The Viability of Agricultural Development Banking in Ethiopia
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Date
2023-06-30
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AAU
Abstract
The fundamental issue with agricultural development banks is their long-term viability. This study
found that there are many viable agricultural banks worldwide. In Ethiopia, there was agricultural
banking. But currently, there are none. The study identified four factors that determine the viability
of an agricultural development bank: organizational competence, economic feasibility,
technological readiness, and societal factors. Quantitative data was collected from central,
development, and commercial banks in Ethiopia and analyzed using a statistical model. All four
variables were found to significantly and positively support the dependent variable (viability). A
dichotomous question further assessed the viability issues, with overwhelming responses
indicating a need for reform in the current agricultural-related finances. Therefore, reforming the
current commercial and development banks is recommended along with the full-fledged
agricultural bank. Organizational competences for agricultural development banking can be
achieved through government support, skilled manpower, diversified portfolios, corporate social
responsibilities, product value chain, and security measures. It is recommended that if an
agricultural development bank is implemented, all four determinant factors be considered due to
their significant and positive effects. However, it should be noted that only 58.6% of the viability
is explained by these four variables, with the remaining 41.4% attributed to other factors not
covered in this study. The study used the Fit-Viability Model (FVM) by Liang (2007), focusing
solely on the viability aspect while leaving the fit part for future research. The study only employed
quantitative data and could benefit from the inclusion of qualitative data. Additionally, the
Ministry of Agriculture of Ethiopia was not included in this study but will be considered in future
studies as another stakeholder for the agricultural development bank.