An assessment of interest rate policy impacts on savings mobilization in banking: a case study of Fortis Microfinance Bank
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Background of the Study
Interest rate policies are a pivotal factor in shaping customer savings behavior. Fortis Microfinance Bank has recently revised its interest rate policies to enhance the mobilization of savings by offering competitive returns on deposit products (Ibrahim, 2023). These policy adjustments are intended to incentivize customers to save more by providing attractive interest rates while ensuring the bank’s profitability. The revised policies also aim to create a more transparent and customer-friendly savings environment, encouraging both new and existing customers to increase their deposit volumes (Adeyemi, 2024). Savings mobilization is critical for banks as it directly affects liquidity and the capacity to fund lending operations. Fortis Microfinance Bank’s strategy involves a careful balance between offering competitive interest rates and managing the risk associated with increased deposit inflows. Advanced analytics and customer segmentation techniques are being used to tailor interest rate offerings to different customer groups, thereby maximizing the appeal of savings products (Chinwe, 2023). Despite these efforts, challenges persist in effectively communicating policy changes to customers and ensuring that the new rates translate into higher savings mobilization. This study will assess the impact of Fortis Microfinance Bank’s interest rate policies on savings mobilization by analyzing deposit growth trends, customer feedback, and market competitiveness. The findings will offer insights into how interest rate adjustments affect customer behavior and provide recommendations for optimizing savings mobilization strategies.
Statement of the Problem
Even with the implementation of revised interest rate policies, Fortis Microfinance Bank has encountered challenges in achieving the desired level of savings mobilization. Customers have shown varied responses to the new rates, and the expected increase in deposit volumes has been inconsistent across different customer segments (Ibrahim, 2023). One critical issue is the communication gap between the bank and its customers regarding the benefits of the new interest rate policies, leading to confusion and lower-than-expected uptake (Adeyemi, 2024). Additionally, external market factors, such as economic volatility and competition from other financial institutions, further complicate the impact of the revised policies on savings behavior. Inconsistent implementation of policy changes across branches has also contributed to the problem, resulting in a fragmented customer experience (Chinwe, 2023). Without clear evidence linking interest rate adjustments to increased savings mobilization, bank management faces difficulties in fine-tuning policies to achieve optimal results. This study aims to investigate the relationship between interest rate policy changes and savings mobilization, identify the barriers hindering customer uptake, and propose actionable strategies to improve policy communication and implementation. The outcome is expected to enhance the bank’s capacity to mobilize savings effectively, contributing to improved liquidity and sustainable growth.
Objectives of the Study:
1. To assess the impact of revised interest rate policies on savings mobilization at Fortis Microfinance Bank.
2. To identify barriers affecting customer uptake of new savings products.
3. To recommend strategies for improving communication and policy implementation.
Research Questions:
1. How do revised interest rate policies affect savings mobilization?
2. What factors hinder the effective uptake of new savings products?
3. What strategies can enhance the communication and impact of interest rate policies?
Research Hypotheses:
1. Revised interest rate policies significantly increase savings mobilization.
2. Poor communication negatively affects customer uptake.
3. Tailored interest rate offerings lead to higher deposit growth.
Scope and Limitations of the Study:
The study focuses on Fortis Microfinance Bank’s savings mobilization data and customer surveys. Limitations include external economic fluctuations and potential response biases.
Definitions of Terms:
• Interest Rate Policy: The bank’s framework for setting interest rates on deposits.
• Savings Mobilization: The process of attracting and increasing customer deposits.
• Customer Segmentation: Dividing customers based on demographics and behavior.
• Deposit Growth: The increase in customer savings over time.
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