Commercial banks are the main controller of
the financial system in Ghana performing financial intermediation. They control
greater portion of the investment funds from domestic deposits and are the main
creditors of the corporate bodies, SMEs and individual investors. However, the
amount of domestic funds that commercial banks receive is far below the level
sustainable for self-sufficiency. Huge volumes of loanable funds are left out
of the banking system and it needs the efforts of the commercial banks to tap
them into productive uses. The purpose of this study therefore is to identify
the most effective and efficient ways commercial banks in Ghana should employ
to maximize the volume of domestic deposits in the environment of high rural
population, dominant informal sector employment and macroeconomic instability.
Thus, the study aims to evaluate the design of bank products and services,
assess their effectiveness of harnessing domestic deposits and challenges they
face in mobilizing deposits. This research is based on relevant books,
journals, articles and other publications. In addition, data from commercial
banks in Ghana on deposits they received from 2000 to 2004 were studied to make
recommendations. Results from the analysis indicated that deposits mobilization
of Commercial Banks in Ghana though, has an upward trend, it increases at a
decreasing rate hence, the present level of deposits as a ratio of the total
amount of money in circulation is woefully inadequate. The study also reveals
certain basic facts about commercial banks in Ghana. Their concentration in the
cities and a few urban areas as well as their product design and services are
targeted to the literate formal sector employees. In addition, unfavourable
macroeconomic conditions have resulted in negative real interest rate on
deposits while unnecessary government intervention has reduced the confidence
in the banking sector. The effects of these factors are the low deposits that
commercial banks receive. The study concluded with recommendations for
commercial banks such as; the need to redefine their product target, increase
their scope to include the large majority etc. in order to ensure improvements
in their operations.
Commercial banks, mobilization of
deposits, products and services, macroeconomic conditions, capital growth and
investment, and interest rate.
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