Law

Permanent URI for this collection

http://etd.aau.edu.et/handle/123456789/102

Browse

Browsing Law by Author "Abdissa Dashura"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    Conversion of MFISTO Banks in Ethiopia:-Exploring the Entry Challenges and Solutions
    (Addis Ababa University, 2023-12) Abdissa Dashura; Fekedu Petros(Assistant Professor)
    The main objective of converting microfinance institutions into fully-fledged banking industries is to meet the legal requirements of banking regulations and conduct banking activity. To meet the requirements, the author identifies the challenges and risks/problems associated with the conversion of microfinance entities into banks, as well as risk mitigation techniques, especially in entry regulations. The research was conducted using data from in-depth interviews with participants from the two converted entities (Siinqee Bank and Tseday Bank) and the regulatory authority engaged in the process. Legal provisions, additional literature, and primary and secondary data sources were all qualitatively analyzed to achieve better findings. The state's policy of emancipating microfinance institutions into fully fledged banking operations has already resulted in the conversion of certain regionally owned microfinance institutions into banks, despite challenges and risks. However, there is currently a lack of administrative cooperation and a competent manager who can help with the conversion, a lack of clear microfinance and banking business lines inclusive of rules for conversion, dissatisfied infrastructure and premises for accessing and functioning the branch, inconvenient minimum capital requirements for private/small microfinance institutions, and Regional Governments share overridingvia a lack of transparency in allocating residual shares. For converted entities, losses of profit tax and court fee exemptions and their employees’inexperience with digital bankingservices are arising as problems/risks. Also, former microfinance institution customers are susceptible to the problems/risks of information and communication technologies, digital banking services, asymmetry in information about conversion, and distance-related bank outreach. The Regional Government's tax authority is no longer able to collect taxes or other sources of revenue from the converted entity, which harms the authority's income. Finally, the author makes a recommendation to the National Bank of Ethiopia to amend or improve the market entry challenges and problems mentioned.