Economic Determinants Of Savings Mobilization By Commercial Banks In Kenya

Abstract

Savings is a sacrifice of current consumption which provides for accumulation of capital hence addition of output that can be used for future consumptions. Commercial banks play a major role in savings mobilization through its function of financial intermediation to promote growth and investment. This function of the bank is critical with respect to economic growth. In Kenya and the developing countries it is evident that foreign capital alone is not adequate to create a permanent high standard of living in future thus domestic sources of finance will facilitate more successful implementation of any economic development. This study analyzed the economic determinants of savings mobilization by the commercial banks in Kenya with regards to real deposit interest rate on savings mobilization by commercial banks in Kenya and structural infrastructure. The target population of this study composed of representatives of the all commercial banks in Kenya with head office in Nairobi, both the managers and middle level employees. The target population of this study therefore was 431. The study used stratified random sampling method, to select 30% of the respondents who formed a sampling frame of 129 respondents. Data was collected using questionnaires. Data was analyzed using descriptive statistics done with the help of software Program SPSS version 21 and presented using frequency tables and graphs. In addition, multivariate regression model was applied to determine the relative importance of each of the four variables with respect to savings mobilization. Based on the research findings the study concludes that real deposit interest affects saving mobilization of the commercial bank to a moderate extent. The study also concludes that economic growth has a significant influence on saving mobilization in commercial banks in Kenya. The research further concludes that structural infrastructure has a great influence on saving mobilization. Basing on findings the study recommends that commercial banks should reduce it real deposit interest in order to attract more customers to save in their banks. Commercial banks should come up with policies to adjust their interest rate that are favorable to customers. The study further summarizes that considerable investment in the rural areas takes place in a non-monetized form through the use of family cottages-cottages for family use, farm roads and the like.Finally government should gear its efforts towards reducing domestic inflation in order to arrest its negative impact on both real interest rates and spread.