Assessing the Implications of Regulatory Policy on the Development of Private Commercial Banks in Ethiopia: A Case of NBE Bills Purchase Directive.

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Date

2014-05

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Addis Ababa University

Abstract

This paper assesses the implications of regulatory policy namely, NBE bills purchase directive, on the development of private commercial banks in Ethiopia. Mixed research approaches and descriptive research type were employed. Accordingly, research questions were approached via research tools like questionnaires, key informant interview and document surveying and analyzed using simple descriptive statistics like ratio, percentage and average. The findings of the research shows that NBE bills purchase directive have negative implications on loanable fund, income and expense, profit, Capital and reserve, and deposit of private commercial banks, whereas positive implications on branch expansion and product development of private commercial banks. According to the finding, the directive affected the loanable fund, income, profit, reserve, and deposit of private commercial banks via reducing them. The implication of the directive implied on expense of private banks via increasing overall expenses. Thus, the NBE bills purchase directive has negative impact on almost all performances of private commercial banks, which further has negative implications on the development of private commercial banks. Finally, respondents forwarded recommendations like lessening the percentage amount of allotment, increasing interest rate paid for the bills and phasing out the directive

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Purchase directive

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