Assessment Of Ethiopian Financial Institutions Readiness For E- Commerce Adoption

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Date

2018-06-01

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Addis Ababa University

Abstract

The 21st century is known by the rapid growth of Information and Communications Technology (ICT). The advancement in ICT introduced many new concepts to the world. One of these concepts is electronic – commerce (e- commerce). E- commerce is generally defined as a way of sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks. E- commerce provides advantages for both the buyer and seller. It avoids geographical barriers and promotes trade from all corners of the worldMany firms in the developed countries are being driven toward the adoption of e- commerce. In only two decades, it has become the backbone for many of the prestigious firms in the world. However, most of the firms in the developing countries have been struggling in e- commerce adoption. Like any other businesses, the financial institutions (Banks, Insurances and MFIs) could be benefited by adopting e- commerce in their business. They can use the technology and business practice of e- commerce to market their products to the customers. Most of the financial institutions in the developed world are already started using e- commerce to advertise and sell their products online.Ethiopia, e- commerce is in its infant stage and only a few businesses are trying to adopt it. Currently, there are 70 financial institutions including banks, insurances and MFIs, but there is none which uses e- commerce as a business platform to sell their products online. The financial institutions in Ethiopia stand to gain considerably from e- commerce solutions, considering that there are various products and services that can be provided by these financial institutions to the online customers. However, evidence on the ground shows that the promise of e- commerce has not been realized by these institutions. The use of e- commerce in the financial institutions won’t be an option if they want to stay competitive in the global economyThis research assessed Ethiopian Financial institutions readiness for e- commerce adoption. The research evaluates the readiness of factors for e- commerce adoption in the selected financial institutions (banks, insurances and MFIs) in Addis Ababa. The research used a STOPE model as, which consisted of five e- readiness domains and sixty-four factors related to Strategic, Technology, Organization, People and Environment. In the STOPE model factors are evaluated individually and collectively. Each factor, at any level, would be evaluated according to a scale of five grades. The model serves as a guide to develop questionnaire and interviews, collect and vii analyze data, and draw conclusion. This research is mostly a quantitative type of research; however, it also examines qualitative data such as interviews. To participate in the survey 6 banks of which 1 is a consortium of banks, 5 insurances, and 6 MFIs of which 1 is the association of MFIs are selected. From the total population size of 205 individuals a sample size of 76 individuals are selected. A total of eighty-five questionnaires were distributed and seventy-six questionnaires are returned. Data encoding, cleansing and analysis were made using SPSS v.20. The research used Alpha model to analysis the reliability of the research questions. The Cronbach’s Alpha for the questionnaire in this study is 0.812, which is greater than 0.70 (minimal alpha value).This study uses McConnell analysis method. Based on the mean of the manifest variables five groups have developed: Red [1 – 1.80], Red – Amber [1.81 – 2.6], Amber [2.61 – 3.40], Amber – Blue [3.41 – 4.20], and Blue [4.2 - 5]. Accordingly, five out of twelve factors in the Strategy readiness are classified as Amber – Blue; six out of twelve factors are classified as Amber; one out of twelve factors is classified as Red – Amber. Similarly, three out of twelve factors in Technology readiness are classified as Amber – Blue; nine out of twelve factors are classified as Amber. In Organization readiness seven out of twelve factors are classified as Amber and the other five classified as Red- Amber. In People readiness six out of twelve factors are classified as Red- Amber, three out of twelve factors are classified as Amber and the other three are classified as Amber – Blue. In Environmental readiness one factor is classified as Red, four out of twelve factors are classified as Red – Amber, six out of twelve factors are classified as Amber, and only one factor is classified as Amber – Blue. Generally, Banks have better readiness for e – commerce adoption than insurances and MFIs with a cumulative mean of 3.09, 2.78, and 2.78 respectively. The quantitative analysis result supplemented with interview. The qualitative data mainly focuses on identifying the challenges of e- commerce adoption in the financial institutions. A number of challenges related to each of the five domains are discussed in the discussion part of the study. The research highlighted some recommendations/ feedbacks for the successful implementation of e- commerce in the financial sectors.

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Keywords

e- commerce, e- readiness, STOPE model, technology adoption

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