Operational Challenges and Opportunities of Interest Free Banking in Ethiopia: The Case of Commercial Bank of Ethiopia
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Date
2023-02-04
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A.A.U
Abstract
The main objective of the study is examining the operational challenges and
opportunities of Interest Free Banking in Ethiopia, particularly, in Commercial Bank of
Ethiopia empirically. To accomplish the intended purpose of this study, survey method of
descriptive research design was used to gather data. Primary data was collected through
interviews and questionnaires to answer the research questions. In addition secondary
data extracted from internal reports and survey of the bank. Respondents were sampled
from IFB employees of Commercial Bank of Ethiopia to achieve the objectives of the
study. Data was collected through questionnaire by using random sampling from a
sample of 155 IFB staffs 135 were properly filled and returned the questionnaires. The
data collected from the questionnaire were analyzed using SPSS statistical tools such as
percentages and frequency. The result indicate that legal and regulation framework, low
level of awareness of practitioners, lack of commitment, taxation related issues, lack of
trust by customer about segregation of funds, wrong perception of Interest Free Banking
or wrongly associated with religion and weak shari’ah experts functionality are the
major challenges of IFB operation in Ethiopia. Further the finding of the study showed
that interest free banking creates opportunity to the bank to mobilize the idle resource
which was out of bank system through enhancing customer base and it is helpful to the
economy as well. Thus, the National Bank of Ethiopia as a regulatory body, the
government and banks should give more emphasis for the challenges that they face on the
operation to have those mentioned opportunities and inclusive growths.
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Keywords
Interest Free Banking, Islamic Banking, Operational Challenges of IFB, Opportunities of IFB