ADMAS UNIVERSITY MEKANISACAMPUS

SCHOOL OF POST GRADUATE STUDIES.

MASTERS IN BUSINESS ADMINISTRATION (MBA)

INDIVIDUAl ASSIGNMENT

ASSESSMENT OF DEPOSIT MOBILAIZATION ACTIVITY ON ABAY BANK IN CASE OF

LEBU BRANCH
THIS PROPOSAL SUBMITTED TO ADMAS UNIVERSITY IN THE PARTIAL FULFILMENT
OF REQUIRMENTS OF MASTER OF BUSINESS ADMINSTRATION (MBA) ON COURSE OF
BUSINESS RESEARCH METHODOLOGY.

PREPARED BY:
ESHETU KASSAW……………………7358/21

SUBMITED TO; DR.MOGES LOGAW

MARCH,2022

ADDIS ABABA. ETHIOPIA

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 Table of Contents
ContentPage
CHAPTER ONE........................................................................................................................................1
1. INTRODUCTION.................................................................................................................................1
1.1 Back ground of the study...................................................................................................................1
1.2 Statement of the problem.................................................................................................................2
1.3 Research questions............................................................................................................................2
1.4 Objectives of the study......................................................................................................................3
1.4.1 General objective........................................................................................................................3
1.4.2 Specific objectives......................................................................................................................3
1.5 Significance of the study...................................................................................................................3
1.6 Scope of the study..............................................................................................................................3
1.7 Organization of the study...................................................................................................................3
CHAPTER TWO.......................................................................................................................................4
2. RELATED LITERATURE REVIEW.................................................................................................4
2.1 Theoretical Review............................................................................................................................4
2.1.1 Depository Institution.................................................................................................................4
2.1.2 Type of depository institution.....................................................................................................4
2.1.3 Source of fund for the bank........................................................................................................5
2.1.4 Major types of deposit................................................................................................................6
2.1.5 Services of Banks in Modern Times...........................................................................................7
2.1.6 Significance of deposit mobilization...........................................................................................8
2.2 Empirical review...............................................................................................................................9
CHAPTER THREE.................................................................................................................................11
3. RESEARCH METHODOLOGY.......................................................................................................11
3.1 Research design...............................................................................................................................11
3.2 Data type and collection techniques.................................................................................................11
3.2.1 Types of data............................................................................................................................11
3.2.2 Data collection techniques........................................................................................................11
3.3 Sampling design..............................................................................................................................11
3.3.1 Target population......................................................................................................................11
3.3.2 Sampling technique..................................................................................................................11

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 3.4 Methods of data analysis and presentation.......................................................................................12
CHAPTER FOUR...................................................................................................................................13
4. WORK AND BUDGET PLAN...........................................................................................................13
4.1 TIME SCHEDULE..........................................................................................................................13
4.2 BUDGET SCHEDULE...................................................................................................................14
Reference..................................................................................................................................................15

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CHAPTER ONE
1. INTRODUCTION

1.1 Back ground of the study

Deposit mobilization activity is a process of money and security to back and other who promises
to preserve it or use it and return in kind, especially the act of placing money in bank for safety
and conveniences. Saving activity often small saving in community with expectation of that
those deposit can be become more available for sending to rural and agricultural enterprises that
can use find productivity. We can understand that the banking system have a great impact on the
development of one's country in achieving its economic plan (Mishkin, 2002).

Mobilizing deposit is one of the essential issues in developing countries as a domestic fund
provide cheap and reliable source of funds for development, which is of a great value to these
countries, especially when the economy has difficulty raising capital from international donors,
financiers and markets. Yet in many developing countries, there is a considerable amounts of

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saving that are not intermediated through the formal sector particularly there exist significant
savings potential in the rural and semi urban sector of many developing countries(Giragn Garo,
2015).
Mobilization of deposit plays an important role in providing satisfactory service to the different
sectors of the economy (Rajeshwari, 2014). To mobilization of sufficient deposit from depositor
needs to point out the determinants to maximize deposit. However, in most of the developing
countries it has observed that a high proportion of money held in currency and low proportion in
bank deposit (Furness, 1975). Such situation implies that majority of loans have to made in
currency which hinders deposit creation. In Ethiopia also there are a large number of people still
prefer to live the crude way of keeping money under the carpet and with a number of non-formal
financial institution such as thrift collectors, local word of collecting of money such as Edir,
Ekub, Mahiber and undisclosed places: in the roof ,pot, walls, underground or under bed. Saving
cannot be converted to investment when it is kept under these methods (Bahredin Awole 2016).
The researchers will be interesting in knowing or assessing the deposit mobilization of activity in
Abay bank, Lebu branch. Because deposits is the major activity of for all banking institution.
The activity of lending is possible when the bank can mobilize enough or sufficient funds from
their customer. The basic function of financial institution of mobilizing funds from the surplus
economic agents to deposit economic agents is put to test in order to generate economic growth.
The finance literature provides support for the argument that countries with better (efficient)
financial system grow faster, while inefficient financial system bear the risk of bank failure
(Kasekede, 2008).

1.2 Statement of the problem

Revenue from the bank deposit mobilizing activity benefits the bank depositor as well as
economic development of the country as a whole. On the bank said the source of profit is
interested earned on loan money. Depositors can benefit from this activity small saving their
money is secure place with reward given to them called interest (Next, 2004). The reason why
developing countries experience very low rate of growth is their financial system. That means
they lack of sophistication required for the economic growth (Obamuyi, 2012). They are highly
fragment and regulate with little depending (Mohamed, 2006). On the other hand as (Ohio, 2010)
stated that, those developing countries there are mall-adaptations of financial system. This
intensified adverse selection and moral hazard problems there by increasing the ability of

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financial market to firm with productivity investment opportunities (Ross, 2003). Moreover
(Mishkin 2002) has supported the above idea financial system banks face several difficulties that
keep them from operating efficiently. This problem mostly comes from legal system functions
poorly making. The previous researchers conducted on the related issue of mobilization of
depositors focused on the problem and effect of financial system. While, this research want to
add the need and significance of mobilizing depositors with its problem and effect on Abay
Bank. By having for going away in brain the researchers want to know the positions of Abay
Bank, Lebu branch branch and its activity regarding deposit mobilization and how they are
resisting essential research questions.

1.3 Research questions

 What are the main sources of deposit for Abay bank?
 To whom loan is provided mostly?
 Is deposit mobilizing activity effective in Abay bank?
 What are the challenges of deposit mobilization in Abay bank, Debre Tabor branch?

1.4 Objectives of the study

1.4.1 General objective

The general objective of this study is to assess deposit mobilization activities of Abay bank,
Lebu branch.

1.4.2 Specific objectives

The specific objectives of the study: -
 To identify the main source of deposit for Abay bank.
 To identify for whom loan is provided mostly in Abay bank.
 To assess the effectiveness of deposit mobilization activities in Abay bank.
 To identify the challenges of deposit mobilization in Abay bank, lebu branch.

1.5 Significance of the study

The significance of the study will to enable the users of this study for the Abay bank and also
important to increase the business community how to become beneficiary in deposit, saving,
having loan from Abay depositor capital.

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1.6 Scope of the study
The study will focus on assessment of deposit mobilization activity in Abay bank, Lebu branch.
The researchers restrict to only one local area of Abay bank.

1.7 Organization of the study

This paper will contain threechapters. The first chapter deals with introduction which contain
back ground of the study, statement of the problem, objective of the study, significance of the
study, scope of the study, limitation of the study, organization of the study. The second chapter
deals with related literature review. The third chapter deals with methodology of the study.

CHAPTER TWO
2. RELATED LITERATURE REVIEW

2.1 Theoretical Review

Deposit is the act of giving money or other property to another who promise to person or to use
and return it in kind. It is the act of money placing in the bank safety and convenience (Ross,
2003).

2.1.1 Depository Institution

Depository institutions are financial intermediaries that accept deposit from individuals and
institutions and make loans. These institutions include commercial bank and the so-called thrift
institution (thrifts): saving and loan association, mutual savings bank, and credit unions (Mishkin
& Eakins, 2006).

2.1.2 Type of depository institution

2.1.2.1 Bank
Banks are a financial institution that accept deposit and make loans. Banks are the financial
intermediaries that the average person interacts with most frequently. Most Americans keep a
large proportion of their financial wealth in banks in the form of checking accounts, saving
accounts, or other types of bank deposit. Because banks are the largest financial intermediaries in
our economy (Mishkin, 2004).

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2.1.2.2 Non-Bank Thrift Institution
Thrift institution are specialize type of depository institution. Thrifts were not permitted to accept
deposits transferable by check (negotiable) through checking accounts. They obtained funds
primary by tapping the saving of household (Mishkin, 1992).
Some of non-bank institutions are saving and loan association and credit unions.
 Credit unions: Are small cooperative lending institutions organized around a particular
group of individuals with a common bond (union members or employees of a particular
firm). They are the only financial institutions that are tax-exempt and can be chartered
either by the state or by the federal government; over half are federally chartered. The
National Credit Union Administration (NCUA) issues federal charters and regulates
federally chartered credit unions by setting minimum capital requirements, required
periodic reports, and examining the credit unions (Mishkin, 2008).
 Saving and loan association: Are the largest of all thrift institutions, accepting deposit
and extending loans and other services primarily to household customers. Saving and
loan association is emphasize longer-term loans to individuals and families in contrast to
the shorter –lending focus on most other deposit –type financial institution. Saving and
loan association are developing many new financial service to attract customers and boost
their earnings. Saving and loan association are similar to credit unions because they
extend financial services primarily to households. The basic motivation behind creations
of saving and loan association was provision of funds for financing the purchase of a
home. Saving and loans associations are either mutually owned or have corporate stock
ownership (Ross, 2009).

2.1.3 Source of fund for the bank

A bank acquires funds by issuing (selling) liabilities, which are consequently also referred to as
sources of funds. The funds obtained from issuing liabilities are used purchase income-earning
assets (Mishkin, 2004).
 Checkable deposits
Checkable deposits are bank accounts that allow the owner of account to write checks to third
parties. Checkable deposits include all accounts on which checks can be drawn: non-interest-
bearing checking accounts (demand deposits). Checkable deposit is an asset for the depositor
because it is part of his or her wealth. Conversely, because the depositor can withdraw from an

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account funds that the bank is obligated to pay, checkable deposits are a liability for the bank.
They are usually the lowest-cost source of bank funds because depositors are willing to forgo
some interest in order to have access to a liquid asset that can be used to make purchase
(Mishkin, 2004).
 Borrowing
Banks obtain funds by borrowing from the Federal Reserve systems, the Federal Home Loan
banks, other banks, and corporations. Borrowing from the federal are called discount loans (also
known as advances). Banks also borrow reserves overnight in the federal funds market from
other US banks and financial institutions. Banks borrow funds overnight in order to have enough
deposits at the Federal Reserve to meet the amount required by Federal (Mishkin, 2004).

 Bank capital
The final category on the liabilities side of the balance sheet is bank capital, the bank's net worth,
which equals the deference between total asset and liabilities. The funds are raised by selling
new equity (stock) or from retained earnings. Bank capital is cushion against a drop in the value
of its assets, which could force the bank in to insolvency (having liabilities in excess of assets,
meaning that the can be forced in liquidation) (Mishkin, 2004).

2.1.4 Major types of deposit

 Current deposits or demand deposits: These deposits are repayable on demand. They
are known as demand deposits in USA and current deposits in England. These deposits
are usually opened with a minimum balance prescribed by the bank and any amount can
be deposited in the account. These deposits can be withdrawn by the issue of cheque.
Generally, no interest is allowed on the current account. These accounts are normally
opened by business houses (Gomez, 2008).
 Saving deposit: Saving deposit accounts are maintained by the commercial banks to pool
the small savings of low and middle income groups. This is a device to encourage thrift
among the persons who earn only a fixed income every month. Certain restrictions also
are imposed on the opening and operation of saving deposit accounts. These restrictions
may vary from bank to bank. Usually, or banks restrict the maximum amount that can be

9
 deposited in or withdrawn from the savings accounts. The number of cheques that can be
drawn against the account within a specified period is also restricted (Gomez, 2008).
 Term (Fixed) deposit: These are deposits for a fixed period. These deposits are known
as fixed deposit in England and time deposit in the United States. Fixed deposits are
advantageous to both the banker and the depositor. The depositors prefer this type of
deposit as they earn a higher rate of interest. The banker is interested in such deposits
because they get the money for a fixed period. As the date of repayment is certain, the
depositors are able to invest the money for long periods and, thus earn a higher return on
the investment. Cheque system is not allowed against fixed deposits (Gomez, 2008).

2.1.5 Services of Banks in Modern Times

According to (Gomez, 2008) modern banks provide to the customers for the following services:
 Teller system
A large number of customer come to the bank for various purpose such as deposit of money,
making of draft and enhancement of check, traveler check and gift check one of the most
important methods of reducing the waiting time of customers at the counter is the adaptations of
the teller system. Under the teller system, a separate counter is opened through which
transactions involving amounts not exceeding certain limit are settled. This counter is closed in a
cubicle and one officer of the bank called the teller is put charge of it. The teller is also provided
with a suitable cash box. The teller counter is placed in such a way that the teller has easy access
to the relative ledgers.
Credit cards
Credit cards are the cards made of plastic which carry a specimen of the holder's signature. They
have certain information embossed on them. Credit cards are designed to avoid use of either cash
or checks and to give some measure of credit to the cardholders. They are used in place of
making cash payment for goods or services only in those establishments which have agreed to
accept them. The credit card organizer makes payment to the establishment concerned and once
a month sends an invoice to the credit card holder for all his purchases in the previous month.

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Generally, the bank which issues the credit card will be a member of a payments brand. The visa
cards, Master cards, and Maestro cards are examples of such cards. These cards are linked to a
global payment system.
 Debit Cards
Credit and debit cards (which may be called plastic money) are more in vogue. Carrying a lot of
cash is cumbersome and risky. Credit card or ATM card is smart solution to such problems. It is
a convenient and safe alternative for carrying cash. Debit card is more advanced than ATM and
credit cards as it can be used at specified retail or departmental stores in addition to specified
bank branches. It functions as both ATM card and, sometimes, credit card. This system requires
a terminal known as the point of sale terminal at every place of purchase. After making the
purchase, the merchant interest the card in to the machine and enters the amount of the
transaction. Immediately, the machines automatically check the balance in the account and
reduce the amount of the transaction from the balance. The merchant gets credit for all his
transaction on the next day.
 Automatic teller machine cards
Another important modern technology which is gaining popularity is the use of automated teller
machines (ATM) in the banking system. ATM card requires the personal index numbers entered
to avail the services. ATM provided quick and convenient service to the customers by enabling
them to have access to money round the clock and also throughout the year. ATM provides the
following services:
 They enable the banks to provide fast services in terms of accessibility to cash 24 hours a
day even on weekends and holidays.
 We can avail new and crisp notes from them.
 The services of ATM are available at convenient locations.
 They provide privacy in transactions.
 They help the banks in reducing crowd at banks counters.
 Under this system, banks issue ATM card to the customers for transacting on the
network. This card would contain some important data such as the name of the
cardholders, bank code, branch code, and personal identification number.

2.1.6 Significance of deposit mobilization

 A source of investment

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The intermediation functions of banks play a vital role in the efficient allocation of resources of
countries by mobilizing resources for productive activities. They transfer funds from those who
do not have productive use of it to those with productive venture (Ongore &Kusa, 2013).
Savings are resources which one decides to put aside for investment purpose and not for luxury.
What people save, avoiding to consuming all their income, is called “person savings”. These
savings can remain on the bank accounts for future use or be actively invested in houses, real
state, bonds, shares and other financial instruments (Nwanko, Ewuim, & Asoya, 2013).
 Low cost
The success of the banking greatly lies on the deposit mobilization. Performances of the bank
depend on deposits, as the deposits are normally considered as a cost effective source of working
fund (Shettar & Sheshgiri, 2014).
Savings are a source of funds with low financial cost i.e., interest cost, compared to other
commercial funds. With regard to financial costs, most of the institutions apply a differentiated
interest rate schedule, compensating for the higher administrative costs with no or low interest
rates on small savings and increasing them according to the size of the deposit (Elser, Hannig, &
Wisniwski, 1999).
 Source of profit
The ability of a bank management and staff to attract checking and saving accounts from
business and individuals in an important measures of the banks acceptance by the public.
Deposits provide most of the raw materials for bank loans and thus represent the ultimate source
of bank profits and growth (V arman, 2005).
Deposits are an indispensable tool commercial banks use to enhance its profitability through
advancing deposits mobilized to its customer in form of loans which make in return interest to
commercial banks (Tuyishime, Memba, & Mbera, 2015).
 Economic growth and development
In addition to resource allocation good bank performance rewards the shareholders with
sufficient return for their investment. When there is return there shall be an investment which, in
turn, brings about economic growth. On the other hand, poor banking performance has a
negative repercussion on the economic growth and development. Poor performance can lead to
runs, failures and crises. Banking crisis could entail financial crisis which in turn brings the
economic meltdown (Ongore & Kusa, 2013).

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2.2 Empirical review
According to (Obamuyi, 2013), the lending activity is made possible only if the banks can
mobilize enough funds from their customers. Since commercial banks depend on depositor’s
money as a source of funds, it means that there are some relationships between the ability of the
banks to mobilize deposit and the amount credit granted to the customers. Thus, the main
function of financial institutions of mobilizing funds from the surplus economic agents to the
deficit economic agents is put to test in order to generate economic growth. However, the
efficiency of performing this function depends on the level of development of the financial
system. The finance literature provides support for the argument that counters with better
financial systems grow faster, while inefficient financial system bear the risk of bank failure. The
efficiency of a financial system is gauged by how speedily and cheaply the financial system is
able to channel funds from the surplus economic agents to the deficit agents for productive
investments, while insuring reasonable returns for the financial intermediaries. (A sited by
Gerawork).
According to (Vohra &sehgl, 2012) sufficient deposit mobilization and careful lending behavior
are the two most important functions of banks since their profitability and survival depend on
these. The authors noted that interest income constitutes the single most important part of banks
profit. It is therefore clear that high deposit levels and prudent credit behavior are critical factors
for bank profitability, financial system stability and economic development. (Asited by Akoto
&Nabieu).
The researchers were conduct on the related issue of mobilization of depositors focused on
problem and effect of financial system. The researchers are want to add the need and significant
of mobilization of depositors with its related problem and effect on Abay bank, Debre Tabor
branch.

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CHAPTER THREE
3. RESEARCH METHODOLOGY

3.1 Research design

In this study the researchers will use descriptive type of research design. This design is selected
because it is clearly present the fact and the condition of deposit mobilization. This study also
uses quantitative research approach because it is applicable to phenomena that can be express in
terms of quantity, numerical and graphical.

3.2 Data type and collection techniques

3.2.1 Types of data

The researchers will use both primary and secondary data sources. Primary data source is
collected from the sample population using questionnaires. Secondly data source is collected
from written document of the organization.

3.2.2 Data collection techniques

The study will use two types of data these are primary and secondary types of data. The primary
data source will collected by questionnaire, observation and unstructured interviews from the
concerning parties of the organization employees and manager. The secondary data sources
collected from the written documents of the organization. In addition to this open ended and
close ended questioners are used.

3.3 Sampling design

3.3.1 Target population

The target population of the study is employees and manager of Abay bank Lebu branch. The
target population of Abay bank in Lebu branch has ten. From these target population the bank
has one bank manager, one credit officer, one accountant, one auditor, four customer service
officers, one cash managing, and one cashier.

3.3.2 Sampling technique

The sampling technique of this study is conducted based on census sampling of non-probability
sampling technique. The reason to select census sampling technique is: The total populations of
the organization are small and to get more reliable and accurate data.

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3.4 Methods of data analysis and presentation
After necessarily will collect from primary and secondary data sources, the data will process and
analysis by descriptive method. Because it is analyze by using table and percentage .After the
data is analysis it will be presented the data.

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CHAPTER FOUR
4. WORK AND BUDGET PLAN

4.1 TIME SCHEDULE

There are different activities in this study so to undertake all activity on time the researcher
depends according to the following schedule.

N o w o r k A c t i v i t y Time of executio n

1 T i t l e a p p r o v e d N o v e m b e r

2 F i r s t p r o p o s a l d r a f t D e c e m b e r

3 S e c o n d p r o p o s a l d r a f t J a n u a r y

4 D a t a c o l l e c t i o n F e b r u a r y

5 D a t a a n a l y s i s & p r o c e s s F e b r u a r y

6 L i t e r a t u r e r e v i e w M a r c h

7 R e s e a r c h c o m p l e t e & p r i n t i n g J u n e

8 P r e s e n t a t i o n J u n e

4.2 BUDGET SCHEDULE

The resource necessary to undertake the proposal study are presented as follows in a detailed
manner.

N o I t e m Units of measurement Quantity U n i t o f p r i c e Total cost

Birr cents B i r r

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1 Stationery material

P a p e r P a c k e t 5 0 0 0 5 0 2 5 0

Flash disk N u m b e r 1 1 5 0 0 0 1 5 0

Re-writer CD N u m b e r 1 2 5 0 0 2 5

P e n Numbers 3 0 1 0 0 0 3 0 0

Photo copy of different literature P a g e s 6 0 1 5 0 9 0

S u b t o t a l 8 1 8

2 Personal expense

Internet service H r s . 1 0 0 0 2 0 1 2 0 0

Transportation cost B i r r 1 5 1 2 00 1 8 0

Miscellaneous expense 2 0 0 0 0 2 0 0

Sub- total 1 5 8 0

Grand Total 2 3 9 8

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Reference

 Tuyishime, Memba, & Mbera, (2015). The effects of deposit mobilization on financial
performance in commercial banks in Rwanda, at equity bank Rwanda LIMITED.
International journal of small business and entrepreneurship research.

 Shettar, & Sheshgiri, (2014). Deposit mobilization socio-economic impact: A case study
of union bank of India. IOSR journal of Engineering (IOSRJOEN).
 Obamuyi, (2013). An analysis of the deposits and lending behaviors of banks in Nigeria.
International journal of Engineering and management.

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 Nwanko, Ewuim, & Asoya, (2013). Effect of co-operative on the Savings Behavior of
Members in Oyi Local Government Area, Anambra state, Nigeria. African Research
Review.
 Kaseked, (2008). Developing a sound banking system. Paper presented at IMF seminar
Tunisia.
 Gomez, (2008). Financial markets, institutions & financial service.
 Mishkin, & Eakins, (2006). Financial markets and institutions, 5th edition.
 Mishkin, (2005). The economies of money, banking & financial markets, 1st edition
Columbia University.
 Mishkin, (2004). The economies of money, banking, and financial markets 7th edition.
 Ross, (2003).Money market and capital market, 8th edition.
 Elser, Hannig, & Wisniwski, (1999). Comparative analysis of saving mobilization
strategies. CGP.
 Mishkin, (1992). The economies of the money, banking and finance market, 5th edition,
Colombia University.

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