The Impact of Liberalization on the Banking Sector in Ethiopia
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Date
2021-07
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A.A.U
Abstract
liberalization in the form of direct and portfolio investment in the banking sector was
officially announced by the government in 2019, the study investigates how this major policy
shift after more than seven decades will affect domestic banks that are currently in operation
in the country. With a largely cordoned off sector domestic banks have become the pillars of
the finical scene in Ethiopia and the paper utilizes quantitative and inferential analysis to
analyze how this paramount sector would be impacted once the policy is undertaken, utilizing
econometric models and stratifying the population in different homogeneous strata the study
identifies how banks would react to foreign competition and supplements that analysis with
the study of important ratios indicating were the sector currently stands and if it can with
stand the competition heading its way. Results from the analysis indicates that banks that
were established early on before the year 2000 to be exact perform much better on many
scales and are largely affected by micro economic factors while latter established banks show
a volatile performance and are affected largely by macro-economic factors. The fact that even
better performing banks can’t meet the international standards and recent banks show
volatility indicate that time is needed for banks to adjust their stances for the competition and
a mix of the polish and French approaches would best suit this demand but any policy that is
undertaken must be done is a prudent and intendant manner so that rational and proactive
decisions can be made.
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Practices in Ethiopia, Ababa Selected Private Audit Firms