Commercial Banks In Ethiopia Research Articles

Assessment of Asset Management Practice in Commercial Bank of Ethiopia in Case Study of Kebri Dehar Branch

Banking in Ethiopia has a hundred years of history that back the Ethiopia economic environment through various mechanisms. One of the mechanisms is through asset management, which is helpful for planning and controlling of the bank to maintain its liquidity. As far as the information and knowledge of the researcher is concerned, no further study was conducted on asset management practice in the Commercial Bank of Ethiopia Kebridehar Branch. Thus, there are literature gaps. Thus the study focused on asset management practice in the Commercial Bank of Ethiopia, Kebridehar Branch. The study was organized into five chapters. The research design is of the descriptive type and the researcher will use a qualitative research approach to assess asset management of CBE Kebridehar branch. The study used primary and secondary data. In terms of primary data, the research was used 12samples distributed for the bank manager, vice-managers and officers. Besides, the secondary data such as annual reports and manuals of the bank and NBE, Journal articles and books were reviewed. The data collected via primary and secondary sources were analyzed critically. In addition to this the internal control system of asset management and saving campaigns should get high priority in order to enhance asset management. In addition to this, the bank should employ by far asset exploitation (use of the asset to meet some corporate objective. The findings of the study revealed that there is no uniform (standardized) asset management policy and procedure in the banking industry which is in commercial banks in Ethiopia, kebri dehar branch. The directives issued by NBE have no significant impact that will affect the performance of commercial banks instead they are important for the normal operations of banks and the industry in general. Keywords: Asset management, cash, inventory DOI: 10.7176/RJFA/13-11-02 Publication date: June 30 th 2022

Determinants of Bank Liquidity: Empirical Evidence on Ethiopian Commercial Banks

Liquidity management is considered as one of the top priorities in banks to ensure their ability to reach funds when needed in order to meet their customers' demands and meet their obligations at time. Therefore, this study aims to identify determinants of liquidity for commercial banks in Ethiopia. In order to achieve this aim, banks’ balance sheets and income statements was analyzed in order to compute study variables. Liquidity, which is the dependent variable of study, expressed by two liquidity ratios as: liquid assets to total deposit (L1), and loans to deposits (L2).Therefore, the purpose of this research was to identify the factors determine Ethiopian commercial banks liquidity. The study has categorized the independent factors into bank specific factors and macro-economic factors. The bank specific factors include management efficiency, deposit, Bank Size, Capital adequacy, Profitability, asset quality, and loan growth. While, the macroeconomic factors include short term interest rate, interest rate spread, interest rate, Gross Domestic Product (GDP), general inflation and unemployment rate. The panel data was used for the sample of nine commercial banks in Ethiopia from 2007 to 2017 year and estimated using Fixed Effect Model (FEM), data was present by using descriptive statistics and the balanced correlation and regression analysis for liquidity ratios was conducted. The findings of the study show that, asset quality, GDP, and loan growth had statistically significant and negative relationship with banks’ liquidity. profit and unemployment rate had statically positive significant impact on liquidity measured by variable L1.whereas interest rate spread and bank size had statically negative significant impact on L1 On the other hand capital adequacy had statistically significant and positive relationship with banks’ liquidity measured by variable L2. While, inflation rate, and management efficiency had no statistically effect on bank liquidity. The study generally stresses the importance of internal management of liquidity risk of banks on a continuous basis, and specifically recommends balancing the bank's deposit taking and lending structure on the one hand and maintaining liquidity on the other. It also recommends to strengthening banks capital structure and control over operating expenses. Moreover, banks in Ethiopia should not only be concerned about internal structures and policies, but they must consider both the government regulation and the macroeconomic environment together in developing strategies to improve the liquidity position of the banks. Key w ords: Liquidity, Commercial banks, assets, loan DOI: 10.7176/RJFA/13-11-03 Publication date: June 30 th 2022

Effect of Credit Risk Management on Business Performance of Banks Operating in Ethiopia

The main aim of this study was to identify the effect of credit risk management on profitability (business performance) of selected commercial banks of Ethiopia based on secondary data sources over the period of 2010-2021 G.C. The study employed a quantitative research approach with an explanatory research design. The result of regression analysis of the random effect model was applied to investigate the effect of explanatory variables on profitability.The finding of this study showed that capital adequacy has a positive and statistically significant effect on the financial performance of commercial banks in Ethiopia. Besides, variables like a loan to deposit ratio and loan provision ratio have a positive and statistically significant effect on the profitability of commercial banks. In opposite direction, non-performing loans, loan to total asset ratio, and cost per loan have a negative and statistically significant effect on ROA respectively.Apart from contributing to the body of existing literature on the effect of credit risk management on the financial performance of the banking sector, the study gives a guideline to both public and private banks in the world in general and Ethiopia in particular. It indicated that the financial performance of commercial banks can be improved by improving the credit risk management system.This study contributes by supporting that credit risk parameters such as loan to deposit ratio, loan provision, non-performing loan, loan to total asset ratio and cost per loan have a statistically significant effect on ROA respectively. Keywords: Credit Risk, Risk Management, Commercial Banks, Sidama ,Furra college DOI: 10.7176/RJFA/13-9-02 Publication date: May 31 st 2022

The Effect of Corporate Social Responsibility (CSR) on Brand Equity (BE) in Commercial Banks between Awash International Bank S.C and Commercial Bank of Ethiopia in Dire Dawa, Ethiopia

The objectives of this study was to examine the effect of CSR on brand Equity in Commercial Banks particularly between Awash Bank and Commercial Bank of Ethiopia in Dire Dawa Multidimensional corporate social responsibility (philanthropic, ethical, legal, and economic) on brand equity (brand awareness, brand association, perceived quality, and brand loyalty)in the banking industry, specifically were investigated the case of Awash Bank branch and Commercial Bank of Ethiopia branch in Dire Dawa Districts. Descriptive and explanatory research design quantitative methods were used and also using non-probability sampling technique. This study was used quantitative data collection tools self-administered structured questionnaires for collecting information. Both primary and secondary data sources were used to satisfy both the general and specific objective of the study. The data collected were analyzed through both descriptive and inferential statistics. Inferential statistics such as such as independent-samples t-test and ordinal logistic (O logit) regression data analysis were used. The survey findings the bank managers should be considered, CSR activities can create a positive impact on a bank’s image, as perceived by its customers. Although three CSR components (Legal, Ethical and Economic domains) are found significant, they vary in terms of their importance by the banks’ customers. However, Philanthropic domain of CSR is not significantly influence on Brand Equity in commercial banks particularly Awash Bank and Commercial Bank of Ethiopia in Dire Dawa thus, need to realize and incorporate these activities into their corporate strategy if they want to obtain and sustain a good level of competitive advantage, it will create a positive influence on society engaging in charitable activities, donating to the society and protecting the environment. Keywords: Brand Equity, CSR, Economic, Ethical, Legal, Philanthropic, and Commercial Banks DOI: 10.7176/RJFA/13-7-04 Publication date: April 30 th 2022

Determinants of Banks Liquidity: In Case of Commercial Banks in Ethiopia

This study examined the bank specific, regulatory and macro-economic factors that affect liquidity of Ethiopian commercial banks. The data covered the period from 2010-2019 GC for the sample of selected seven commercial banks. Quantitative research approach and explanatory design adopted in carrying out this research. Secondary data was collected from the selected seven commercial banks using purposive sampling technique. The fixed effect regression technique used by econometric package EViews10. The variables are from three factors that, Bank size, Capital adequacy ratio, Profitability and Deposit growth are from bank specific factors, Reserve requirement and NBE bill purchase are from regulatory factors and GDP is from macro-economic factors is selected by researcher. The results of balanced fixed effect panel data regression analysis showed that deposit growth, capital adequacy, bank size and NBE bill purchase had positive effect on liquidity at different significance level. On the other hand, profitability, reserve requirement and gross domestic product affect liquidity of commercial banks in Ethiopia negatively. Keywords: Ethiopian commercial banks, factors of liquidity, fixed effect regression, purposive sampling. DOI: 10.7176/RJFA/13-8-06 Publication date: April 30 th 2022

Balance sheet and income statement effect on dividend policy of private commercial banks in Ethiopia

Balance sheet and income statement effect on dividend policy of private commercial banks in Ethiopia

Financial performance of commercial banks in the emerging markets

In the economic growth of a country, the banking sector plays a significant role (Alam, Rabbani, Tausif, & Abey, 2021). The overall objective of the study is to investigate the financial performance of commercial banks in emerging markets. The study tried to see the impact of governance, exchange rate volatility, trade openness, and internet access on the financial performance of commercial banks in Ethiopia during the years from 2014 to 2019. The study employed a random-effects model using balanced panel data. The result indicated that composite governance index, trade openness, and internet access have a positive and statistically significant effect on the financial performance of commercial banks as measured by their return on assets. However, the exchange rate volatility has a negative and statistically significant effect on the financial performance of commercial banks. On the other hand, the result of bank-specific variables considered in the study such as profit margin, asset utilization, net interest margin, overhead efficiency, and numbers of branches have a positive and statistically significant effect on the financial performance of commercial banks. Contrarily, the equity multiplier ratio has a negative and significant effect on the financial performance of commercial banks

Determinants of Deposit Mobilization of Commercial Banks in Ethiopia

The aim of this study is to assess the determinant of deposit mobilization in reference to Commercial banks in Ethiopia. The study adopts explanatory research type. The study was also guide by pure quantitative research approach. The necessary data required for this study was secondary data. The secondary data was the audited financial statement for the period of 2005 to 2017. The data was collected from the National Bank of Ethiopia and ministry of finance and economic development (MOFED). The study used non probability sampling, through purposive method in order to take sample size. Currently, there are 18 Commercial banks with their respective branch operation in Ethiopia. The researcher base on their year of establishment considering that, the bank that operates long life expected to have large number of customer and deposit amount than that of new one. Thus, seven Commercial Banks was taken as sample namely, Commercial bank of Ethiopia, Awash International Bank S.C, Bank of Abyssinia S.C, Wegagen Bank S.C, United Bank S.C, Nib International Bank S.C, and Dashen Bank S.C . Data was analyzed using descriptive statistical techniques like mean, standard deviation, minimum and maximum. The correlation analysis is also used. Fixed effect Econometric model was adopted. The result shows that number of branch (NOBR) had positive and significant effect on deposit mobilization (DM) of Commercial banks in Ethiopia. This result may indicate that increase in number of branch was increase the accessibility of bank service, therefore the more banks accessible the more customers was access and as the same time the more deposits was collected. Saving Deposit Interest Rate (IR) had positive and significant effect on DM of Commercial banks in Ethiopia. Loan to Deposit Ratio (LDR) had positive and significant effect on deposit of Commercial banks in Ethiopia. This result implies that when the amount of loan is high there is high amount of money is circulated in the country. Inflation Rate (INF) had a negative and insignificant effect on DM of Commercial banks in Ethiopia. Gross Domestic Product (GDP) had a negative and insignificant effect on DM of Commercial banks in Ethiopia. This is because of the absence of favorable economic conditions in our country. And also inconsistent increase of GDP in the country during the study period was negatively affect Commercial bank deposit in Ethiopia. Keywords: Deposit Mobilization, Commercial Banks Operating in Ethiopia DOI: 10.7176/RJFA/13-1-02 Publication date: January 31 st 2022

HRM as a strategic business partner: insights from selected private commercial banks in ethiopia

The HRM function is evolving from an administrative function that focuses on legal compliance to a strategic function that requires HR to be a strategic partner in improving business performance. However, there are still organizations that consider HRM merely a cost driver rather than a value-adding function. This study attempts to examine whether HRM is playing its strategic role to enhance competitive advantage in the selected private commercial banks and to assess the contributing factors for HRM to execute its function as a strategic partner. Data was collected by using a selfadministered questionnaire that was designed and distributed to employees of the HR department in the selected private commercial banks. The results of the study confirmed that HR involvement, mindset, competence, and role balance are enablers and contributors for HR to become a strategic partner. Furthermore, the finding indicates that mindset and competence can impact the role of HR as a strategic partner at large. It was further found out that the current status of HRM as a strategic partner is at its moderate level because its enablers do not exist at a higher level. Accordingly, the role of HRM as an administrative expert is still dominantly played as compared with that of a strategic partner, but it is observed that HRM is progressing towards a more strategic function than the administrative function. To realize the full strategic partnership of HRM therefore, HRM work units of private banks are recommended to exert more effort to continue with the current progress in shifting HRM function from routine administrative function towards strategic function by capitalizing on the enablers of HR strategic business partners such as mindset, competence, HR involvement, and role balance.

Impact of Corporate Social Responsibility (CSR) on Performance of Ethiopian Commercial Banks

Impact of Corporate Social Responsibility (CSR) on Performance of Ethiopian Commercial Banks

Banking Services and Customers Bank Selection Criteria (Evidence from Ethiopian Commercial Banks in Addis Ababa)

To design a suitable marketing strategy to keep existing customers and for attracting new ones, commercial banks need to identify the criteria on which customers determine their bank choice decision. Hence, the purpose of this study is to examine the significance of bank selection criteria and how customers rank the factors based on their importance level to prioritize banks and banking services. It also intends to present an analysis of gender differences on the relative importance of choice criteria in respect of selecting a bank and to bring about the opinion of customers on any extra services needed to be offered by banks. Both quantitative and qualitative methodologies are used, Based on responses given by 201 customers in Addis Ababa city from different occupations (students, employees, and businessmen), is employed in the analysis. A non-probability convenience sampling was also used. The finding from this study reveals that there are two most important bank selection criteria for customers are "convenience" and "service provision" for the entire customers while it is "bank's image" is the second most important factor for male customers. On the other hand, the least two important factors of bank selection for customers are "financial benefits/ technology", "reputation" and "promotion strategy" and "attractiveness” for female customers. Finally, it is recommended that hierarchical information integration is a potentially useful method for bank managers to study complex decision-making problems such as bank choice. Keywords: Bank selection criteria, Customers, Banks, and Banking service. DOI: 10.7176/JMCR/83-03 Publication date: December 31 st 2021

Determinants of the Profitability of Commercial Banks in Ethiopia

Determinants of the Profitability of Commercial Banks in Ethiopia

The Effect of Financial Innovations on Financial Performance of Banks: The Case of Commercial Banks in Ethiopia

The Effect of Financial Innovations on Financial Performance of Banks: The Case of Commercial Banks in Ethiopia

Examining employees creativity in commercial bank of Ethiopia Woldia branches

Creativity is the ability to combine unique ideas, identifying new ways, systems and products in the organization. Creative workers in the organization can transform their organization to higher level by inventing new systems. This study tried to examine employees’ creativity in the bank at commercial bank of Ethiopia Woldia branches. The researcher used an institutional-based cross-sectional design and followed a mixed research approach. The researcher applied a census method to participate in respondents from four branches, which were on duty 182 employees in commercial bank of Ethiopia. The collected data were analyzed by using multiple regression method after proving the quality of the data. The study finding revealed that autonomy, supervisors’ support and role ambiguity significantly affects the creativity of employees in the workplace. The remaining variables self-efficacy and job complexity have no statistically significant effect on employees’ creativity in the bank.

Financial Performance Analysis of Selected Private Commercial Banks in Ethiopia: Using a CAMEL Rating Approach

This study analyzes the performance and financial credibility of Private Commercial banks in Ethiopia for the period of 2013-2019. This period is taken to consider the political instability and social unrest in the country. As one of the most popular methods for measuring banking performance, CAMELS method is used to analyze the performance of the banks. The good performance of the financial institutions must for the sustainable growth of economy Therefore, this research paper makes analysis of performance of selected private banks in Ethiopia under political instability. The finding indicates that performance of banks in 2016 were decreased than any other year in terms of profit, profit per employee, loan and net income. Cost to income ratio increased. The result implies employee productivity of banks were decreased in 2016, where there were high social and political unrest in the country. Therefore, banks should not concentrate in a single region and has diversify their operations across regions. Keywords: financial performance, CAMEL approach, Political instability, private banks DOI: 10.7176/RJFA/12-19-04 Publication date: October 31 st 2021

The Determinants of Deposit Growth in Case of Commercial Banks in Ethiopia

Deposits are the foundation upon which Banks prosper and grow. And deposit is engine to financial institution operations due to the fact maximum companies in rising markets depend closely on financial institution loans as a supply of financing. So, this study investigates bank-specific variables and macro-economic determinant of commercial banks deposit growth in Ethiopia. Macro-economic factors consider under this study were age dependency ratio, unemployment rate, population growth, broad money supply and Inflation. While bank specific variables included were branch expansion and bank size. Eight commercial banks have been the subject for the study by incorporating a 10 years’ data ranging from the period 2010 to 2019. A quantitative research approach and explanatory design were adopted in carrying out this research. The study had employed fixed effect panel data estimation techniques to analyse the influence of bank specific and macroeconomic factors on deposit growth using Eviews 10. The results of regression analysis showed that branch expansion, bank size, broad money supply and inflation have a positive and significant effect on deposit growth of commercial banks. On the other hand, Age dependency ratio and population growth have negative and statistically significant effect on deposit growth. Finally, the study recommends there should be stable inflation, a healthy money supply and population growth and branch expansion. Keywords: Deposit, Commercial banks and Fixed effect. DOI: 10.7176/RJFA/12-19-03 Publication date: October 31 st 2021

The Impact of Establishing Capital Market on Ethiopian Commercial Banks

The paper analysed the implication of establishing the capital market on commercial banks operating in Ethiopia. The study aimed to identify its potential opportunities and main challenges to banks, to see how the capital market is operating in other African countries and to show the necessary preconditions to commercial banks to prepare themselves. The research method employed in the study had both qualitative and quantitative features, and the research was conducted using a mixed research method. Primary data was collected from focus group discussions with experts that have experience in the area, and, furthermore, secondary data were collected from literature and websites. The findings of the study identified the major risk of the capital market to the economy like economic risk to investments, inflationary/deflation risk, market value risk, being too conservative and political crisis by relating with the current situation of country regulation power. The study also investigated the major opportunities of the capital market to meet the financial need for the economy and how it can work with commercial banks. Besides, the study investigated its challenges to commercial banks working with security exchange companies. Many literature analyses confirmed the reputation of capital markets comparative to banks, which cannot explain across-countries deviation in economic growth. And it is better to establish a well-functioning legal framework, which plays a vital role in creating a healthy financial system. The study recommended that commercial banks should modify their business models and create products related to the investment bank and product differentiation that captures the mode of the capital market. And it is better for the commercial banks to empower their human resource, and they shall aggressively work on technology adaptation, work highly on awareness creation for all internal and external customers. Banks’ capital increment should be made before the security market is established to minimise any risk that may come with it.

Determinants of automated teller machine deployment in commercial banks of Ethiopia

The increasing development of transaction technology investment in the financial sector of the national economy especially Automated Teller Machine (ATM) in Ethiopia banking industry is below customers demand. The availability and deployment of ATM in Ethiopia is low-level compared to the fast growing urban population. Thence, the prime objective of this paper is to evaluate the determinants of ATM deployment in commercial banks of Ethiopia. In order to achieve the objective, panel data was gathered from thirteen Ethiopian commercial banks for the sampled time period beginning from 2012 to 2016. This study used descriptive statistics and panel data econometric regression analysis to analyze the data collected. The random effect model was employed as a reasonable fit model for this study and interpretations of estimates were made based on this model. The result of the descriptive analysis indicated that the trend of ATM deployment in commercial banks of Ethiopia was rising over the sample time period. The results investigated from random effect model indicated that that bank size, bank profitability and deposit ratio were statistically significant and had positive impact on ATM deployment. Meanwhile, cost efficiency and number of branches had statistical insignificant relationship with ATM deployment in Ethiopian commercial banks. Based on these findings, it is recommended that the commercial banks of Ethiopia or any concerned body need to envisage the bank size, bank profitability and deposit ratio in introducing and expansion of ATM and any other electronic form of payments.

Service Delivery Toward Customer’s Satisfaction: Commercial Bank of Michille Branch, Dilla Town, Southern Ethiopia

The Study was conducted in Commercial bank of Ethiopia, Michille branch, Dilla Town.The major aim of the study was to assess the nature of service delivery towards customer’s satisfaction in the selected bank because Customer satisfaction is essential for the success of service firms like Commercial bank of Ethiopia. The service delivery has become an aspect of customer satisfaction. Day by day it has been proven that service delivery quality is related to customer’s real satisfaction. This study endeavors to discover the impact of service delivery towards customer satisfaction in Commercial Bank of Ethiopia, Michille Branch, Dilla Town. Five dimensions such as in service quality tangibility, reliability, responsiveness, empathy, and assurance were considered as the base for this study. Structured questionnaire and interview has been used to collect the data survey. The sample size was 100 and the data has been analyzed by using Excel program to include pie-charts, tables, graphs, percentages. The study has a significance in terms of service quality dimensions which is crucial for customer satisfaction in public/Governmental commercial banking sector in Ethiopia in general and in Michille bank in particular. The finding of the study shows that about 85 percent respondents are satisfied with Michille Bank service delivery, so that the respondents confirm that they will wait and see for changes of the study bank (Michille Bank) rather than they move to other banks. Keywords: Commercial bank of michille; service delivery; customers’ satisfaction; Southern Ethiopia. DOI: 10.7176/RJFA/12-15-04 Publication date: August 31 st 2021

Determinants of commercial bank loan and advance disbursement: the case of private Ethiopian commercial banks

PurposeThis paper aimed to investigate the determinants of loans and advances from commercial banks in the case of Ethiopian private commercial banks.Design/methodology/approachThe study randomly selected seven commercial banks to represent the population stratified on their asset, deposit and paid-up capital amounts. The study utilized an unbalanced panel data model as each bank started operation at a different period of time and considered the period 1995–2016 for secondary details.FindingsThe findings showed that the deposit size, credit risk, portfolio investment, average lending rate, real gross domestic product (GDP) and inflation rate had significant and optimistic effects on the lending and advancement of private commercial banks. On the contrary, liquidity ratio had significant and negative effects on private commercial bank loans and advances. Finally, the study forwarded a feasible recommendation for concerned organs to focus on deposit size, credit risk, portfolio investment, average lending rate, real GDP, inflation rate and liquidity ratio. The results of this study will help banking industry policymakers and planners understand how to minimize inflation and unemployment by improving development and sustainable economic growth.Originality/valueThe findings of this study can also affect the general attitudes of a society by increasing knowledge and improve the quality of life for the general public.