Challenges and Opportunities of Interest Free Banking in Ethiopia
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Date
2017-12
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Addis Ababa University
Abstract
In order to examine opportunities and challenges adjacent to the growth and development of
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interest free banking in the case of Commercial Banks, operating in Addis Ababa, Ethiopia. A descriptive study was conducted on five commercial banks namely Commercial bank of Ethiopia, Oromia International bank s.c, united bank s.c, Wegagen bank s.c and Nib international bank s.c. The population of this study consisted of branches of those commercial banks located in different parts of Addis Ababa city based on their IFB deposit mobilization and number of IFB accounts depending on the information obtained from the IFB divisions on the above banks. Data were collected from a total of 123 respondents by means of structured questionnaires which were distributed to branches and were filled by bank staffs who had the knowledge about interest free banking system. The results revealed that the main challenges in implementing IFB system included lack of awareness by customers about IFB services, institutional, need for special regulations and lack of specialized human resource. In addition, the difficulty in segregation of funds for effective implementation of IFB was another problem expressed by respondents. On the other side, IFB in Ethiopia was believed to still have a huge untapped opportunity to be exploited by other financial services providers which would use customer satisfaction as a niche in offering IFB services. Other potential opportunities mentioned included global trends, economic growth in Ethiopia and within Muslim communities. The findings suggest that the opportunities of interest free banking are more significant than its challenges in Ethiopia. A number of recommendations related with the study findings were forwarded.
Description
A Thesis submitted to the Department of Accounting and Finance for the fulfillment of the requirements of the Degree of Master of Science in Accounting and Finance
Keywords
Banks of Ethiopia, Challenges, Interest free banking