The Impact of COVID-19 on the Financial Sector: The Case of Private Commercial Banks in Ethiopia
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Date
2023-12-09
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AAU
Abstract
The outbreak of a new strain of Coronavirus, now known as COVID-19, which has been
classified as a global pandemic by the World Health Organization (WHO), has frightened the
world. One aspect of the economy that is hit hard by the pandemic and its resultant outcome
is the service sector. In Ethiopia, the financial sector faced a challenge by slowing the
market, in particular by stalling its economic growth. This paper aims to examine the impact
of covid-19 on the performance of the private commercial banking sector in Ethiopia
concerning its key performance indicators. Mainly banking performance in return on
investment, assets, and net interest margins. This study used DiD model to analyze the data
obtained in the study. The DID analysis was employed to assess private banking sector
growth in main indicators of performance before (2014-2018) and after Covid (2019-2021).
The results indicate thattheDiD estimation model shows that the pandemic affected ROA and
ROE negatively. However, the impact was not statistically significant during the study
period. The other factor is NIM. In this factor, although it was affected positively the level of
significance is low. Thus, it can be concluded that the pandemic has not affected the
performance of the private commercial banks during the study period in a meaningful way.
But the government is recommended to highly follow up on the banking financial sector to
sustain shocks in the economy. This will lead to a sustainable economic outcome and growth
for the private financial sector