Department of Accounting and Finance

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Assessment of the Determinants of Non-performing Loans the Case of Commercial Banks in Ethiopia
(Addis Ababa University, 2017-05) Atomsa Yonas; Abate Sewale
The paper investigated the determinants of non-performing loans (NPLs) in commercial banks in Ethiopia in the period of 2007–2016. This study sought to explain the significance of interest rate, growth in GDP, inflation rate, exchange rate, real interest rate, ROA, ROE and loan growth rate on nonperforming loans in commercial banks in Ethiopia.. Explanatory research is conducted in order to identify the extent and nature of cause-effect relationships between dependent and independent variables. The study used secondary data collected from eight purposively selected commercial banks in Ethiopia. Econometric regression analysis was used in establishing the significance of the relationship. The paper found that the level of NPLs can be attributed to both macroeconomic conditions and banks’ specific factors, though the former set of factors was found to have a relatively low explanatory power. From the macro determinants, Real interest rate has positive relationship with NPL which are statistically significant at 1% level of confidence. ROA and ROE from bank specific factors have negative and significant relationship with the NPLs in commercial banks in Ethiopia. The outcome of this project firstly would enable commercial banks adopt workable strategies, benefit to the Ethiopian banking and non-banking financial sectors as a whole, and serve as a source of reference for other related research works in the future. Government Expenditure, Import & export of the country, foreign currencies availability, political stability, and competition in banking industry are recommended for further studies. Key words: Nonperforming loan, Return on asset, Ethiopian commercial Banks, Real GDP, crossectional data, Inflation.
Challenges and Prospects of E-payment Service: In the Case of Selected Ethiopian Commercial Banks.
(A.A.U, 2020-12) Mulatu Wakgari Geda; Abate Sewale
In Ethiopia cash is still the most dominant medium of exchange and electronic payment systems are at an embryonic stage. This study is aimed to assess the challenges and prospects of E-payment in Ethiopian commercial banks. The study was conducted based on the data gathered from five banks in Ethiopia; four private banks (Dashen bank, Zemen bank, Nib International bank and Awash bank) and one state owned bank (commercial bank of Ethiopia). Qualitative and quantitative research approach were used to answer the research questions that emerge through the review of existing literature and the experiences of the researcher in respect of the E-payment system in Ethiopia. The study statistically analyses data obtained from the survey questionnaire and interview. The study used descriptive statistics and Data was analyzed using a statistical package for social sciences (SPSS). The study identified basic benefits of E-payment for the customers and banks, which helps to enhance other banks to engage in such activity. It also indicated that the major challenges Ethiopian banking industry faces in the practice E-payment system are, Organizational related problems (lack of awareness creation and public confidence, lack of system readiness, lack of trust and lack of responsiveness), infrastructure related (lack of network penetration, power disruption and lack of alternative power and network) and socio-cultural challenges include (fear of risk, society perception to emerging technology). Prospects of E-payment system in Ethiopia; Digital Economic policy is the most important opportunity in Ethiopian e-payment system, liberalization of telecom sector, competitive e-payment channel, emerging need and innovation. The study suggests recommendation: the banks should run campaigns, promotions and adverts, which aim at educating their customers on the need to adopt electronic payment services deeply into technical areas to develop confidence and public awareness. Banks also should make their e-payment instruments ready, motivating e-payment support staffs to immediate e-payment users’ support and make clear the limit of daily e-payment transaction limit. To overcome network and power challenges, the banks should create better strategic partnership with telecom sector and electric power providers, installing 4G network and generators for e-payment users where e-payment instruments locate. To use the prospects (opportunities), the banks should being prepared for digital economy policy of Ethiopia, emerging need, restructuring of network infrastructure provider (ethiotelecom) and competitive e-payment channels. By drafting bank based (modified) digital policy, identifying and hiring emerging (prospect) e-payment customers, developing criteria to select network provider and e-payment channel provider based on latest e-payment owners and users’ criteria
Challenges and Prospects of International Financial Reporting Standards (IFRS) Implementation in Ethiopia
(Addis Ababa University, 2017-01) Teshome Firdawok; Abate Sewale
One of the foremost requirements to operate a Business successfully is to have a good financial reporting system in place. This study examines implementation of International Financial Reporting Standards (IFRS) In Ethiopia in accordance with financial reporting proclamation # 847/2014. The study investigates the challenges faced in implementing, International Financial Reporting Standards (IFRS) by Ethiopian firms The paper provides insight into the IFRS adoption process based on a questionnaire sent to Authorised Accounting and Auditing professionals in Ethiopia. 95 responses received out of 116 and it indicate: (1) a majority of respondents have indicated IFRS Enforcement capacity will be a key challenge for transition; (2) the process is costly, complex, and burdensome; (3) Institutional readiness require more attention for transition to IFRS; (4) the more comprehensive the approach to conversion, the more respondents tend to agree with the factors influencing the transition; (5) the complexity of IFRS as well as the lack of Implementation guidance and uniform interpretation are also key challenges in technical capacity area; the results of the questionnaire and interviews confirmed that, the transition to IFRS in Ethiopia will be challenging. The study also discusses the prospect of IFRS implementation in Ethiopia and the result showed that the transition plan to IFRS and its implications for preparers, users, educators and other stakeholder has to be effectively coordinated and communicated. In the conclusion part, the study brings out the ways through which these challenges can be addressed. Keywords: IFRS; Proclamation; Challenge; Enforcement Capacity, Institutional readiness; Technical Capacity
Determinants of lending Decision of Private Commercial Banks Ethiopia
(A.A.U, 2021-06) Zeleke Abay; Abate Sewale
The main objective of this study was to examine the determinants of lending decisions of private commercial banks in Ethiopia from year 2011 to 2020.The study used panel data of eight private commercial banks of Ethiopia selected purposively. The study applied explanatory research design and secondary data were analyzed through multiple linear regression models of the bank’s lending decision; Loan and advance (LOA). Random effect regression model were applied to analyze the effect of asset quality, capital adequacy, liquidity, lending interest rate, money supply, return on equity and volume of deposit on lending decision of private commercial banks. The finding of the study indicates that volume of deposit, Liquidity, Capital adequacy, Money supply and asset quality have significant effect on lending decisions of private commercial banks in Ethiopia, Whereas, return on equity and Interest rate have insignificant effect on lending decisions of private commercial banks in Ethiopia.
Determinants of Commercial Banks Profitability: An Empirical Study on Private Commercial Banks in Ethiopia
(Addis Ababa University, 2017-02) Belete Dawit; Abate Sewale
Both internal and external determinants of Bank profitability affect the profitability of Private Commercial Banks in Ethiopia. This study identifies bank specific, industry specific and macroeconomic factors that determine the profitability of Ethiopian private commercial banks. Six private commercial banks have been the subject for the study ranging from 2004/2005 to 2014/2015. The bank's Audited financial statement, National Bank of Ethiopia and Ministry of finance and Economic Cooperation has been the main source for the study and the panel analysis has been carried out to obtain the result for this empirical study. The study used ROA as a Dependent variable and capital adequacy, operational efficiency, liquidity, income diversification, concentration, GDP, inflation and money supply as independent variables. The empirical results showed that capital, operational efficiency, income diversification, concentration and money supply have significant relationship with profitability of Ethiopian private commercial banks. However the result shows insignificant relationship between profitability of Ethiopian private commercial banks with liquidity, GDP and inflation. Keywords: Profitability, Private Commercial Banks
Determinants of Deposit in Ethiopian Private Commercial Banks
(Addis Ababa University, 2017-01) Hailemariam Dereje; Abate Sewale
Understanding the nature of national savings behavior is critical in designing policies to promote savings and investment which in turn enhance economic growth through capital formation. This paper empirically examines the determinants of savings in private commercial banks of Ethiopia for the 2001-2015 periods. From total of sixteen private Banks which are engaged in commercial activities, six selected based on the historical time formation of banks. The conceptual framework for this study is originally derived from Life-Cycle model and appropriately modified to accommodate the peculiarities of a developing country and builds on the existing cross-country literature on determinant of saving mobilization. The researcher adopted Quantitative research approach. Bank specific and macroeconomic variables were analyzed by using the balanced panel fixed effect regression model. Different diagnostic tests (test for assumption of Homoscedasticity, Autocorrelation, Normality, average value of the error is zero and independent variables are non-stochastic) were conducted to check the appropriateness of the model. The results reveal that disposable income, real GDP growth, branch expansion, are positively and statistically significant on bank deposit growth; whereas, loan to deposit ratio (bank’s liquidity)influence is negatively and statistically significant on bank deposit growth. Deposit rate and profitability had insignificant positive influence on bank deposit growth. Whereas population growth and capital to loan ratio (capital adequacy) had insignificant negative influence on bank deposit growth. The study implies that stimulation of economic growth is most important factors that affect bank deposit growth. The research recommends that private commercial banks should have to intensify branch expansion to areas where there are potential deposit sources even to remote locations .moreover, private commercial banks required to have enough liquid assets to meet the demand for cash outflows so as to generate and sustain public confidence of the depositors. Keywords: Private commercial Banks, Bank deposit, Regression Analysis
Determinants of Dividend Pay-out Ratio: Empirical Study on Private Commercial Banks in Ethiopia
(A.A.U, 2021-03) Tessema Girma; Abate Sewale
This research aims to examine the determinant factors of dividend pay-out policy of the stated private commercial banks in Ethiopia. In this study, seven variables such as lending rate, liquidity, growth, asset size, efficiency, profitability and inflation are taken as potential determinants of dividend pay-out policy. Ordinary least square (OLS) multiple regression model was used on a sample of nine private commercial banks for the period of ten years from 2010 to 2019. Quantitative research approach and descriptive research design is employed. While testing the impact of seven independent variables on the dividend pay-out ratio, we concluded that only three can explain the dividend policy. The results show that dividend pay-out ratio is positively and significantly affected by lending rate, but are negatively affected by liquidity and growth. Asset size, efficiency, profitability and inflation do not have a direct influence on the dividend payments. Thus, Lending rate, liquidity and growth are functioning as the key determinants of dividend pay-out of the listed private commercial banks in Ethiopia. As per the findings in this research existing and potential investors as well as the banks management, board members and policy makes should pay their attention on variables(lending rate, liquidity and growth)since they significantly determine dividend pay-out rate of private commercial banks in Ethiopia.
Determinants of Financial Risks of Private Commercial Banks In Ethiopia
(Addis Ababa University, 2017-02) Tona Emawayih; Abate Sewale
While financial risk is one of the major risks of banks that can affect the development of financial system, identifying the determinants of this risk is crucial for the soundness of financial sector. The main objective of this study is to find out determinants of financial risk in Ethiopian private commercial banks covering a period of fifteen years (2001-2015) on six sample private commercial banks using quantitative research approach. This study directly examined indicators of financial risk in terms of credit risk and liquidity risk in an objective manner from a wide range of variables. Bank specific and macroeconomic variables were tested for the two dependent variables credit and liquidity risk models by using the balanced panel fixed effect regression model. The findings of the study for credit risk model revealed that Loan to deposit ratio (Liquidity), income diversification, non performing loan, real GDP growth rate and inflation have significant positive impact on credit risk whereas return on asset found significant negative impact on credit risk of Ethiopian private banks. The rest three bank specific variables Loan growth, bank size and operating inefficiency had no significant effect on credit risk of Ethiopian private banks during the test period 2001 to 2015.The regression result of the second financial risk indicator liquidity risk revealed that capital adequacy ratio and Real GDP growth rate have significant positive impact on liquidity risk whereas Banks age and Average Nominal lending interest rate have significant negative impact on liquidity risk. Finally the result indicates that return on asset, Tangibility and impaired loan have negative but insignificant relationship with liquidity risk. Key words: Financial risk, credit risk, Liquidity risk, Ethiopian Private Commercial Banks
Determinants of Foreign Direct Investment Flows in Ethiopia
(Addis Ababa University, 2017-01) Shebu Dereje; Abate Sewale
This paper attempts to examine the determinants of Foreign Direct Investment flow in Ethiopia.The study applies multivariate ordinary least square regression by using time series data covering over the period 1974 to 2015. In order to point out the main factors that can highly affect the inflow of FDI in Ethiopia and to know how much these factors affect FDI leading to an oscillating trend, the study took the determinant of FDI in Ethiopia such as infrastructure development, the domestic market size and growth potential, macroeconomic stability, human capital development, openness, and external debt and evaluate as to how they affect the inflow of FDI. In the analysis there are findings. Firstly, I found that the explanatory variable such as macroeconomic stability measured by inflation rate, and openness have significant and negatively related to FDI. Second, exchange rate and school enrollment rate proxy of macroeconomic stability and human capital development respectively are found positively related and statistically significant to the inflow of FDI. Thread, gross fixed capital formation and real GDP growth rate proxy of infrastructures and market size respectively have statistically significant and positively related to FDI. Last, foreign debt has negative and insignificant effect on FDI. These findings imply that inflation and trade openness should be controlled and improved by giving special attention. Key words: FDI, FDI determinants, time series, ordinary least square regression
Determinants of Lending Decision and their Impact on Financial Performance: Empirical Study on Private Commercial Banks In Ethiopia
(Addis Ababa University, 2016-05) Abebie Berhanu; Abate Sewale
he objective of the study is to investigate the determinants of lending decision of private commercial banks in Ethiopia and the impact of those factors that significantly affects the lending decision on the financial performance of the banks. Panel data was collected from audited annual financial report of each bank, publications of National Bank of Ethiopia (NBE) and Ministry of Finance and Economic Development (MoFED) and used to analyse the bank-specific determinants as well as the macroeconomic determinants. The collected panel data was analyzed using descriptive statistics, and multiple linear regression analysis. Random effect panel regression was used for the data of six private commercial banks in Ethiopia for the sample covered the period from 2001 to 2015. Eight variables that affect banks’ lending decision were selected and analyzed with E-view 9 econometrics software. The results of panel data regression analysis showed that Liquidity ratio(LIQ), Capital adequacy ratio (CAR), Inflation rate (INF) and gross domestic product (GDP) had positive and statistically significant effect on banks’ lending .Nonperforming loans (NPLs) Cash reserve requirement (CRR) and lending interest rate (INT) had negative and statistically significant effect on banks’ lending. Volume of deposit (VoD) had positive but insignificant effect on banks’ lending. Among factors that statistically significantly affecting banks’ lending; liquidity (LIQ), Lending interest rate (INT) and GDP had positive and significant impact on financial performance whereas, non-performing loans and Cash reserve requirement had negative impact on financial performance. Capital adequacy ratio had positive and inflation rate had negative but, insignificant impact on financial performance. Therefore, banks’ lending had an impact on the financial performance of private commercial banks in Ethiopia. The study suggests that Ethiopian commercial banks should/need to work more to improve their liquidity and capitalization, to reduce their nonperforming loans and consider macroeconomic environment when extend loans. Moreover, banks should exert additional effort to properly manage their loan portfolio in order to enhance their profitability. Key Words: Banks, Bank Lending, Loans and Advances, Financial Performance
The Effect of Financial Risk on the Financial Performance of Ethiopian Commercial Banks
(A.A.U, 2021-03) Abebe Robel; Abate Sewale
This study aimed to identify effects of financial risk on the performance of Ethiopian Commercial banks over the period from 2000 to 2018. The study employed secondary data that bank detailed data were obtained from the audited financial statements of the selected Ethiopian commercial banks head office. In addition, Macroeconomic data were used from MOF. Moreover, balanced panel data were utilized in the research. Accordingly, by using purposive sampling technique only seven commercial banks out of the total of seventeen commercial banks functioning in Ethiopia were included here. Beside to this, the study used ROA as a dependent variable and liquidity risk, solvency risk, credit risk, interest rate risk, foreign exchange rate risk, GDP and bank size as independent variables. Finally, the empirical result of random effects panel data model regression revealed that liquidity risk, solvency risk, GDP and Bank size take positive effect on ROA and statistically insignificant with the exception of liquidity risk which takes positive impact on ROA as well as statistically significant impact, while credit risk has statistically significant and negative influence on the financial performance (ROA) of the Ethiopian commercial banks providing interest rate risk and foreign exchange rate risk statistically insignificant and negative influence on ROA. As a result, Ethiopian commercial banks should evaluate the borrowers’ historical and projected cash flows and adequate collateral margins in order to improve financial performance, need to come with credit policies and devise strategies that not only limit the banks' exposition to credit risk but also establish a proper credit risk management strategy, should have optimal level of liquidity which enables to meet their contractual commitments and should device rigorous policies and measures with appropriate fiscal and monetary policies must be applied to control risks in an economy.
The Effect of Inflation on Reported Profit for Decision-Making: In the Case of Banks in Ethiopia
(A.A.U, 2021-03) Sheferaw Alemtsehey; Abate Sewale
This study analyzes the effect of inflation rate on reported profit, investment, and lending rate for decision making in Ethiopian banks between the period of 2015 – 2019. To address the research objectives, 10 banks were selected due to the availability of full data for the selected period. A total of 50 observations were collected from the audited annual financial report of each bank and macroeconomic and social indicators published by the National Bank of Ethiopia (NBE). The study adopts a purposive sampling method to collect data and a survey research method to analyze documents. In light of prior literature, key explanatory variables were identified to disclose the effect of inflation on reported profit. These variables are lending rate, profit, and investment. The variables were analyzed using STATA econometrics software. The assumptions needed to be fulfilled for OLS were tested and the result proves that the data was not found heteroscedastic, free of autocorrelation, and normally distributed. The findings of the study show that the lending rate has a statistically significant and positive relationship with the inflation rate. However, the other variables profit and investment have a positive and statistically insignificant relationship with inflation. The study recommended that the management and policymakers of Ethiopian banks should come up with better strategies of countering the inflation effect to allow sustained profits and attract customers and prevent them from minimizing and terminating borrowing
The Effects of Risk Management on Financial Performance of Ethiopian Insurance Companies
(Addis Ababa University, 2017-02) Woldemichael Zinaye; Abate Sewale
The study focuses on the investigation of the risk management factors that affect the financial performance of the Ethiopian insurance industry. Managing risks is an important factor which insurers must attend to achieve their financial performance. From this perspective, risk management becomes one of the most important practices to be used in insurers in order to get higher returns. Therefore, this study is attempted to ascertain the relationship between risk management and financial performance of insurers in Ethiopia. In order to achieve this objective, the study used explanatory research design, mixed research approach. Panel data covering eleven-years (2005–2015) are analyzed for nine insurers in Ethiopia. Also in-depth interview is conducted with the NBE officers. The results of the fixed effect regression model revealed that technical reserve and liquidity risks have negative & significant impact on ROA (proxy measure for financial performance) of non-life insurers in Ethiopia, whereas company size and reinsurance risk have positive & significant effect on ROA. The study led to the conclusion that technical reserve, size of a company, reinsurance risks and liquidity risk are the pull factors for the financial performance of insurers. On the basis of these findings, the study recommends that there is greater need for Ethiopia insurers to manage the risks particularly technical reserve risk, reinsurance risk and liquidity risk more integrally. The study also recommends Ethiopian insurers to increase their size by enhancing their assets base. Keywords: risk management, financial performance, insurance companies
Enterprise Resource Planning (ERP) System Implementation: Evidence From Ethio- Telecom
(Addis Ababa University, 2016-05) Gazu Hailemeskel; Abate Sewale
This research work finds challenge and constraint of an Enterprise Resource Planning (ERP) system implementation with particular reference to Ethio telecom. An Enterprise Resource Planning system is a corporate wide information system which is used to integrate the business processes and resources of a company. When the business environment of a company increases and becomes complex, it is difficult to continue with the traditional decentralized information systems for timely decision making and other activities. In today‟s competitive business environment, ERP systems are found to be essential for companies to get competitive and strategic advantages. Therefore, the major objective of this study is to assess the implementation challenge of Enterprise resources planning in ethio telecom and to recommend possible solutions for the gap created during the implementation. As result, the researcher has tested the implementation effectiveness by selecting major challenge and other related concepts. This research has a exploratory nature which elaborates the existing phenomenon as it exists. The data was collected using questionnaires from ERP user. The collected data was analyzed using mainly by computer such as SPSS (Statistical Package for the Social Sciences) version 23 Furthermore, the units/strata have been selected since these work units are the major owner of the modules in the system, accordingly the total of 38 employees select randomly among ERP user as a sample by using stratified random sampling technique and questionnaires were distributed accordingly Consequently, results shows that the deploy ERP system is not properly implemented and practiced on the basis of the selected effectiveness variables; it is observed that the ERP system is not effective across the divisions the system is implemented. In addition, problems which hinder the practice of the system were identified. As a result, lack of top management support, the rate of training, documentation and knowledge transfer, compatibility issues with ERP module were found major challenges in ERP implementation in Ethio-telecom. However, the priori criteria “stepwise implementation” was not considered as putting the challenge and constraint in the implementation of ERP in Ethio-telecom. Hence, the researcher has recommended that the company should re-consider its system with regard to the support of top management in assisting successful implementation of ERP in Ethio- telecom. Moreover, user interface of the system should easily be understandable, there should be mechanism so that users c an work on the system without any challenge . Finally, the company should give emphasis for the reporting formats so that any decision maker or external stakeholder can the reporting formats should be easily understandable
Factors Affecting Loan Repayment Performance of Borrowers in the Case of Dashen Bank Addis Ababa District
(2021-01) Tadesse Tabor; Abate Sewale
The loan is a single largest asset in banks’ balance sheet. Thus, it’s essential to learn about the factors that affect this asset. However; some of the loan given out become non-performing or end up in default and adversely affect the financial performance of commercial banks. Dashen bank A.A district currently provides different types of loan to its customers. But its onperforming loan rate is becoming high and high comparing to the previous periods. Although different studies were undertaken to find out the different factors that contributed for non-performing loans most of them concentrated on micro finance which can’t be generalized to the bank context in addition to this new factors like effect of covid 19 and corruption was included in the study. The general objective of the study is to identify and explain how and which client, lender and business characteristics affect loan repayment performance of Dashen bank A.A district borrowers. Identifying factors that affect successful loan repayment will help Dashen Bank to be aware of the current factors influencing loan repayment performance and reformulate appropriate credit program. There are many researches regarding repayment of loans, in Ethiopia as well as internationally. The researcher’s states different empirical and theoretical literature reviews from different perspective and titles. And Based on the objective of the study conceptual model has been developed. The research adopted descriptive research designing and it applied a qualitative and quantitative research methodology. The quantitative data method will be employed to collect the primary data from the sample respondents in relation to the socio-economic characteristics of borrowers, business factors and loan related factors. The hosmer and lemeshow test result shows that 0.821 which means that the model is fit in addition Nagelkerke R Square suggests that the model explains roughly 88.5% of the variation in the outcome or all the 19 variables together or jointly explain 88.5% of loan repayment performance of a borrower by the model. There are around 11 significant factors which can distinguishes credit worthy borrowers and not creditworthy borrowers, so scrutinize borrowers based on those factors and give the loan to the one which have high rate comparing to the other borrowers. Keywords: borrowers, loan repayment, logistic mode
Factors that Identify the Effectiveness of Internal Audit in Oromia Special Zone Surrounding Finfinne Administration Finance and Economic Development Offices, Ethiopia
(Addis Ababa University, 2016-01) Aliyi Hawa; Abate Sewale
The establishment of IA function is important as an essential internal assurance mechanism in public financial controls and as a tool for monitoring and evaluating financial management activities in private, government agencies and other sectors. The general objective of the study is to investigate factors that affect the effectiveness of internal audit in Oromia Special Zone Surrounding Finfinne Administration Finance and Economic Development office, Ethiopia. A cross-sectional design is employed for a data collection and analysis purpose. The sample was selected by purposive sampling selection techniques. Findings indicate that the four factors such as: independence, management support,competence and organization setting do have an impact on the effectives ofinternal audit. Thus the following recommendation was made: the Finance and Economic Development Offices found in the study areas, other concerned government body and stake holders should work to make effective independence/objective, the management support, the competence, and the organizational setting of internal audit to help them to perform their professional obligations and duties Keywords: Internal Audit, competence, organizational setting, independence, management Support, internal audit effectiveness
Impact of Asset Liability Management on Profitability: A Case of Selected Private Commercial Banks in Ethiopia
(A.A.U, 2021-06) Abi Abel; Abate Sewale
The main aim of the study was to examine the impact of asset and liability management on profitability of selected private commercial banks in Ethiopia for the study period 2010 to 2019. The researcher used explanatory research design to examine the impact of asset–liability management on profitability of selected private commercial banks in Ethiopia. Eleven private commercial banks were selected based on purposive sampling technique, quantitative data collected from each selected private commercial banks, and from National bank of Ethiopia. Profitability was used as dependent variable, whereas. Income diversification, liquidity, bank size, funding cost, asset quality, capital adequacy and operational efficiency .The collected data analyzed using descriptive statistic, correlation analysis and multiple regression analysis with the help of Eviews statistical software. The finding of the study shows that income diversification, liquidity, bank size and funding cost statistically significant and positive effect on banks profitability. On the other hand, variables like asset quality, capital adequacy and operational efficiency has a negative and statistically significant effect on banks profitability. The study revealed that asset quality ratio, operational efficiency, income diversification, liquidity, bank size, capital adequacy and funding cost are the key driver of return on asset of banks, Therefore, Bank managers are advised to give due attention to the significant variables to Improve profitability.
The Impact of Information and Communication Technology on Performance of Commercial Banks in Ethiopia
(Addis Ababa University, 2016-06) Abebe Girma; Abate Sewale
Information and communication technology has become the heInformation and communication technology has become the heart of banking industry, while the banking industry is the heart of the economy. This research has considered a critical literature review of previous researchers with the objective to examine the impact of Information and Communication Technology on banks performance. Business organizations, especially the banking industry is operating in a complex and competitive environment characterized by the changing conditions and highly unpredictable economic climate with Information and Communication Technology (ICT) is at the center of the change curve. This study assessed the impact of ICT on the performance of Ethiopian banking industry using secondary data over the period 2010 – 2014 published annual reports by the banks. Data analysis is carried out in panel environment. The study employed purposive sampling technique to select the required sample of banks from commercial banks in Ethiopia. The results were affirmed by cointegration regression analysis. Six banks, out of the 18 commercial banks as of June 2014, were selected for the study. The dependent variable used in this study in order to measure the sample commercial banks performance is ROA whereas the explanatory variables are ICT investment, ATM, POS, INF, BRAN and GDP. The study empirically analyzed the impact of information and communication technology in commercial banks performance in Ethiopia by constructing an econometric model to study the effect of various factors such as ICT investment, ATM, POS, INF, BRAN and GDP. Accordingly, the impacts of ICT on return on asset in commercial banks in Ethiopia were analyzed using the OLS technique. The regression result showed that the ICT, ATM and POS have no statistically significant effect on return on asset on commercial banks in Ethiopia. Based on the research findings and conclusions the researcher recommended for commercial banks in Ethiopia to improve return on asset, the banks should improve more on its information and communication technology so as to enhance their performance, enlightenment has to be given to the general public through the various media on how to use some of the information technology, ATM and POS. Finally, banks should put more effort in advertising these products in Ethiopia. Key words: Bank’s Performance, Banking Industry, ICT and Return on Asset.art of banking industry, while the banking industry is the heart of the economy. This research has considered a critical literature review of previous researchers with the objective to examine the impact of Information and Communication Technology on banks performance. Business organizations, especially the banking industry is operating in a complex and competitive environment characterized by the changing conditions and highly unpredictable economic climate with Information and Communication Technology (ICT) is at the center of the change curve. This study assessed the impact of ICT on the performance of Ethiopian banking industry using secondary data over the period 2010 – 2014 published annual reports by the banks. Data analysis is carried out in panel environment. The study employed purposive sampling technique to select the required sample of banks from commercial banks in Ethiopia. The results were affirmed by cointegration regression analysis. Six banks, out of the 18 commercial banks as of June 2014, were selected for the study. The dependent variable used in this study in order to measure the sample commercial banks performance is ROA whereas the explanatory variables are ICT investment, ATM, POS, INF, BRAN and GDP. The study empirically analyzed the impact of information and communication technology in commercial banks performance in Ethiopia by constructing an econometric model to study the effect of various factors such as ICT investment, ATM, POS, INF, BRAN and GDP. Accordingly, the impacts of ICT on return on asset in commercial banks in Ethiopia were analyzed using the OLS technique. The regression result showed that the ICT, ATM and POS have no statistically significant effect on return on asset on commercial banks in Ethiopia. Based on the research findings and conclusions the researcher recommended for commercial banks in Ethiopia to improve return on asset, the banks should improve more on its information and communication technology so as to enhance their performance, enlightenment has to be given to the general public through the various media on how to use some of the information technology, ATM and POS. Finally, banks should put more effort in advertising these products in Ethiopia. Key words: Bank’s Performance, Banking Industry, ICT and Return on Asset
The Influence of E-Banking Service Quality on Customer Satisfaction in Ethiopian Banking Industry in Case of Nib International Bank S.C Addis Ababa
(A.A.U, 2021-04) Tadege Worku; Abate Sewale
he main purpose of the study is to examine the influence of e-banking service quality on customer satisfaction. The study conducted in Nib International bank Addis Ababa city selected branch. The sampling technique that the researcher was used convenience sampling due to time scarcity. The method of data collection was questionnaire and source of data was primary data. Regression, correlation and descriptive analysis was used to analyses the influence of e- banking service quality on customer satisfaction by using SPSS. The researcher used four independent variables such as reliability, convenience, responsiveness and speed. From the four variables convenience is the most significant effect on customer satisfaction followed by speed and responsiveness even though speed is negatively affected customer satisfaction. Reliability is the least significant effect on customer satisfaction. The higher service quality leads the greater customer satisfaction. The researcher recommends NIB to conduct ongoing research on service quality and customer satisfaction in order to understand customer level of satisfaction on what to be done and what strategies to be implemented and launch new product and service since customer now the service provided by NIB and other banks.
Institutional Factors Affecting Loan Collection Performance of Development Bank of Ethiopia: The Case of Addis Ababa, Head Office
(A.A.U, 2021-06) Terefe Kidist; Abate Sewale
This study assesses the institutional factors affecting loan collection performance of Development Bank of Ethiopia. The institutional factors are categorized as Staff-related Factors, Policy-related factors and Management Information System-related factors. The study employs Descriptive Research Design and applies quantitative research approach to analyze and interpret the findings. In addition to reviewing the annual report of the bank as a secondary data, 50 questionnaires were completed by respondents who are staff members in different departments. As a result, Development Bank of Ethiopia's loan collection performance has been assessed to have significantly higher loan default rates. Based on the findings of the study, the major institutional factors affecting loan collection Performance of Development Bank of Ethiopia are Poor credit scoring and poor valuation of collaterals, ineffective monitoring and controlling of debtors, policy ineffectiveness in creating improved loan collection, restricting loan concentration and favoring loan diversification, , inefficiency of Management Information System in making ease of administrative tasks, improving the Bank’s loan collection performance, aiding operating efficiency, aiding controlling task of problem loans and lack of supervision schemes. It is recommended that Development Bank of Ethiopia should focus on upgrading its Management Information System so as to improve its loan collection performance. It is also suggested that DBE's Management Information System should include a problem loan management system.

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