Challenges on Interest Free Banking Services: The Case of Commercial Bank of Ethiopia
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Date
2016-06
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Addis Ababa University
Abstract
The main objective of this study is to empirically examine challenges on Interest free banking
services in Ethiopia with particular reference to the commercial bank of Ethiopia. The study has
employed descriptive research based on survey and the data are of cross sectional type. The
study has used both primary and secondary data which are quantitative and qualitative in
nature and have been collected through structured and semi structured questionnaire and
interview. A total of 485 sample respondents were taken through multistage sampling. Of the
total sample interest free banking customers and staffs of the bank constitutes 383 and 102
respectively. The data was analyzed using descriptive statistics of mean, frequency and
percentage using SPSS version 20 software. Based on the analysis of the obtained data, this
research has found out the challenges to IFB services as: lack of commitment of the bank, lack
of Shariah advisor, lack of supportive regulatory directives , Problem related to Ethiopian
Commodity Exchange (ECX) law, lack of capacity to deliver IFB product at full rage, lack of
awareness of customer about IFB products, lack of trust and confidence of customers,
inadequate marketing and promotion, double taxation, nature of IFB products, unavailability of
IFB products in all of its branches and the IFB being delivered in a Window model.
Accordingly, the following recommendations were forwarded by the researcher based on the
results of the findings in conjunction with literature review reflections: aggressive promotion
and marketing campaign about IFB products, provide sustainable and continuous training to
build the capacity of the manpower, the bank shall increase accessibility of its products with the
expected services attached to the products, the bank has to have Shariah advisor, give the
required attention and focus for the business and the bank has to be transparent in its IFB
business undertaking, in addition to these NBE directives, tax and ECX law shall include
exceptions for IFB business undertaking
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Keywords
Interest Free Banking Services