Management of customer deposits and the performance of financial institutions

Abstract

The study examined the effect of management of customer deposits on the performance of financial institutions. It specifically looks at the effect of deposit insurance on the performance of financial institutions. The study objectives include; the effect of remote deposit capture on the performance of financial institutions and the relationship between interest rates on the customer’s deposits and the performance of financial institutions. The study was conducted in Centenary bank. The study sample involved staff and customers and data was collected from questionnaires and interviews. SPSS version 16 was used to come up with descriptive statistics and bi-variate analysis was done to obtain correlation in establishing relationship between variables. The study findings revealed that management of customer deposits has a positive and significant connection with the performance of financial institutions in such a way that if these deposits are not properly managed this may lead to the collapse of the financial institution since the more cash a bank holds, the more active it can be as a lender, and the more interest revenue it can therefore bring in to boost its balance sheet. The findings also revealed that deposit insurance has a great impact on the performance of financial institutions since deposit insurance secure a greater percentage of the customers’ deposits thus increasing the trust they have in their banks. The study concluded that the management of customer deposits has a positive and significant connection with the performance of financial institutions. Therefore it is the proper management of customer deposits that distinguishes a successful bank/ financial institution from the rest. The following recommendations were made; further studies about the topic, education of the customers about the different deposit insurance schemes and interest rates since most of them (the customers) didn’t know that the deposit insurance schemes existed nor did they know about the interest rates.