An Assessment on Interest free Banking Practice in Ethiopia

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The main purpose this thesis paper is assess practical implementation of IFB in Ethiopia with specific reference nine commercial banks currently providing IFB service. The study has used both primary and secondary data sources. Structured questionnaire were the primary source of data. A total of 45 sample respondents were taken through purposive sampling. As the orientation of this paper is chiefly descriptive in nature, the data was analyzed using descriptive statistics of percentage, frequency and mean. The finding of the study depicts, most of banks are doing in accordance with IFB principles. However, there were also some gaps on Sharia advisors related to properly performing their role, duty and responsibilities in a regular manner, again doubt on their academic knowledge and experience on IFB. In addition, there was a gap related to applying one of the major IFB principles known as risk and return sharing principle, and lack of financing, which resulted inability to meet financial needs of IFB customers and made total financing below an average. Moreover, result from study revealed that providing IFB through dedicated window facilitated for the banks to take many opportunities. Furthermore the result indicates that banks have been facing many challenges to provide IFB successfully, such as; lack of well trained and experienced human resource on IFB, lack of qualified Sharia advisory scholar, lack of educational and training curriculums on IFB, limitation of capital and resource, lack of knowledge and proper understanding of IFB among the society on IFB products and services, and lack of suitable banking polices for IFB. Accordingly, the study recommends for the banks, government and all other responsible body, that, to take consideration for the above discussed and other features of IFB industry and to take proactive measures from all perspectives. Key Words: Interest fee banking, compliance, opportunities, challenges, growth.



Compliance, Interest fee Banking