Potential Effects of Opening the Ethiopian Banking Sector to Foreign Banks
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Date
2017-05
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Addis Ababa University
Abstract
In theory, foreign bank entry could significantly reduce the cost of credit by bringing capital,
technical skills, and product innovation to host countries, which increases competition and leads
to improvements in the efficiency of the banking sector, ultimately benefitting customers of the
banking system, including small and new enterprises. The main objective of this study is to
evaluate the potential impact of foreign bank entry in Ethiopian banking sector and analyses how
far the domestic banking sectors are ready to compete with the new technology and modern
management system. The quantitative research method was adopted to collect data based on the
pre-design survey questionnaires and the result of 134 survey questionnaires were distributed
and the analysis done using descriptive statistics like graphical presentation, average, standard
deviation, frequency, percentage etc. A cross-sectional design was employed for a data collected
and analyzed more than one case at a single time. Only quantitative research approach was also
implemented. Out of the total respondents, the indicate samples were selected under the
consideration of both purposive and random sampling techniques. The key findings revealed that
if foreign banks were entered in the country, the domestic banks would be benefited in all the
four dimensions such as potential benefit, potential efficiency, macro-economic and social
indicators and potential costs. Therefore, the permeation of foreign bank would improve the
domestic banks economic potential, additionally different macroeconomic and social indicators
show that
the country would be benefited if the foreign bank were permitted. Finally the
government should adopt from neighboring country like Kenya and Egypt , those have a long
period of experience in supervising foreign bank and
revise the investment proclamation
that prohibited Foreign bank entry.
Key words: Foreign Bank, Entry, Macro-economic indicators, Domestic Bank
Description
Keywords
Foreign bank, Entry, Macro-economic indicators, Domestic bank