance specific factors are factors that are specific to the micro financing system and the country
specific factors are factors that are beyond the micro financing system.
2.5.1 Exogenous Factors

These are factors that are from country and microfinances that can affect the growth of microfinances
deposits. There are discussed as follows: -
2.5.1.1 Country Specific Factors
The country’s economic, social, and political factors can affect the microfinances. Country specific risks
such as political, economic and financial risks may affect the propensity for depositors to place funds in
[16]
the micro financing system . Any single microfinance operates under the rule and regulation of the
country where it belongs, also different problems and shocks that has happened in the country has its
own concern in the microfinance’s operation. Generally, a microfinance success in their operation is
mainly depends on the environment where the business is undertaken.
A. Saving Interest Rate/Deposit Rate
[17]
One of the most effective factors for deciding to deposit in micro financing system is the interest rate .
Moreover, this article shows the impact of interest rate on the performance of the micro financing
system to achieve the goals that are expected from the micro financing system. Interest is one of the
[18]
determining factors for microfinances deposits . The offering of attractive interest rate on
[19]
microfinance deposits may be considered to have had a beneficial effect . Moreover, low deposit rates
[20]
are discouraging saving mobilization . the micro financing system is unlikely to be in a position to
meet the demand for microfinance credit unless concerted policy is pursued to raise the rate of saving
generally and the rate of saving in the form of deposits in particular [8].
B. Inflation
[9]
Inflation is one of the factors that determine microfinances deposits . Mahdi showed that in Latin
[9]
America the effect of inflation on savings and time deposit to GDP was significantly negative . The
classical belief is that, because microfinance assets and liabilities are expressed in monetary terms and
because these assets will normally grow in line with growth in money supply, microfinances are
relatively immune from the effects of inflation [1].
In brief, monetary policy works by controlling the cost and availability of credit. During inflation, the
Central microfinance can raise the cost of borrowing and reduce the credit creating capacity of
microfinances. This will make borrowing more costly than before and thereby the demand for funds will
be reduced [1].
Similarly, with a reduction in their credit creating capacity, the microfinances will be more cautious in
their lending policies. Since the microfinances demand for fund decreases obviously, the deposits will
decrease. Micro financing system was affected by inflation in terms of deposit absorption and facilities
[9] [17]
grant . High inflation rates reduce the real value of deposits . According to Baqui et al (1987),
inflation technically did not decrease deposit; however, it decreases the value of deposits.
C. Real Interest Rate

Real interest rate is nominal interest rate minus inflation rate. In negative real interest rate condition,
[18]
people withdraw their resources from micro financing system . Some research supposed that decrease
in real interest rate could decrease true demands for money (in its extensive definition including savings
[18]
and time deposits) . Therefore, it states that the interest rate and deposit of the microfinances have
positive relationship. While interest rates risk is a major concern for microfinances due to the nominal
nature of their assets and the asset-liability maturity mismatch [15].
D. Population Growth of the Country
The twin objectives of microfinances, i.e., acquiring deposits and advancing credit cannot be attained
[13]
without good micro financing habits of the people . The number of deposit accounts is more ensures
that the probability of account holders withdrawing cash at a time decreases as the number of deposit
account increase, thereby creating advantage for microfinances in terms of increasing the size of the
loan-able fund. Therefore, the higher number of deposit accounts the greater is the advantage to
microfinances [12]. The number of deposit accounts depends on the number of deposit account holders.
E. Per Capita Income of the Society
[20]
Per capita is the level of GDP divided by the population of a country or region . Changes in real GDP
per capita over time are often interpreted as a measure of changes in the average standard of living of a
[15]
country. If households and firms desire to hold more money, deposits will increase . The relationship
between income and deposits is positive, that is as the income of the society increases the same happens
for the microfinance’ deposits. Therefore, as society’s per capita income increases the same will happen
for microfinances deposits.
F. Economic Growth
Economic performance is generally being measured through GDP (Gross Domestic Product), a variable
[11]
that has also become the de facto universal metric for 'standards of living . It is universally applied
[13]
according to common standards, and has some undeniable benefits mainly due to its simplicity .
[16]
Growth is one of the determining factors for microfinances deposits . GDP is calculated by adding up
the value-added at each stage of production (deducting the cost of produced inputs and materials
purchased from an industry’s suppliers).
G. Consumer Price Index
[5]
Price can also determine microfinance deposit and it can be indicated by consumer price index . In
literature there is evidence for the influence of consumer price index on microfinances deposit, however
this area was rarely studied.
H. Shocks
Aggregate shocks affect deposits and interest rates during crises, regardless of microfinance
fundamentals and investors’ responsiveness to microfinance risk taking increases in the aftermath crises
[6]
. Therefore, given all other variables the shocks happened in the economy can affect the
microfinances’ deposits.
2.5.1.2 Microfinance Specific Factors
A. Liquidity of the Microfinances
An important measure of liquidity is loan to deposit ratio. The loans to deposit ratio are inversely related
to liquidity and consequently the higher the loans to deposit ratio the lower the liquidity and vice versa
[1]
. Key liquidity indicators such as central microfinance credit to financial institutions, deposits as a
share of monetary aggregates, loans to deposits ratios, are important for open market operations and
liquidity management [4]. the basic need for liquidity, asset, liability, capital adequacy, credit and interest
rates risk management are now more challenging than before [3]. The microfinances’ liquidity
management involves acquiring sufficient liquid asset to meet the microfinance’s obligation to
depositors [7]. Liquid microfinances as well as microfinances with a higher loan exposure are associated
with higher deposit growth. The liquidity situation of the microfinance also plays a significant role in
determining microfinances deposit growth [11].
B. Profitability of the Microfinance
Erna and Ekki(2004) finds the long run relationship between microfinances deposits and the profitability
of the microfinances. Higher microfinance profits would tend to signal increased microfinance
[4]
soundness, which could make it easier for these microfinances to attract deposits . However, the effect
of microfinance profitability and microfinance size are found to be insignificant once controlling for the
other variables. Therefore, the effect of profitability and microfinances size on microfinance deposit is
lower as compared with other variables.
C. Security of the Microfinance
Security of microfinances matters in mobilizing deposit. Riskier microfinances would be able to attract
deposits only paying higher Interest rates. The security of microfinances has its own impact on its
attractiveness for depositors. For example, in the existence of deposit insurance, the depositors no longer
are concerned about the soundness of their microfinances because their deposits are insured in the event
of microfinance failure. Therefore, the microfinance should secure its system so as to mobilize more
deposit than before and to attract new depositors and maintain the exiting depositors.
D. Branches
There is a relationship between microfinances deposits and microfinance’s branch expansion. Not only
do microfinance branches influence deposits, but the level of deposits in any area also influences the
[8]
expansion of microfinance branches . It is expected that microfinances make decisions on expanding
their facilities by considering factors such as level of competition, deposit potential, regional income,
and existence of road and vehicles. As deposit potential is one thing that microfinances consider in
expanding its branches, the deposit can also be a reason for branch expansion strategy that the uses.
There is a long run relationship between microfinance branch and microfinances deposits [10].
E. Microfinance Size
Among the factors prominently identified as affecting deposit variability one is microfinance size. Evidence
indicates that the number and diversity of the ownership of individual deposit accounts as well as the
distribution of deposits by type vary with microfinance size [2]. Herald and Heiko founds that although
insignificant once controlled by other variables microfinance size have an effect on deposits. A smaller
microfinance has to generate less deposit in absolute terms to achieve the same deposit growth than large
microfinances, thus possibly favoring smaller microfinances in achieving higher deposit growth.
F. Reserves
[7]
Reserves that are fixed legally can influence the deposits that microfinances can hold . According to
them reserve requirements determine the maximum amount of loans and investments that each
microfinance and the micro financing system as a whole may maintain in relation to deposits. Thus, if
the reserve requirement is 20 percent of deposits, loans and investment (of the microfinance’s own
choosing) may not exceed 80 percent of deposits. Therefore, reserve requirements limit the total
expansion of microfinance deposits that can occur on the basis of any primary increase in deposits.
Reserve requirements also have the effect of limiting the reduction in microfinance credit and deposits
that is forced up on the micro financing system by a primary decrease in deposits.
G. Transaction Cost
Important indicator of management’s effectiveness in any microfinance are whether or not deposited
funds have been raised at the lowest possible cost and whether enough deposits are available to fund
those loans the microfinance wishes to make [4].
2.5.2 Endogenous Factors
In the literature three endogenous factors are identified that can affect the growth of microfinances
deposits. They are awareness of the society for using microfinances to deposit their money, convenience
of Microfinance’s office and service in the microfinances.
A. Awareness of the Society
Some analysts argue that demand for deposits is influenced by education level, which in turn increases
[16]
the awareness of the rural people about micro financing services . Since the study of Baqui et al
(1987) conducted by taking rural area as its base it is obvious that it considers the awareness as a factor
of deposit mobilization. It was also found that literacy as a proxy for awareness about micro financing,
positively influence deposits.
B. Convenience of Microfinance’s Office
Road and vehicles directly influence interest-bearing deposits because of the reduction in depositors’
[15]
transaction costs through reduced time spent in travelling to and from microfinances . Microfinances
can mobilize more deposit when they make themselves closer to their customers (depositors).
C. Services in the Microfinance
It is known that microfinances are service-giving organizations and the service delivery can affect their
business undertakings. There is some empirical evidence demonstrating the positive influence of
services rendered to depositor [12].
2.6 Approaches to Attract Cash Depositor
There are some of the more important expected changes in micro financing industry operations in the
[19]
near future . Most microfinances will adopt at least a few of these policies to maintain enough cash
deposit and profitability. Perform a savings account comparison to take advantage of improved
microfinance rates and terms. Take advantage of the positive changes in this group and closely examine
their new income ideas. Always compare your institution with its competitors to learn of the best and
most cost-effective offers.
Go beyond interest rates to attract new customers. Most microfinances will not be able to beat the
interest rates offered on a national level. One of the most difficult things for a microfinance to
communicate to potential customers is the quality of customer service offered. Use testimonial-based
advertisements to highlight the benefits of customer service. This is particularly important for long-term
loan relationships such as mortgages. If customers believe that a loan officer at your microfinance will
be attentive to their individual needs, they may be more likely to overlook differences in interest rates [4].
Increase customer access to funds by expanding ATM networks and improving online micro financing
offerings. ATMs and online micro financing are less expensive than training and paying tellers. But
building an ATM network is expensive, particularly if you're not a franchise of a larger national
microfinance. Many smaller microfinances have gotten around this issue by subsidizing fees paid to out-
of-network ATMs. This allows smaller microfinances to offer the same ease of access as larger
microfinances at a relatively low cost [19].
Create time-limited marketing incentives to attract new deposits. Offer to pay termination and transfer
fees from old microfinances. Offer cash payments for deposits over a certain amount. To maximize
effectiveness, limit the offer to a period of 60 days or less and emphasize that fact in advertisements.
Offer tiered rewards depending on the level of deposit made. In most cases, customers will stay with a
[19]
microfinance that they have opened an account with for years . Measure the effectiveness of your
marketing. Try to run only a few marketing initiatives at any one time so you can more easily measure
their effectiveness. Repeat promotions that have measurable results, and curtail the campaigns that fail.
Consider how profitable a campaign was per dollar amount [19].
Offer higher interest rates on savings accounts and lower interest on loans to existing customers with
high microfinance balances. It's much less expensive to keep a customer that you already have than to
attract a new one. Tiered accounts create incentives for your customers to keep their business with you
rather than shop around elsewhere [19].
Adding "rewards" features to transaction accounts (checking, money market accounts, etc.).The success
of rewards credit cards is sparking interest in offering similar features to other deposit and transaction
accounts. Individuals should examine these offers from their current institution and competing programs
from other microfinances. Compare money market rates and "rewards" to find the best program for you
[19]
.
CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1 The Research Design
A survey would make in Dedebit Microfinance Share Company to examine deposit mobilization and
assess factors affecting deposit mobilization in private microfinances. The data will be collected from
the microfinance documents and employees working in different Dedebit branches. The subjects of the
study will senior employees of Dedebit Microfinance S.C. working in different area branches and head
office located in Axum. The respondents should have at least two years of service in the microfinance
assuming that they could have enough experience to the deposit mobilization of the microfinance
practice. Accordingly, 21 senior employees, who will serving the microfinance for at least two years will
be selected.
3.2 Sources of Data
I have used two types of sources of data. These are primary source of data and secondary source of data.
3.2.1 Primary Source
The questionnaires were distributed to 21 senior employees of Dedebit microfinance. Also asking by
personal on the branch employee. This group is appropriate for the study since it will afford the
researcher to assess the contribution deposit mobilization to customer empowerment, both socially and
economically. Besides, data was gathered from the questioner conducted on the workers of Dedebit
microfinance.
3.2.2 Secondary Source
Secondary sources of information Such as web site, textbooks, newspapers and annual report Dedebit
2014/15 E.C. among others to conduct the study.
3.3 Population and Sample

As discussed above in the sources of data section, questionnaires will distribute to 21 employees of the
City Branches. Data will collect from 21 employees.
Population refers to a group of individuals or items that share one or more characteristics from which
data is been gathered and analyzed. Since the focus of this study is to explore the role of deposit
mobilization in business branch in awash microfinance, 21 employee’s Dedebit microfinance constitute
the population of the study.
Dedebit microfinance has launched a total of two area branches in Axum until 10 th of August 2016 E.C.
Out of these only 1-area branches have started operation correctly. Dedebit categorized all branches into
classes 1 to 4 based on numbers of staff, customer flow and deposit amount.
3.3.1 Sample Size

Twenty-one respondents were chosen from employees and customers of Dedebit as they were time and
cost limitation to take the total population.
3.3.2 Sampling Techniques

To this effect simple random sampling techniques was applied to select those branches which qualifying
the minimum requirements and equal opportunity given to branches in each class. From those selected
branches senior staffs including Branch manager and Ass. Branch manager was purposively selected this
due to senior staffs are believed to have enough knowledge about deposit mobilization practice of the
microfinance of all Axum branches, the below depicted ones was enter in to operation before two years.
The study employed both the probability and non-probability sampling methods. Probability sampling
according to (Jankowicz, 2000) involves identifying and questioning people because they are members
of some population to ensure that your assertions are valid for your respondents and directly
generalizable without further inference, to that population. Stratified random sampling, which is one of
the probability sampling methods, is used in this study. The technique is a modification of random
sampling in which the population is divided into two or more relevant and significant strata based on
one or a number of attributes (Saunders et al, 2007). The non-probability sampling method adopted is
the purposive sampling. The sample were 21 work force 21 resonate return the questioner.
3.3.3 Sampling Procedure

The sampling procedures employed were that from the target population of branches, Dedebit S.C. Who
are believed to have a better exposure and experience to deposit mobilization activities was selected as a
sample for the study.
3.4 Sources and Tools of Data Collection
The study was using both primary and secondary source of data. The close-ended questionnaire was
having two parts. The first one being demographic data such as working position and work experience
According to Kothari C.R. (2004), the method of collecting information through personal interviews was
usually carried out in a structured way. As such, we call the interviews as structured interviews. Such
interviews involve the use of a set of predetermined questions and of highly standardized techniques of
recording. In line with this, secondary data was gathered from the company’s Studies and annual
Reports.
3.5 Procedures of Data Collection
Hard copies of the questionnaire were distributed to branches. A structured interview was also conduct
with selected department managers and branch managers who are believed to have proximity to the
issue at hand.
3.6 Data Analysis and Interpretation

The data collected presented, organized, analyzed, and interpreted using descriptive statistical tools such
as frequency, percentages, and bar charts as per the convenience to the types of data to use for best
interpretation and easy understanding. The questionnaires were analyzed using descriptive analysis
techniques. The researcher was using Excel software to analyze the questionnaires and describe the
result.
CHAPTER FOUR
4. DATA ANALYSIS AND INTERPRETATION

In this chapter an overview of the data obtained in the study are analyzed, presented and discussed.
Based on the first section of the questionnaire, it outlines personal information depicted in graphical
formats. The descriptive statistics are presented thereafter. In order to clearly show the existing
similarity and among demographic and some categorical data, bar charts are widely used. Response Rate
21 questioners were distributed to the employees all of them were collected which accounts 100%
response rate. Accordingly, the analysis of this study is based on the number of questionnaires collected.
4.1 Personal information of employee

The first section of the questionnaire demanded personal information from respondents. These questions
include position in the organization and work experience. The response of Personal information is
presented and discussed below.
4.1.1 Profile of Respondents
Table 1: Working Position in Dedebit
Description Frequency Percentage%
Sex
Male 11 52.38%
Female 10 47.62%
Total 21 100%
Age
Below 30 years 12 57.14%
31-40 years 8 38.1%
41-50 years 1 4.76
51 Above 0 0.0%
Total 21 100%
Position in Dedebit
Director 0 0.0%
Department Manager 0 0.0%
Division director manger 0 0.0%
Branch manager 3 14.29%
Assistant Branch manager 3 14.29%
Supervisor 3 14.29%
19.05%
Casher 4
9.52%
Auditor 2
28.56%
Customer service officer 6
0.0%
 other 0
Total 21 100%
Work Experience
1-5 years 2 9.52%
6-10 years 9 42.86%
10-15 years 6 28.57%
16 and above years 4 19.05%
Total 21 100%
According to table 1, it is observed that out of the 21 respondents 11 (52.38%) of respondents were
males and the remaining 33 (47.62%) were females. This shows that majority of the respondents were
males. This might be due to smaller number of female employees in the microfinance, compared to
males. 12 (57.14%) are below age 30 years, 8 (38.1%) are between age 31-40, 1 (4.76%) are between
age 41-50, This helps to see the view of employees from different age categories on the deposit
mobilization process of the microfinance as employees’ age category has its own influence on the view
they have regarding the practice. The wider and diversified the age group, the wider and diversified are
the views of the employees on the issue under consideration.
Shows that,14.29% branch managers, 14.29% assistance branch managers and 14.29% were supervisors,
19.05% were cashiers, 9.5% were auditors,28.57% were customer service officer. All participants have
direct experience at deposit mobilization; it enabled the researcher to get all required data from the
participant.
2 (9.52%) are 1-5 years’ experience, 9 (42.86%) are 6-10 years’ experience, 6 (28.57%) are 10-15 years
and the remaining 4 (19.05%) are above 15 years’ experience. This indicates that the respondents are
well experienced and able to contribute their effort to the deposit mobilization process of the
microfinance. Hence, data collected from them is reliable.
4.1.2 Customer response about customer service of the microfinance

Table 2:Percentage for Working Position in Dedebit

Very Good 6 28.57%
Good 9 42.86%
Satisfactory
6 28.57%
Poor
0 0.0%
Total 21 100%
According table 2, 6(28.57%) of the respondent were Very good, 9(42.86%) were Good, 6(28.57%)
were satisfactory.
Description Frequency Percentage %

Agree 7 33.33%
Disagree 14 66.67%
Total 21 100%
4.1.3 The microfinance offers different products, which satisfy the microfinance customer
Table 3: The Microfinance Offers Different Products Which Satisfy the Microfinance Customer
Table 3 shows, from all respondent’s majority of the respondents which are 14 (66.67%) disagree that
the microfinance offers different products to its customer. 7 (33.33%) of the respondents agreed that the
microfinance offers different products to its customer. As per to the response Dedebit Does offer
different product to its customer. Products are often developed in a top-down fashion, rather than
customized to the needs of different target group. Product development should be supported by detailed
market research. Decisions about product would answer questions about the design of the service
offered to suit customer needs, the desirable hour for offering such services, the attractive names of such
services and so on. Microfinance of Abyssinia should offer well designed saving products so that
customers of all types can customize their use of these products to meet their own need which help the
microfinance to mobilize more deposit (Ariful, 2014)).
4.1.4 Factors Affecting the Deposit Mobilization process of the Microfinance
Table 4: Factors Affecting the Deposit Mobilization Process of the Microfinance

 The current infrastructures reconstructions 3 14.29%
 Government interventions towards privately owned microfinances
6 28.57%
 People attitude towards private microfinances
7 33.33%
 Branch office location and poor parking areas
 Computation with other private and governmental microfinance
4 19.05%
 Other 1 4.76%
0 0.00%
Total 21 100%
The above table, Table 4, shows that The majority of the respondents, 7 (33.33%), believe that the
People attitude towards private microfinances of the city are the major factors affecting the deposit
mobilization process; 6 (28.57%) of the respondents agreed, government intervention affect mainly the
deposit mobilization process; 4 (19.05%) of the respondents agreed Branch office location and poor
parking areas are highly influence the deposit mobilization process; 3 (14.29%) of the respondents
agreed the current infrastructures reconstructions are reason for poor deposit mobilization and the
remaining 1 (4.76%) believes computation with other private and governmental microfinances. The
results indicate that the negative impact of the reconstruction of Adigrat on the deposit mobilization
process and this urges the microfinance to search option to alleviate such abnormalities.
4.1.5 Customer Satisfaction
Table 5: Customer Satisfaction

Description Frequency Percentage %
Very Good 8 38.10%

Good 5 23.80%
Satisfactory 4 19.05%
Poor 4 19.05%
Total 21 100%
According to Table 5, 8 (38.10%) strongly agree, 5 (23.80%) agree that they are happy because they feel
their suggestion is worthy for the microfinance. While, 4 (19.05%) satisfaction, 4 (19.05%) strongly
disagree. This figure indicates that about 75% of the respondents feel that they can easily express their
feeling about the customer service of the microfinance. Receiving feedback from the customer helps the
microfinance to improve its service quality and the microfinance shows by making easy to customers to
express their feeling (Assefa, 201).
4.1.6 Major depositors of Dedebit
Table 6: Major Depositors of Dedebit

 Individual Depositors 12 57.14%
 Business organizations
5 23.81%
 NGOs
3 14.29%
 Government
1 4.76%
Total 21 100%
According to table 6, 12 (57.14%) of the respondents respond that Dedebit Microfinance Collects its
deposit from individual customers, 5 (23.81%) of them says it is mobilizing its Deposit from business
organizations, 3 (14.29%) of the respondents says that the non-government Organizations are the main
depositor of the microfinance and 1 (4.76%) of the respondents says that the microfinance is mobilizing
its deposits from all the above mentioned. This indicates that the deposits of Dedebit Microfinance
mainly from individuals. The deposit builds by small groups of people will have high risk of declining
of balances when one of them are withdrawing their money, Awash microfinance to this effect minimize
this risk due to the microfinance build their deposits mainly on individuals depositors.
4.1.7 The microfinance current commission and service charge dose affect the deposit
mobilization
Table 7: The Microfinance Current Commission and Service Charge

 Yes 3 14.29%
 No 18 85.71%
Total 21 100%
According to table 7, 3 (14.29%) of the respondents, believed the existing commission and service
charges affect the deposit mobilization process of the microfinance; and Majority of the respondents, 18
(85.71%) of the respondents agreed the deposit mobilization process not affected by the microfinances
commission and service charges tariff. This implies the current microfinance’s commission and service
charge tariff applied were comparable and reasonable with other private microfinances and not affect the
deposit mobilization process.
4.2 Presentation of Data from Secondary Sources
4.2.1 The Performance of Deposit, Loans, and Advances
To analyzing credit performance, evaluation of "loans and advances" is the central part of the process; it
is also equally important that evaluating the performance of deposit mobilization efforts in order to
analyze the credits. Dedebit Microfinance has a consistent growth record in both deposit and loans and
advance. Following table shows this trend:
Table 8: Deposits, Loans and Total Assets in Billon of Birr
Year Total deposit Loans and Total Assets Loan and
advance advances as %of
Total Deposit
2010/1 3.42 2.4 4.78 70%
2011/2 4.96 2.56 7.13 52%
2012/3 6.46 3.15 9.02 49%
2013/4 8.05 3.99 11.09 50%
2014/5 9.57 5.51 13.13 58%
From table 8 shown above, it is observed that total loans and advances of the Microfinance markedly
rose to Birr 5.51 billion in 2010/1 from about Birr 3.99 billion a year earlier, partly reflecting the
positive impact of the removal of credit ceiling by the National Microfinance of Ethiopia and partly due
to the growing credit demand in the country associated with economic growth. To proper managements
of the increasing loan requests, aggressive works required to increase the deposit level accordingly. As a
result, the Microfinance’s loan/deposit ratio improved to 58 percent from 50 percent the previous
financial year Total deposits of the microfinance reached over Birr 9.56 billion as at 2010/1, higher than
those of last year by 19%. This is mainly due to the aggressive deposit mobilization efforts and its
widespread branch network.
4.3 Presentations of Data from Interview
Results concerning the deposit of the microfinance, branch expansion, networking of the branches,
union for card micro financing system, and challenges for deposit mobilization were obtained through
interview with Branch managers and other employees of the microfinance and customers of Dedebit. In
addition, the summary of the interviews is presented here below.
4.3.1 Deposit of the Microfinance

The Microfinance planned to mobilize significant number of deposits, mainly due to the concerted
efforts both at the Head Office and branch levels, growing public confidence in the Microfinance and
widespread distribution of branch network. To this effect deposit mobilization committee established at
head office level and the committee regularly visit all branches in Axum monthly bases and at least once
in quarter for outlying branches. In addition to the visit, all branches established their committee at
branch level and report their deposit mobilization efforts monthly to head office controlling organs. As
per the effort made by the branch’s awards will be forwarded for those best performed branches by
deposit mobilization effort.
4.3.2 Branch Expansion
As per the Branch Expansion and Coordination Manager, the financial year 2014/15 witnessed a historic
expansion in branch network. Accordingly, more than five branches were opened during the last period in
Tigray. Dedebit effectively expanded its physical presence and diversified its customer base thus enabling
more people to have access to the Microfinance’s products and services. And by current year the
microfinance planned to open more than 3 branches and expect to reach the branches number 20 at the end of
the year on Tigray. These all enables the microfinance to increase its deposit substantially.
4.3.3 Networking of the Branches
In the discussion with Branch Expansion and Coordination Manager more than one third of outlying
branches and all branches in Axum were able to provide on-line micro financing services. And the
microfinance plan to online the remaining branches with the coming year; in addition to that, the
Microfinance has been working on a project aimed at replacing the existing CORE micro financing
system (Microfinance master) with a new one. To this effect, it has established an IT Project
Management Office, entrusted with ensuring a successful implementation of various micro financing
applications. The project was expected to be complete during the financial year 2012/13.
4.3.4 Union for Card Micro financing System
According to the discussion with the Branch manager, the Microfinance is already implement card
micro financing in coordination with other two microfinances, namely NIB International Microfinance
S.C., and United Microfinance S.C.; and have established a share company known as “Premiere Switch
Solutions S.C.”, and started operation last year and expected to reach customers by using these three
microfinances ATM terminals located at different area in Axum and also believed to helps the deposit
mobilization process of the microfinance.
4.3.5 Challenges for Deposit Mobilization
As per the discussion made with the director some of the main challenges for deposit mobilization
processes are:
 The inflationary situation,
 The Government house Construction program and the related deposits requirements,
 The current reconstructions of Axum road
 The National Microfinance of Ethiopia’s Directive that obliges domestic private microfinances to
purchase NBE bills amounting to 27% of their credit disbursements at 3% annual interest rate
(which is actually below the minimum deposit rate). Obviously, this will gradually erode the
liquidity position of microfinances by obliging them to purchase NBE bills of five years maturity
with short term deposits,
 There by leading to asset-liability mismatch, unless corrective measures are taken.
 This current monetary policy leaves limited space for microfinances to accommodate the growing
demand for credit from different sectors of the economy.
 Aggressive branch expansion of Dedebit Microfinance
CHAPTER FIVE
5. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
This chapter is concerned with the highlights of the study findings and conclusions that are derive from
the data analyses and discussions. Recommendations are provided at the end based on the findings and
conclusions drawn from the study.
5.1 Summary of Findings
 Majority of the respondents are depositors of the microfinance in addition to employee and also
some of the respondents still not deposit their money in the microfinance.
 Large number of respondents believes that the deposit of Dedebit Microfinance come from more
of Individuals depositor.
 Majority of employees of the microfinance have believed that the distribution of branches in city
and outlying are not fairly opened.
 Large numbers of respondents believes that aggressive branch expansion is the major reason to
increase the deposit balances.
 Almost all respondents indicated that Dedebit has different interest schemes to entertain different
customers’ needs.
 Most respondents believe the current reconstruction of the Axum roads are the major problems for
 Large number of employees responded that the 27% government bill purchase doesn’t affect the
deposit mobilization efforts of the microfinance. Instead, it lowers the loan-able fund of the
microfinance.
 Large number of employees believes the current house construction program affect the deposit
mobilization process of the microfinance.
 Most of the respondents believe that the current commission and service charge tariff doesn’t
affect the deposit mobilization process of the microfinance.
 Large proportion of the respondents agreed the microfinance promotions towards motivating
people to use private microfinances are not attractive or not done well.
 Majority of the employees believe the aggressive expansion of Dedebit affect the deposit
mobilization of the microfinance.
 The secondary data shows, amount of both total deposit and loan increased during the past five
years from 2007/08 to 2011/12.
 Deposit mobilization committee established at head office level and also at branch level to
facilitate and monitor the deposit mobilization process.
 More than 20 branches opened last year and planned to open more than 25 branches by the current
fiscal year.
 More than one third of outlying and all branches in Axum are providing online micro financing
services.
5.2 Conclusions
After careful analysis of factors affecting deposit mobilization at Dedebit Microfinance, the following
conclusions were made. The main factors that affect the deposit mobilization process of Dedebit
Microfinance are the here and their reconstruction of Axum roads, the direct and indirect government
intervention or control on private microfinances activities people attitude towards Using private
microfinances, branch office location and poor parking areas and competition with other private’s
microfinance are some of the factors that can hinder the growth of the deposit balances of the
microfinance. The existing commission and service charge tariff are not affecting the deposit
mobilization process.
The possible factors, which contributed to the growth of the deposit balances of Dedebit Microfinances,
are aggressive branch expansion, aggressive promotion or advertisement, promoting service quality,
updating and going with the developing technology and extending the working hours. The 27%
government bill purchase doesn’t affect directly the deposit mobilization process; it affects
unconstructively the loan-able balance of the microfinance. The current activities of Dedebit by branch
expansion as well as aggressive promotional complain directly or indirectly affect the deposit
mobilization process of private microfinances. In addition, the current promotional activities of Dedebit
microfinance to develop people awareness towards using private microfinances are not attractive and
required additional efforts.
The deposit of Dedebit Microfinance largely collected from individual depositors. The current house
constriction program directly or indirectly affects the deposit mobilization process of the microfinance
because the minimum saving requirement goes solely to Dedebit, which might from different private
microfinances individual depositor. The total deposit balance of the microfinance bigger year to year
and the related loan and advance balances increases with the pace of deposit balance.
The microfinance collects deposit in three forms, i.e., demand deposit, fixed deposit, and saving deposit.
Among this form of deposits, the largest proportion of deposit is on the form of saving deposit which is
fixed interest-bearing deposit. Dedebit microfinance applied different interest rate scheme to entertain
different requests of depositors and encourage potential depositors to deposit their money in Awash
Microfinance than other microfinances. Branch expansion is an important strategy for deposit
mobilization. The microfinance opened more branches in Tigray than outlying this mainly due to the
economic center of the city. More than one third of outlying branches and all city branches were able to
provide on-line micro financing services, in addition the microfinance implements card micro financing
system with coordination with other two private microfinances.
5.3 Recommendations
In connection with the summary of finding and conclusions drawn above, the following
recommendations are provided to address the gaps identified by the study.
 Since the main source of funds for Dedebit Microfinance is deposit, therefore the
microfinance should give due emphasis to its deposit and strive to increase it.
 The microfinance should provide excellent service for its customers to mobilize more
deposits since the capital and expansion of Dedebit are high challenges for Dedebit.
 Dedebit should arrange and apply Incentives programs such as coupon prizes for those
depositing above a fixed amount of money which was effective when applied by Dedebit
previously.
 Dedebit microfinances should go through promotional effort and awareness creation
campaign to have well informed society who has awareness of the micro financing system
and are interested in keeping their money in microfinances.
 Dedebit microfinance should have convenient office environment with hard working
employees to satisfy the existing customers need and as well as to attract new depositors.
 Since the current reconstruction of roads would be the main challenges for microfinances and
dissatisfy the customers, the microfinance should place ATM machine at different common
areas to reduce such abnormality.
 Dedebit microfinance should also control the customers’ preference and compete with other
microfinances to attract more depositors in turn to mobilize more deposits through
controlling the market or through expanding their market share.
 Since branch expansion has positive and significant effect on total deposit of microfinances,
Dedebit Microfinance should also expand their branches in order to increase their deposit.
 The microfinance should aware the staffs first about the importance of depositing their
money at the microfinance in order to increase the motivation and participation of staffs in
REFERENCE
[1] Desinga, R. (1975). “Deposit Mobilization by Co-operative Microfinances: A Comparison

Economic and Political Weekly” No. 29, pp. 1098-1100.
[2] Mohammad, N. and Mahdi, S. (2010). The Role of Inflation in Financial Repression: Evidence
from Iran.
[3] National Microfinance of Ethiopia, 2015/16 annual report Kapila 2001
[4] Venkatesa, (2012). An Empirical Approach to Deposit Mobilization of Microfinances in
Tamilnadu, IOSR Journal of Business and Management Vol. 4, Issue 2, PP 41-45
[5] Brian and Janette. (2007), the key to strike the balance: an introduction savings mobilization
[6] Getaneh A, (2008). Determinants of microfinances deposit mobilization Evidence from private
microfinances in Ethiopia Bhatt, V. V. (1970).
[7] Some Aspects of Deposit Mobilization” Economic and Political Weekly, Economic and
Political Weekly. Vol. 5, No. 36, pp. 1495-1497. Kelvin 2001
[8] Mahendra Panthee. Researcher, Mathematics ... , 2005
[9] Kumaris a Regents Professor at the University of Minnesota,2000
[10] DEDEBIT (2008). DedebitMicrofinance. Annual report for financial year ended 31December
2007. 32pp.
[11] DEDEBIT (2009). DedebitMicrofinance. Annual report for financial year ended 30 June2009.
36pp.
32pp.
39pp.
[14] Baqui, K., Richard, L., Meyer, L. and Hushak, J. (1987). Deposit Mobilization in
[15] Bangladesh: Implications for Rural Financial Institutions and Financial
[16] Policies. The Bangladesh Dev. Stu., 15(4) 85-1 17.
[17] Bhatt, V. (1970). “Some Aspects of Deposit Mobilization” Economic and Political
[18] Weekly, Economic and Political Weekly, Vol. 5, No. 36, pp. 1495-1497.
[19] Desinga, R. (1975). “Deposit Mobilization by Co-operative Microfinances: A Comparison
[20] Economic and Political Weekly” No. 29, pp. 1098-1100.
[21] Devinaga, R. (2010). Theoretical Framework of Profitability as Applied to
APPENDIX
Adigrat University
This questionnaire prepare to managers and staff employees of Dedebit Microfinance S.C. the objective
is to get an input for the accomplishment of BA degree project paper on the title of assessment deposit
mobilization (the case of Dedebit Microfinance S.C.) the information you provide is valuable for the
success of the research paper and will only be used for academic purpose it shall be kept confidential.
No need of writing your name
1. Personal information
Female Male
2. Age
Below 30 years 31-40 years
41-50 Years
51 and above
3. What is your position in Dedebit Microfinance S.C? Director department
Division District manager Branch manager assistant branch manager
Supervisor
4. Work experience in the microfinance industry; Below one year 1-5 years 6-10 years 10-15
years 16 years and above
II. Deposit mobilization issues
1. What mechanism does the microfinance use to encourage/motivate deposit mobilization effort
made by the branch?
________________________________________________________
________________________________________________________
________________________________________________________
2. How do you evaluate the understanding and commitment of staff for deposit mobilization?
Very good Good satisfactory Poor
3. Recently the microfinance has introduced various new products on deposit accounts. How do
you measure their contribution in the effort to mobilize deposit?
Very good Good satisfactory Poor
4. What has been done in Dedebit Microfinance S.C. to promote awareness of the society
pertaining to DEDEBITs Services?
__________________________________________________________
__________________________________________________________
__________________________________________________________
5. What factors from the listed affect the deposit mobilization of your microfinance?
The current infrastructures reconstruction
Government intervention towards privately owned microfinances
People attitude towards private microfinances
Branch office location and poor parking area
Computation with other private and governmental microfinances
Other
6. What special services do the microfinance provides for corporate depositors/customers?
____________________________________________________________
____________________________________________________________
____________________________________________________________
7. Does the volume of deposit grow because of such special services provided for the corporate
depositors?
Yeas No
8. How do you rate your customer’s satisfaction?
Very good Good Satisfactory Poor
9. What tools techniques do customers have to express their satisfaction /dissatisfaction?
______________________________________________________________
______________________________________________________________
______________________________________________________________
10. What is the major cause for the variation in deposit among branches of Dedebit microfinances
S.C.?
Convenience of branch office/location availability of parking areas

efforts of the branch staff most of the surrounding society of the branch are not
identified target customers of DEDEBIT other reasons (specify)
11. How much time does it take customer to open a new account in your microfinance?
Less than 10 minutes 10-30 minutes more than 30 minutes
12. How much time does it take customer to withdraw or deposit cash to his account?
Less than 10 minutes 10-30 minutes more than 30 minutes
13. As per the annual reports, total deposit of Dedebit microfinance S.C. is continuously growing
during the last three years what is the main reason.
Society’s preference to deposit their savings than other investment
Dedebit microfinance S.C. has many branches and large market share from private
microfinances
The service given by the microfinance
The good will of the microfinance
Other reason (specify)
14. Who do you think are major depositors of Dedebit microfinance S.C.?
Individual customers business organizations NGOs
Government
15. Do you think the 27% bill purchase government policy affect negatively the deposit mobilization
of your microfinance?
Yes No
16. Do you think the current commission and service charge used in the microfinance higher and
affect the deposit mobilization effort?
Yes No
17. From the listed, which factors contribute more to increase the deposit amount of the
microfinance?
Expanding branch opening/aggressive branch expansion

Aggressive advertisement
Increase customer handling culture
Others
Interview Questions
1. How does Dedebit Microfinance mobilize funds?
2. Would you explain the practice of deposit mobilization of Dedebit in relation with other private
and governmental microfinances, what techniques does the microfinance use, what is the
difference from other microfinances?
3. The current government policy with respect to the construction of the house and the related
saving requirements by the people affect your deposit balance. If so, what mechanism your
microfinance thinks to overcome this potential problem?
4. Now in the market Dedebit has the 2nd private microfinance in deposit mobilization from the
people, do you think and plan to be the first private deposit mobilizing microfinance in the
industry? if so, how you can be?
5. Do you have deposit plan, if yes what are your strategies to achieve your deposit plan, and the
plan achievable?
6. Is Dedebit mobilizing enough deposit currently and satisfy the current loan request of your
customer without any pre condition?
7. How do you rate the government intervention to your deposit mobilization effort?
8. In your microfinance, is any department, which monitors the deposit mobilization process? If
yes how and what this department work?

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SHEBA UNIVERSITY COLLAGE

Collage of Business and Economics

A senior essay submitted to the department of Accounting and Finance in partial

Prepared By: Siem Habogna Advisor: Mr.

NGO============ none Governmental Organization

GDP============Gross Domestic Product

ATM============Automotive Teller Machine

S.C. =============Share Company

Table 1: Working Position in Dedebit....................................................................................................................20

1.1Background of the Study

1.3 Basic Research Questions

1.4 Objectives of the Study

1.4.1 General Objective

1.4.2 Specific Objectives

The specific objectives of this study are:

1.5 Significance of the Study

1.6 Scope of the Study

1.7 Organization of the Research proposal

2. RELATED LITRATURE REVIEW

 Relationship between Interest Rates and Deposit Mobilization:

 Customer Behavior and Deposit Mobilization:

 Technological Advances and Deposit Mobilization:

 Institutional Factors and Deposit Mobilization:

 Socioeconomic Factors and Deposit Mobilization:

 Financial Inclusion and Deposit Mobilization:

2.2 The Role of Microfinances in Financial Systems

2.3 Microfinance Deposits

2.4 The Importance of Deposits for Microfinances

2.4.1 Deposits as a Source of Fund for Loan

2.4.2 Attracting Deposit

2.4.3 Microfinances Make Profit Using their Deposits

2.5.1 Exogenous Factors

C. Real Interest Rate

3.1 The Research Design

3.2 Sources of Data

3.2.1 Primary Source

3.2.2 Secondary Source

3.3 Population and Sample

3.3.1 Sample Size

3.3.2 Sampling Techniques

3.3.3 Sampling Procedure

3.5 Procedures of Data Collection

3.6 Data Analysis and Interpretation

4. DATA ANALYSIS AND INTERPRETATION

4.1 Personal information of employee

51 Above 0 0.0%

Branch manager 3 14.29%

Assistant Branch manager 3 14.29%

16 and above years 4 19.05%

4.1.2 Customer response about customer service of the microfinance

Description Frequency Percentage%

Description Frequency Percentage %

4.1.4 Factors Affecting the Deposit Mobilization process of the Microfinance

Table 4: Factors Affecting the Deposit Mobilization Process of the Microfinance

4.1.5 Customer Satisfaction

Table 5: Customer Satisfaction

Very Good 8 38.10%

Table 6: Major Depositors of Dedebit

Table 7: The Microfinance Current Commission and Service Charge