Abebaw Kassie (PhD)Yonas Mulugeta2025-03-042025-03-042024-02-22https://etd.aau.edu.et/handle/123456789/4430This research aims to examine the challenges and prospects of full-fledged Islamic banking operations in Ethiopia. To realize this objective descriptive research design was used Primary data is collected through a structured interviewing of purposely selected key informants including the banks’ management group, board members, shareholders and customers. Moreover, questionnaire on a form of both close–ended and open ended questions are used for the bank’s employees. Secondary data are journal articles, various post graduate studies, banks report and internal document, and web particularly Google scholar. The researcher apply a mixed (both qualitative and quantitative) research approaches. The data was analyzing via descriptive occurrence, statistics of mean and standard deviation using SPSS version 25 Software. The result shows that Islamic banking service has a potential to attract investors, have contribution to support and expand local businesses, creates employment opportunities and the service represents additional deposit to the banks. by way of, the communication imply that skilled concede possibility be vital public explanation programmers to build more consideration and to remove argument and changeableness between Muslim and non-Muslim; Shareholders, board of managers and the administration of the bank endure recognize the idea and be helpful accompanying interest free banking as a consequence, the following pieces of advice were forward apiece analyst established the results of the influence association accompanying research impression: create awareness by using the marketing tools, training employees about principles and practice of Islamic banking operations, create awareness in non Muslim societies service is based on non interest, not on religion. Key words: Full-fledged Islamic banking, Islamic Finance, Operational challenges of IFB, Prospects of IFBenThesis