Assessment on the Challenges of National Bank Foreign Exchange Surrender Requirement on Private Commercial Banks in Ethiopia.
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Date
2023-06-08
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A.A.U
Abstract
The main objective of the study was to examine the challenges of the national bank of Ethiopia’s foreign exchange surrender requirements on commercial banks. Due to the surrender amount is substantial which is seventy percent of foreign exchange earnings, commercial banks faced different challenges as a result of surrender requirement imposed by National Bank of Ethiopia. The study used a mixture of exploratory and descriptive research designs to get an in-depth understanding of the challenge of the surrender requirement on banks, and a combination of qualitative and quantitative methods were applied to the study. Primarily the study used primary data sources through structured interviews and self-administered questionnaires to examine the real challenges of the surrender requirement. A total of 124 professional employees and 4 senior managers from the IBD department participated in the study. Questionnaires were distributed to IBD professionals and interviews were made with IBD senior managers to explore their understanding of the challenge of the surrender requirement on commercial banks. To analyze the quantitative data descriptive statistics was used whereas, data obtained from interviews were analyzed qualitatively. Accordingly, the findings of the study showed that the surrender requirement reduced the forex mobilization capacity of banks, it leads to adverse customer relationships and it has financial loss to commercial banks. As a result, the findings suggested that commercial banks should encourage customers to open foreign currency accounts such as diaspora account and foreign currency saving account which are not subjected to the surrender requirement so as to minimize the effect of the surrender requirement.
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Keywords
Surrender Requirement, NBE Directives, Foreign Exchange, Challenges