Performance Assessment of Interest Free Banking of the Commercial Bank of Ethiopia
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Date
2019-12
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A.A.U.
Abstract
Interest free banking is one of the emerging trends in the global economy and the fastest growing industry across the globe. It is a banking service that abides by Shariah principles in all of its activities and Commercial Bank of Ethiopia has started the service since 2013. This research project was designed to assess Interest free banking performance of the Commercial Bank of Ethiopia. To achieve the stated objective, purposive sampling technique was used. The study employed descriptive research design approach and collected both primary and secondary data and the data was analyzed using statistical descriptions of mean, maximum minimum values and growth rates of number of branches, population to branch ratio, amount of deposit and investment, and other financial ratios like ROA of IFB, IFB ratio, liquidity ratio, efficiency ratio, and bank size. Accordingly, the study find out that the service accessibility of the IFB of the CBE highly increased. In addition, study found out that though the deposit and financing of the IFB has shown continuous improvement, it is still low as compared to the size of the Bank and its accessibility. The low performance was due to lack of trust of the Muslim society, less effort of the bank in promoting its IFB products/services, lack of awareness of customers and employees and gaps in regulatory frameworks. Coming to the financial ratios, the study concluded that the ROA, IFB ratio, Efficiency and bank size of the IFB has shown continuous improvement over the study period. However, though the liquidity ratio of the IFB has shown a declining trend, the bank is still very liquid since the investment of the IFB is very low and majority of the deposits are safe keeping. Based on the findings and conclusions of the study, the researcher has recommended that the management of the Bank should exert their marketing effort to promote the IFB products so that the public awareness can be enhanced. The bank should also exert its effort to enhance the awareness of its employees so that they can properly promote the service. In addition, the study recommends that the government should revise its regulatory frameworks so as to enhance the IFB financing services. Moreover, the management of the Bank should insist the government to amend its regulatory frameworks. Finally, the researcher suggested further industry level study of the area by other professionals.
Description
A Research Project Submitted to the Department of Management for the
Partial Fulfillment of the Requirements of the Degree of Master of Business
Administration- Financial Services
Keywords
Accessibility, Efficiency ratio, IFB financing, Interest free banking