An evaluation of interest rate stability on deposit mobilization in banking: a case study of Fortis Microfinance Bank
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Background of the Study
Interest rate stability is a critical factor influencing deposit mobilization in the banking sector. Fortis Microfinance Bank, operating in a highly competitive environment, has focused on maintaining stable interest rates as part of its strategy to attract and retain depositors. Stable interest rates provide predictability for customers, encouraging them to invest their savings in bank deposits rather than seeking alternative, potentially more volatile investment avenues (Ibrahim, 2023). The bank’s commitment to rate stability is underpinned by a carefully crafted monetary policy and effective risk management practices that mitigate the impact of market fluctuations.
The importance of interest rate stability is further emphasized by the current economic environment, characterized by intermittent inflationary pressures and global financial uncertainties. In this context, depositors often seek assurance that their savings will yield consistent returns. Fortis Microfinance Bank’s approach involves a combination of conservative lending practices, diversified asset portfolios, and close monitoring of macroeconomic indicators to ensure that interest rate adjustments are minimal and predictable (Okafor, 2024). Moreover, the bank’s transparent communication of interest rate policies and frequent updates to customers have helped build trust and enhance deposit mobilization.
However, maintaining interest rate stability in a fluctuating economic climate presents significant challenges. External factors such as market volatility, fiscal policy changes, and global economic shocks can force banks to adjust rates more frequently, potentially undermining depositor confidence (Adebayo, 2025). Additionally, the internal challenges of aligning interest rate policies with competitive pressures from other financial institutions complicate the bank’s efforts. These challenges underscore the need for a comprehensive evaluation of how interest rate stability influences deposit mobilization at Fortis Microfinance Bank.
This study examines the relationship between interest rate stability and deposit mobilization, aiming to provide insights into how stable rates can contribute to a higher volume of deposits. By analyzing historical data, customer feedback, and macroeconomic trends, the research will offer actionable recommendations for optimizing interest rate policies in a manner that supports both financial stability and competitive deposit growth.
Statement of the Problem
Despite its strategic emphasis on interest rate stability, Fortis Microfinance Bank faces challenges in mobilizing deposits at the desired levels. One major issue is the inherent tension between maintaining stable rates and responding to market dynamics. Frequent fluctuations in the broader economic environment often force the bank to make reactive rate adjustments, which can lead to depositor uncertainty and reduced deposit inflows (Okafor, 2024). This unpredictability undermines the bank’s efforts to build a loyal depositor base and hampers its ability to offer long-term financial products.
Another problem arises from competitive pressures. Competing financial institutions may offer higher interest rates to attract customers, compelling Fortis Microfinance Bank to occasionally deviate from its stability objectives. Such deviations can create a perception of inconsistency, ultimately affecting depositor confidence (Adebayo, 2025). Additionally, the communication strategy regarding interest rate policies is often insufficient, leaving customers unclear about the rationale behind periodic rate adjustments. This lack of transparency further diminishes the perceived benefits of rate stability.
Moreover, the effectiveness of interest rate stability in mobilizing deposits is also affected by external factors such as inflation and currency fluctuations. In an unstable economic environment, even stable bank interest rates may be viewed as inadequate by potential depositors seeking better returns elsewhere. The compounded effect of these issues presents a significant barrier to achieving the desired level of deposit mobilization, necessitating a thorough investigation into the relationship between interest rate policies and customer behavior.
This study aims to explore these challenges in depth, providing insights into how Fortis Microfinance Bank can better balance competitive interest offerings with the need for rate stability to maximize deposit mobilization.
Objectives of the Study
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To evaluate the impact of interest rate stability on deposit mobilization at Fortis Microfinance Bank.
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To identify the challenges associated with maintaining stable interest rates in a competitive market.
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To recommend strategies for optimizing interest rate policies to enhance deposit growth.
Research Questions
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How does interest rate stability influence deposit mobilization at Fortis Microfinance Bank?
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What challenges hinder the effective maintenance of stable interest rates in a fluctuating market?
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What strategies can improve the communication and implementation of interest rate policies to attract more deposits?
Research Hypotheses
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H₁: Interest rate stability positively influences deposit mobilization at Fortis Microfinance Bank.
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H₂: Market volatility and competitive pressures negatively impact the effectiveness of stable interest rate policies.
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H₃: Improved transparency and strategic rate adjustments enhance depositor confidence and deposit growth.
Scope and Limitations of the Study
This study focuses on Fortis Microfinance Bank’s interest rate policies and deposit data over recent years. Data will be obtained from bank records, customer surveys, and market analyses. Limitations include external economic factors that may influence deposit mobilization independently of bank policies.
Definitions of Terms
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Interest Rate Stability: The consistency of interest rates offered by a bank over time.
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Deposit Mobilization: The process of attracting and retaining customer deposits.
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Market Volatility: Fluctuations in economic indicators that affect financial market conditions.
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