The effect of interest rate stability on deposit growth 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 growth in the banking sector. Fortis Microfinance Bank has focused on maintaining stable interest rate policies as a means to encourage depositor confidence and stimulate savings mobilization. Stable interest rates reduce uncertainty among customers, allowing them to plan their savings and investments with greater confidence (Adeyemi, 2023). The bank’s approach integrates macroeconomic forecasting with targeted interest rate policies designed to balance profitability with customer incentives. This strategy is rooted in financial theories that suggest stability in interest rates leads to predictable returns on savings, thereby enhancing the attractiveness of deposit products.
Fortis Microfinance Bank communicates its interest rate policies through various channels, ensuring that customers are well informed about the benefits of maintaining savings with the bank. The emphasis on stability is further reinforced through consistent messaging and transparent policy adjustments, which together foster trust and long-term customer relationships. Empirical studies indicate that banks with stable interest rate environments typically experience higher deposit growth, as customers are more likely to view the bank as a safe repository for their funds (Chinwe, 2024). Moreover, the bank’s strategy includes regular customer education initiatives aimed at explaining the economic rationale behind interest rate decisions, thereby demystifying policy changes and reinforcing depositor confidence. However, external factors such as economic volatility and inflationary pressures pose challenges to maintaining interest rate stability, potentially affecting deposit growth. This study aims to evaluate the effect of interest rate stability on deposit growth at Fortis Microfinance Bank, identifying the key factors that influence customer behavior and providing recommendations for policy enhancements to drive sustainable deposit growth (Okoro, 2025).
Statement of the Problem
Despite efforts to maintain stable interest rate policies, Fortis Microfinance Bank faces challenges in achieving consistent deposit growth. External economic pressures, including inflation and market volatility, have sometimes forced the bank to adjust rates in ways that undermine depositor confidence (Babatunde, 2023). In periods of instability, customers may withdraw deposits or shift their funds to alternative investment opportunities, thereby limiting deposit growth. Additionally, inconsistent communication of rate changes can exacerbate uncertainty, leading to erratic customer behavior. There is evidence that when customers perceive interest rate fluctuations as unpredictable, they are less likely to maintain long-term savings with the bank. These challenges highlight a critical gap between the bank’s objective of rate stability and the practical realities of an evolving economic environment. The difficulty in isolating the effects of external economic variables from internal policy decisions further complicates the situation. This study seeks to investigate the extent to which interest rate stability influences deposit growth at Fortis Microfinance Bank, identifying both internal and external factors that affect depositor behavior. By examining these dynamics, the study aims to provide actionable recommendations to enhance interest rate stability and, consequently, promote sustained deposit growth, thereby strengthening the bank’s financial base (Emeka, 2024).
Objectives of the Study
To assess the impact of interest rate stability on deposit growth at Fortis Microfinance Bank.
To identify the factors affecting depositor confidence in relation to interest rate policies.
To recommend strategies for maintaining stable interest rates to promote deposit growth.
Research Questions
How does interest rate stability affect deposit growth at Fortis Microfinance Bank?
What factors contribute to depositor confidence in a stable interest rate environment?
How can interest rate policies be optimized to sustain deposit growth?
Research Hypotheses
Interest rate stability is positively correlated with increased deposit growth.
Inconsistent rate policies negatively impact depositor confidence.
Transparent communication of interest rate policies enhances long-term savings mobilization.
Scope and Limitations of the Study
This study focuses on the impact of interest rate stability on deposit growth at Fortis Microfinance Bank over the past three years. Limitations include external economic fluctuations and difficulties in isolating the effects of interest rate policies from other market variables.
Definitions of Terms
• Interest Rate Stability: The consistency of interest rate policies over time.
• Deposit Growth: The increase in the bank’s customer deposit base.
• Depositor Confidence: The trust that customers have in the stability and predictability of bank returns.
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