Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Girma Duguma and Jiqin Han
Additional contact information
Jiqin Han: College of Economics and Management, Nanjing Agricultural University, No. 1 Weigang, Nanjing 210095, China

Sustainability, 2018, vol. 10, issue 10, 1-23

Abstract: Increasing institutional capital through deposit mobilization keeps the cost of capital low, thus leading to financial sustainability. However, little is known about how deposit mobilization affects financial sustainability. Using balanced panel data of 166 rural savings and credit cooperatives (RUSACCOs) from Ethiopia over the period of 2014–2016, we investigated the effect of deposit mobilization on financial sustainability. The results of the panel regression estimates showed that, among the deposits mobilization variables, the deposit to loan ratio, deposit to total asset ratio, the volume of deposits, and demand deposit ratio had a significant direct impact on financial sustainability. The fixed effect regression result for interest rate spread showed that an inverse relationship existed between the interest rate spread and financial sustainability. Furthermore, according to our robust fixed effect regression results, among the control variables, the age of the institution and inflation rate affects financial sustainability. Contrary to our expectations, the number of members and the percentage of woman members were not significant. This may be attributed to the fact that some members were inactive for a long period. We suggest that RUSACCOs should focus on deposit mobilization specifically on demand deposits and keep the interest rate spread narrower to ensure their sustainability.

Keywords: deposit mobilization; financial sustainability; rural savings and credit cooperatives; Ethiopia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.mdpi.com/2071-1050/10/10/3387/pdf (application/pdf)
https://www.mdpi.com/2071-1050/10/10/3387/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:10:p:3387-:d:171390

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().