DEBRE MARKOS UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSMENT OF SAVING MOBILIZATION IN AWASH

INTERNATIONAL BANK DEBRE MARKOS BRANCH

A SENIOR ESSAY SUBMITTED TO THE DEPARTMENT OF

ACCOUNTING AND FINANCE OF DEBRE MARKOS UNIVERSITY IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE BA
DEGREE IN ACCOUNTING AND FINANCE

PREPARED BY: GETA BAWEKE

ADVISOR; MINIBEL. (MSc)

Dec, 2017

DEBRE MARKOS, ETH

 Table of Content
CHAPTER ONE....................................................................................................1

1. BACKGROUND OF THE STUDY...................................................................1

1.1 Historical Development of Saving Mobilization.............................................................................1
1.2. Statement of the Problem...............................................................................................................2
1.3 Research Question...........................................................................................................................3
1.4 Objectives of the Study...................................................................................................................3
1.4.1general Objective.......................................................................................................................3
1.4.2 Specific Objectives...................................................................................................................3
1.5 Significance of the Study................................................................................................................3
1.6 Scope of the Study...........................................................................................................................4
1.7 Limitation of the Study....................................................................................................................4
1.8 Organization of the Study................................................................................................................4

CHAPTER TWO...................................................................................................5

LITERATURE REVIEW.......................................................................................5
2.1. Definition of Saving Mobilization..................................................................................................5
2.1.2 Awash international Bank Saving Mobilization.......................................................................6
2.1.3 Importance of Saving Mobilization of Awash bank.................................................................6
2.1.4 Exogenous Problems................................................................................................................7
2.1.5 Bank Specific Problems..........................................................................................................8
2.1.6 Endogenous Problems..........................................................................................................10
2.2 Empirical Study...........................................................................................................................11

CHAPTER THREE..............................................................................................12

RESEARCH METHODS AND METHODOLOGIES........................................12

3.1 Research Design............................................................................................................................12
3.2 description of study area................................................................................................................12
3.3 Target population .........................................................................................................................12
3.4 Technique and size of population ................................................................................................12
 CHAPTER ONE

1. BACKGROUND OF THE STUDY

1.1 Historical Development of Saving Mobilization
Banks are the most important financial intermediaries that play an important role between
depositors and borrowers as Ill as to mobilize fund and pass them over or lend to those which
need to finance business or projects. In other word banks act as a bridge between societies by
transferring fund from savers that needed fund to invest. Because of their intermediary function
bank also serve as vehicle for economic and social development of country. (Kiyota, 2007)
The function of banks is divided in to two. These are primary function and secondary function.
The primary functions of banks are also known as banking function. From this primary function
accepting of deposit, granting of loans and advanced are some components of primary function.
The secondary functions of banks are including agency functions and general utility function.
(Garurava, 2011).
Saving is an act of depositing of money in to the bank. Saving are not only held to meet the
needs of the present or the near future but also kept individuals as part of their total stock of illth.
One of the problems, in the mobilization of saving is that, banking activity in developing
countries is limited to the officially existed marketing activity. In addition, the peoples in the
countries have not found Ill familiar with all banking activities plus when it comes to savings,
people in general and the poor in particular might not be completely rational and completely
knowledgeable. For this matter financial education to undeveloped society enables those to
improve their financial knowledge of savings know from their daily income from future
consumption (Sergeant, 2001).
Maximization of saving customer through intensive collection has been regarded as a major task
of banking. Acceptance of saving is the primary function of awash international bank in Debre
markos branch. Maximization of savings of customer can be meet by using high technologies,
training has given to saving promoting staff, developing high organizational trust, giving client
full pledged facilitate at new (Rose, 2005).
1.2. Statement of the Problem
Saving mobilization is fundamental part of banking activity. Mobilization of saving through
intensive deposit collection has been regarded as the major tasks of banks. According to
(Banson, 2012), “mobilization of saving for a bank is as essential as oxygen for human
being.” saving mobilization is one of the main functions of banking business and so an important
source of working fund for the bank. Saving mobilization is the collection of cash or funds by a
financial institution from the public through its current savings, fixed recurring accounts and
other banks specialized schemes.

Selvaraj, Kumar, 2015, states that, the success of the banking greatly lies on the saving
mobilization. Performance of the bank depends on saving, as the saving is normally considered
as a cost-effective source of working fund. It helps to expand banking operation. Generally
saving mobilization for a bank is as essential as oxygen for human being. However, the Awash
international bank faced by interrelated problems toward of the saving mobilization. Some of the
problems are internal of the organization. Such as the quality of banking service, the interest rate
paid on deposits, bank employee’s behavior and the way they deal with customers, payment of
staff salaries and social securities. While the other are external problems, Such as existence of
competitors, expansion of informal saving, individual income.

According to Shemsu (2015), Mobilization of saving is one of the important functions of

banking business it is an important source of working fund for the bank. Saving Mobilization is
an indispensable factor to increase the sources of the banks to serve effectively. Saving is one of
the resources of banks highly motivated to mobilize and the most liquid Money that is found in
the treasury of the bank and which is ready to be borrowed in need of fund. Awash international
Banks should mobilize enough saving to disburse the loan request of the Customer Deposit
mobilization is an integral part of banking activity.

According to NBE (2016), In Ethiopia, while saving has been growing rapidly, further
Mobilization is needed to satisfy the significant demand for financing. Policies that promote the
expansion of bank branches, increase financial awareness, and diversify savings instruments will
help boost savings. To promote savings, banks Ire being encouraged to expand their branch
network and to develop better-targeted savings instruments (For example for home buyers and
Ethiopia's Diaspora) the NBE agreed with staff that higher interest rates (Especially for term
deposit) could also promote savings, though they saw greater impact from structural policies.

The importance of savings in the development experience of Asian Countries may be relevant in
this regard. (NBE, 2016). Despite many researches Ire conducted in Ethiopia in the area such as,
Sissy (2013), Jember (2014), Hebert (2015), and Kibebe (2016), this study relied Ire focusing on
the function of saving mobilization in Awash international banks in Ethiopia. This research
will be concerned on the factors that affect saving mobilization in international bank Awash
international Ethiopia debre markos branch.

As per the researcher's knowledge, so far there was no research which is conducted in Debre
markos town particularly in Awash international bank, debre markos branch on the same topic
and also the researcher could not find any research conducted on the same topic. So, this area
gap is the reason that initiates the researcher to conduct his study on this topic in Awash
international bank of Ethiopia in debre markos branch. Accordingly, this study tried to identify
the factors that affect saving mobilization in Awash international bank of Ethiopia debre markos
branch by assessment of saving mobilization.

1.3 Research Question

What are the internal problems that challenge mobilization of saving in Awash
international bank in debre markos branch?

What are the external problems that challenge mobilization of saving in Awash
international bank in debre markos branch?

What are the right methods to be used by Awash international bank debre markos branch
in saving mobilization?

1.4 Objectives of the Study

1.4.1 G]eral Objective
The general objective of the study will to assess the saving mobilization in Awash international
bank debre markos branch.
1.4.2 Specific Objectives
1. To identify the internal problems that challenge mobilization of saving in Awash international
bank.
2. To evaluate the external problems that challenge mobilization of saving in Awash
international bank.
3. To show the right method that will be used by Awash international bank in the mobilization of
saving.

1.5 Significance of the Study

The study will help to identify the problems that challenge saving mobilization and help banks to
design and implement effective deposit mobilization strategies. The other significance of the
study was used as the reference for the future researchers and initiated them to perform. It gives
opportunities for the researchers to gain deep knowledge in the practice of saving mobilization
and also important to improve the saving mobilization policy and practice to increase saving
mobilization activities by alleviation of existing problems. It also helps managers of banks,
particularly Awash international banks to identify the cause of the problems and redirects their
policies based on the finding of this study in order to maintain effective saving mobilization
practices. This study comes up with relevant information to improve its performance regarding
saving mobilization.

1.6 Scope of the Study

The scope of this study will be limited to deal with the assessment of saving mobilization in
Awash international bank debre markos branch in debre markos town. It will be focused on
internal and external problems that challenges saving mobilization.

1.7 Limitation of the Study

The researcher faces different limitations to complete this study. From this limitation some of
them are listed below. According to the information from Awash international bank in debre
markos branch, the total target population Ire 20 and it indicates that the target population are
very small So, the researcher will use census techniques. However, the study limited by this
technique, because the number of target population is less than 30. In this case the researcher
faces shortage of sufficient necessary information. And also, the questionnaires are a sired by
only primary source of data. Since, it indicates that secondary source of data does not used to
collect data.

1.8 Organization of the Study

The study is consisting of three chapters. The first chapter contains the elements of the study
that are incorporated in the introductory part such as background of the study and the
enterprise, statement of the problem research questions, research of design and methodology.
The second chapter is part of related literature. This chapter been discussed the findings of
different researches conducted by prominent scholars. Chapter three focuses on the current
situations of the enterprise by analyzing the collected data through different data collection
methods. The chapter indicates the interpretation of the collected data and shows the ultimate
way to come up with solutions against the entire problems of the enterprise. This is followed by
time schedule and budget break down.
 CHAPTER TWO

LITERATURE REVIEW
2.1. Theoretical Literature review
Saving Mobilization is designed to attract funds from customer who wish to set their money
anticipation of future expenditures or financial emergencies. These Mobilizations generally pay
significant higher interest rates. While their interest cost is higher in saving or thrift mobilization
are generally less costly for a bank to process and to manage just as bank for decades offered
only one basic transaction mobilization of the regular checking account, so it was saving Plan.

Book Savings is sold to house hold customer in small denominations and with drawl privilege Ire
unlimited. Few banks have insisted on this technique because of the low interest rate paid on
these accounts and because pass book savings tend to be stable any way with little sensitivity to
change in interest rates. Saving mobilization, these are mobilization which the Bank Pays small
interest to the customers who are usually small savers. (Phil,2010)

Customers can withdrawal any amount standing in their credit by checks without notice.
The bank pays another rate of interest on such saving the interest rate interest rate increase with
the length of period of saving mobilization. Early withdrawal all (before the maturity date) are
made up giving advance notice.
Advance Loan: - bank lend certain amount of money to customers as per their request and
charging higher interest rate than it pays for saving mobilization on such mobilization they have
given loan in the following ways.
Cash credits bank advance to business man against certain specified securities. The borrower can
withdraw money through checks according to his requirement; but pays interest along with
principle amount at regular interval.
Cash loan: - these are very shorter loans advance to the bull blacker for hot more than fifteen
days; such bills can be recalled at very short notice.
Overdrafts: - a bank often allows business man to draw checks for a sum greater than the
balance lying in their account. The business man is charged interest on the amount by which his
current accounts or over drawn. Discounting bill of exchange if creditor holding a bill of
exchange wants money immediately, the bank provides him the money by discounting the bill of
exchange.
Financing foreign trade: - Awash international bank finances foreign trade of its customers by
accepting foreign bill of exchange and collecting them from foreign bank. It also buys and sells
foreign currencies. (Dori, 2015)
Agency services: - bank acts as an agent of its customers in collecting and paying checks; bills
of exchange.
Miscellaneous: - besides; the above noted service the Awash international bank act as, custodian
of valuables of its customer by providing them locker where they can keep their Jells and
valuable documents. (Dori, 2015)

2.1.2 Awash international Bank Saving Mobilization

Awash international bank saving mobilization is major liabilities for Awash international banks.
(Kelvin. 2001) said that savings of private banks account for about 75 % of Awash international
banks liabilities.
Due to the fact that Awash international banks are using this liability to lend it and gain return on
it, and their saving are using for third persons business. Therefore, bank should mobilize more
saving provide limits to the working capital of the bank concerned. If bank has accepting more
saving from customer and can able to lend and through this it can earn more profit. The higher
saving will be founding at the disposal of bank to lend and earn profits (Desingea, 1975)
therefore maximize its profits the bank should increase its saving. Awash international banking is
a service industry with a high rate of built in profit potential (menaces, 1975). Awash
international banks mainly depend on the funds saving with them by the public to lend it to other
in order to earn interest income (Drainage, 2010).

2.1.3 Importance of Saving Mobilization of Awash international Bank

Saving Mobilization as Source of Fund for Loan: -
(Herald, 2001) states saving mobilization are one of main source of banks to provide loan. Thus,
saving mobilization is mainly provided by people as (Mohammad, Maldi, 2001) however saving
can also be provided by business organization, NGO, government and so on. Therefore, whether
saving is from individual’s business and government they are important financial source of
funds.
Attracting saving Mobilization is Cheaper than Raising Equity: -
Banks as any other business organization mobilize funds from debt or equity. In the bank’s
context raising equity is more expensive or costly than attracting saving (Lorenz, 2010) States
that, if the leading channel plays role, the saving growth should lead to an increase in the supply
if loans due to the additional source of financing for banks. As demand for loan increases
because of the development work done by individual, business and government banks creates a
saving by lending to a business man, it is clearly performing function for which its untitled to are
turn in the form of interest payment (Harold, 1946).
Fund Investment and Projects: -
Debt is largely held by domestic Awash international bank which are funded mainly from saving
of government, demand for bank assets enabled banks to continue to expand their saving base
rapidly and profitable (Herad, 2009) individual investor and government are mainly depending
on the saving of banks to fund their investment and development.
Generally, the banking system can be viable only it can mobilize saving at the required rate and
this can be done only by making a bank saving more attractive.

2.1.4 Exogenous Problems

These are problems that are from country and banks that can affect the growth of Awash
international bank saving mobilization there discussed as follow.
Country's Specific Problems: -
The country economic social and political problems can affect the Awash international banks
According to Herald, (2009) country specific risks such as political and financial risks may affect
the propensity for saving to place funds in the banking system. A bank success in their operation
is mainly depends on the environment where the business in undertaken.
Saving Interest Rate: -
One of the most effective problems for deciding to save in the banking system is the interest rate.
According to (Mohammed, 2005) and (Mahad, 2010), interest rate in the bank system it held at
investment cost from the investor point of view and opportunity cost from the customer point of
view. I agene banks mobilization saving are interest rate sensitive. Therefore, as the interest rate
change the saving mobilization Awash international banks will change.
Inflation: -
Is seen as an economic problem in developed countries in the second half of 20 century?
Inflation with effect economic growth, employment, income distribution, as Ill as social and
political conditions of a country can influence its entire dignity. As Mohammed and (Malady,
2010) stated with respects to the effect of inflation on saving it can be mentioned that in general
all individuals who save a part of their income in banks diversely damaged by the inflation and
their assets decrease in proportion with money value decrease In the cause as (Mohammed,
malady, 2010) describes people try to change their cash and savings to more reliable and stable
forms such as land jelly, antiques art collection saving mobilization.
Real Interest Rate: -
Real interest rate is nominal interest rate minus inflation rate. (Mohammed, Mahadi, 2010) said
that in negative real interest rate condition; people withdraw their resource from banking system.
According to (Mohamed, Mahadid, 2010) some research supposed that decrease in the real
interest rate could decrease true demand for many extensive definitions including saving
mobilization therefore; it states that the interest rate and saving of the bank have positive
relationships. (Mohamed, Mahadid, 2010)
Economic Growth: -
Economic performance is generally being measuring gross domestic product (GDP) available
that has also become the universal metric for standards of living (Yonne, 2007).
According to Herald, (2009) growth is one of the determining problems for Awash international
banks of saving mobilization. GDP is calculated by adding up the value added at stage of
production dedicating the cost of produced input and materials purchased from an industry is
supplies (Jim, 2008).
Consumer price index: -
According to (Heral, 2009) price can also determine Awash international bank saving
mobilization and it can be indicated by consumer price index. In literature there is evidence for
the influent of consumer price index on Awash international banks saving mobilization;
however, this area was rarely studies.

2.1.5 Bank Specific Problems

Liquidity of the banks: -
The concept of liquidity in finance principally lies in two areas (Ismail, 2010): -
A Liquidity of Financial instruments in the financial market
B the Liquidity to solvency
The former relates to liquidity of financial market and financial instruments. Smooth transaction
and no barriers; as to Ismail; the later discuss the obligation of banks to make payments to third
parties.
An important measure of liquidity is loan to saving ratio. the loan to saving ratio is inversely
related to liquidity and conserve the higher the loan to saving ratio the loIr the liquidity and vice
versa (Diving,2010).
Key liquidity indicator such a share of monetary aggregates loans to saving ratios are important
for market operation and management (Shekess, 2005) the banks liquidity management involves
acquiring sufficient liquid asset to meet the bank obligation to customer (Von-choosing, 2010).
According to the findings of (Doro 2009), it is more profitable for savings banks to hold liquid
asset than to investment in liquid assets such as medium-term interest bank lending to other
credit institutions.
Profitability of the bank: -
As (Even, Ekk 2004) found, the long run relationship between Awash international bank saving
mobilizing and the profitability of the banks. higher bank profits would tend to signed inversed
bank soundness which could make it easier for these banks to attract saving mobilization
(Herald, Hero, 2009); However; the effect of bank profitability and bank size is found to be
insignificant once controlling for the other valuables so, the effect of profitability and bank size
are found to be insignificant once controlling for the other variables.
Security of the banks: -
Security Of banks matters in mobilization saving riskier banks would be able to attract saving
only paying higher interest rates. The security of bank has its own important on its attractiveness
for customers. for example, in the existence of saving insurance the savers no longer are
concerned about the soundness of their banks because their saving is ensured in the event of bank
failure. The bank should securities system so as to mobilize more saving than before and to
attract new saving and maintain the existing saver. (Herald, Hero, 2009);
Branches: -
There is relationship between Awash international banks, saving and mobilization banks
branches expansion hot only are saving influenced by bank branches. But the expansion bank
branches are also influenced by the level of saving mobilization in any area. (Baquietal,1987) it
is expected that banks make decision on expanding their facilities by considering factor such as
level of competition; saving potential regional income and existence of road and vehicles.

2.1.6 Endogenous Problems

In the literature of endogenous problem are identified that can be affect the growth of Awash
international bank saving mobilization. They are awareness of the society for using banks to
saving their money, convenience of the bank’s office and service in the banks (. Even, Ekk 2004)
Awareness of the society: -
According to (Baquietal1987), some analysts argue that determinate for saving of banking
system of the study conducted by taking rural area as its base it is obvious that in consider the
awareness problem of saving mobilization. It was also found that literacy as proxy for awareness
about banking; positively influence saving mobilization.
Convenience of banks office: -
Road and vehicles directly influence interest bearing rate be airing saving because of the
reduction in customer transaction costs through reduced time spent in travelling to and from bank
(baquietal, 1987) banks can mobilize more saving when they make their service close to their
customer.
Services in the banks: -Service in the bank should be attractive enough for the customer so as to
mobilization saving. Its banks could offer these services; the saver would be inclined to keep a
part of their savings in the form of saving (batt, 1970) names to use to mobilize of saving.

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

2. Offering land revenue or insurance premium.
3. An investment service.
4. Some person like farmers gets; their income says once year; while their expenditure is
spread over the whole year. If bank could collect saving from them at the harvesting seasons; and
assures them regular withdrawals during the year; farmers may be incurred to keep saving with
the bank
2.2 Empirical Study
This section provides the relevant empirical review related to the study of saving mobilization in
Awash international bank. According to (Gockel, Brow 2007), saving bank is money placed in to
a banking institution for safe keeping. Saving bank are made to saving account at a banking
institution. Such as saving accounts, checking accounts and money market accounts. The account
holder has the right to withdraw is saving funds, as set forth in the terms and condition of
account.
According to (Kazi ,2012), in banking sectors, saving mobilization is a scheme intended to
encourage customers to save more cash with the bank and this money in turn will be used by the
bank to disburse more loans and generate additional revenue for them. The main business for
banks is accepting deposits and granting loans. The more the loans the banks disburse the more
profit they make.
According to (Katang, Ntui, 2008), in the most basic terms, Awash international banks take
deposits from individuals and institutional customers, which they use to extend credit to other
customers.
According to (Abay, 2010), by sub-Saharan African standards, Ethiopia’s rate of domestic
saving has been very low. From 1997-2010, the average saving rate in low income countries of
the region was about 9 percent, while it was about 19 percent for middle income countries. In the
same period, the average saving rate of fragile sub-Saharan African states was 11.5 percent, still
significantly higher than Ethiopian’s rate of 4 percent.
According to (Even, Ekk ,2004), on saving determinates of Awash international banks in
Malaysia, investigate the structural determinates of saving level of Awash international banks in
Malaysia, using co- integration techniques. This study classified the variables for saving
mobilization into two, namely financial and economic variables. Financial variables consist of
interest rate on saving account and fixed deposit account, rate of profit for Islamic saving
account and Islamic investment account and fixed deposit account are normally known as
investment account at Islamic bank. Whereas, based leading rate (BLR), consumer price index
rate (CPI), money supply (MS), and gross domestic product (GDP) are Economic variables. The
data for this study is taken from the monthly statistical bulletin of banks (Negara, Malaysia,
Even, Ekk ,2004)
 CHAPTER THREE

RESEARCH METHODOLOGIES

3. Introduction

this chapter includes research design and methodology. I will comprise different sections. Such
as: description of study area, target population, sampling techniques and method of data
collection, analysis and presentation.

3.1 Research Design

the research will use descriptive type of research design for the reason that it helps in describing the
existing situation. A descriptive research sought to obtain information that described existing
phenomena by asking individual about their perceptions, Attitude behavior or value (mugenda2003).

3.2 Description of study areas

Awash International Bank (AIB) was established in 1994 in Ethiopia as the first private bank in the
country after the state monopoly on banking was lifted. It was founded by a group of Ethiopian
entrepreneurs and has since played a significant role in the country’s financial sector. AIB aimed to
provide a wide range of banking services, including savings and loans, to promote economic
development and financial inclusion. Over the years, it has expanded its network of branches and
introduced various financial products, adapting to the evolving needs of its customers. The bank has also
embraced technology, enhancing its services through digital banking platforms. Today, Awash
International Bank is recognized as one of the leading private banks in Ethiopia, contributing to the
nation’s economic growth and development. Specially in Awash international bank debre markos branch
was stablished in 2011 is part of one of Ethiopian leading private banks, the branch offers a range of
financial services. `

3.3 Target population

The population of the study included the management staff and the employees of production
department. Generally, there are 20 permanent employees.

3.4 Technique and size of population

To conduct this research project the research used census method. Census is used to collect data
from the whole employees the rationale to use the census is the numbers of employees in the
organization is small and it prone to free error or increase accuracy of my research. The total
employees concerned with quality issue are 20, Because of the smallness of the population, to
gather the sufficient information the research used the total number of target population. The
interview was conducted with manager. The questionary was distributed for all the employees to
get different data.

3.5 Research approach

The research will be justified by both in qualitative and quantitative data type which means
mixed or paradigms. The qualitative will use for the data contain from the manager of the
organization and information that can obtain with respondent of in the organization which is
interview. Quantitative will being elaborated through describing and presenting a data in a table
and analysis in percentage and frequency which comes from Questionnaire.

3.6 Data source

the sources of data used in the study is primary data. Primary data includes information from
respondents, which through questionnaire, interview and it will assume that this data will provide
original information to the study.

3.7 Methods of data collection

To collect raw data from respondents since it saves cost and enable study participants to
express their feelings and suggestions freely a questionnaire will be used. The questionnaires
include close ended questions and also used interview.

3.8 Method of data analysis and presentation

The data collected is analyzed and interpreted through descriptive method since it describes
the obtained result as it is and then presented in the form of tables and analyzed in percentage
and frequencies.

3.9 Ethical Consideration

In order to insure the study will conduct ethically, I followed a code of conduct. All participants
in the study are Ire assured that their participation will purely voluntary. In addition, it made
clear that any information given by the participants will treat as strictly confidential and the
participants identity will not use.

3.9 Time schedule and budget breakdown

3.9.1Time schedule

No Actives June July Aug sept oct nov Dec

ust
1 Topic selection x
2 Literature Review x
3 Proposal develop X
4 Data collection, data processing and X
analysis
5 Report writing x
6 Summation to dep and advisor x
7 Presentation X

3.9.2 Budget breakdown

No Expense Quantity Unit Birr Cent Total cost
1 Typing 12 Page 15 300
2 miscellaneous expense 500
3 Contingency cost 500
4 Pen 2 15 30
5 mobile card 2 15 30
6 printing cost 40 pages 5 200
7 Transportation 3 days 50 150
Total 1710