Emerie, Asmare (PhD)Getachew, Belay2018-06-212023-11-042018-06-212023-11-042015-06http://etd.aau.edu.et/handle/123456789/2722This paper investigates the determinants of cost of financial intermediation (CFI) of Ethiopian commercial banking sector during the period from 2000 to 2013. The study was based on the hypothesis that cost of financial intermediation in Ethiopian banks‟ is determined by bank, industry and macro-economic related factors. Several theories and empirical outcomes were propounded to explain the determinants of cost of financial intermediation proxied by net interest margin. The variables were chosen based on findings from both empirical and theoretical literature. A quantitative research approach and explanatory design were adopted in carrying out this research. Secondary data were collected from selected eight commercial banks out of nineteen banks using purposive sampling technique. Based mainly on the Seminal Ho and Saunders, 1981 dealership model and extensions thereto, the study employed panel data estimation techniques to analyze the influence of bank, industry and macroeconomic factors on CFI. The fixed effect regression technique was used to estimate the model using the econometric package EViews 8. The results obtained indicated that bank intermediation margin are high in Ethiopia and it is generally driven by banks, industry and macro-economic factors. And specifically the estimation results show that operating costs, capital of banks, market concentration, market share, economic growth and inflation have a positive and significant effect on CFI. Credit risk, asset size, liquidity risk, and opportunity cost of reserve have a negative and significant effect on CFI. Profitability is not significant in determining CFI. The study recommends banks to improve operational efficiency, NBE to instill competition with in banks and policy makers to promote favourable economic situation. Further studies were recommended in the areas by considering additional variables and considering newly emerging banks Keywords: Ethiopian Banking Sector, Net Interest Margin (NIM), Cost of Financial Intermediation (CFI)en-USEthiopian banking Sector; net Interest margin (NIM); cost of financial intermediation (CFI).Thesis