An evaluation of effective interest rate policy communication on stimulating deposit mobilization in banking: a case study of Fortis Microfinance Bank
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Background of the Study
Clear communication of interest rate policies is essential for building depositor confidence and stimulating deposit mobilization. Fortis Microfinance Bank has implemented a comprehensive communication strategy to explain its interest rate policies across multiple channels, including digital platforms, printed materials, and direct customer interactions. By providing transparent and accessible information on how interest rates are determined and adjusted, the bank aims to demystify complex financial concepts and empower depositors to make informed decisions (Uzo, 2024; Adeyemi, 2023). This transparency is crucial in an increasingly competitive market where customer trust is a key determinant of deposit growth.
The bank’s communication strategy is designed to ensure consistency and clarity, reducing ambiguities that may lead to depositor skepticism. Regular updates and proactive outreach initiatives help align depositor expectations with the bank’s policy decisions, thereby fostering a sense of stability and fairness. By leveraging technology and targeted messaging, Fortis Microfinance Bank not only improves depositor understanding but also differentiates itself from competitors that may not provide such transparency. The effective communication of interest rate policies supports long-term deposit mobilization by encouraging customers to invest their funds in a secure and well-regulated financial institution.
Statement of the Problem
Despite robust efforts to communicate interest rate policies, Fortis Microfinance Bank still faces challenges in achieving uniform depositor understanding. Variations in depositor financial literacy lead to inconsistent interpretations of interest rate changes, resulting in hesitancy to deposit funds among less informed customers (Uzo, 2024). Frequent fluctuations in interest rates, driven by volatile market conditions, further complicate depositor comprehension and may trigger uncertainty. Discrepancies in messaging between digital channels and branch-level communications also contribute to confusion, ultimately undermining depositor confidence. The absence of standardized metrics to evaluate the clarity and impact of the bank’s communication efforts complicates the identification of areas needing improvement, thereby limiting the overall effectiveness of the strategy.
Objectives of the Study
1. To evaluate the impact of clear interest rate policy communication on deposit mobilization at Fortis Microfinance Bank.
2. To identify challenges related to depositor understanding and communication consistency.
3. To recommend strategies for enhancing the clarity and effectiveness of interest rate communication.
Research Questions
1. How does effective interest rate policy communication influence depositor behavior at Fortis Microfinance Bank?
2. What challenges hinder depositor comprehension of interest rate policies?
3. How can communication strategies be improved to stimulate deposit mobilization?
Research Hypotheses
1. H₀: Effective interest rate policy communication does not significantly influence deposit mobilization at Fortis Microfinance Bank.
2. H₀: Variations in depositor financial literacy do not significantly affect the impact of interest rate communication.
3. H₀: Improved communication strategies do not significantly enhance deposit mobilization.
Scope and Limitations of the Study
This study focuses on Fortis Microfinance Bank’s interest rate communication practices, using customer surveys, branch feedback, and communication logs. Limitations include varying levels of financial literacy among depositors and challenges in isolating the effects of communication from other factors influencing depositor behavior.
Definitions of Terms
• Interest Rate Policy Communication: The process of conveying information about interest rate decisions and changes to customers.
• Deposit Mobilization: The process of attracting and increasing customer deposits.
• Financial Literacy: The ability to understand and use financial information effectively
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