THE IMPACT OF ELECTRONIC BANKING ON FINANCIAL PROFITABILITY OF COMMERCIAL BANK OF ETHIOPIA

Abstract

This thesis aims to examine the impact of E-banking on Financial Performance of Commercial Banks in Ethiopia. A successful bank in presenting good services to clients and gaining profit is the one using new banking tools. The study has examined the impact of e-banking on return on assets as one of the most fundamental indexes of profitability. The study used secondary data employed purposive sampling technique to select seven banks for the study commercial banks operating in Ethiopia covering the periods from 2010 to 2018. In light of prior literature, key explanatory variables were identified to disclose their relationship and influence on financial performance of commercial banks. These independent and other control variables are value or price of transaction of ATM, value or price of transaction of POS, debit card, GDP-growths, Inflation rate and market share of banks. Result using fixed effect panel least square regression with the aid of stata output 12 application exhibited that numbers of ATM terminals, number of POS terminals and bank market share have positive and significant role on financial performance of commercial banks measured by return on asset. The study shows that increased number of ATM, POS and market share had a positive impact on the financial performance of commercial banks with many banking institutions indicating that increased market share allowed a company to achieve greater scale in its operations which generally improved its profitability. Therefore, this study recommends for enhancing return on asset commercial banks should exert more on awareness creation about e-banking service and timely support for users will cause an increase in e-banking practice in Ethiopia.