OPPORTUNITIES AND CHALLENGES OF INTEREST FREE BANKING (IN CASE OF COMMERCIAL BANK OF ETHIOPIA)

Abstract

This study examines challenges and opportunity of Interest free banking services in Ethiopia with particular reference to the commercial bank of Ethiopia. The study has employed descriptive research based on survey and the data are of cross sectional type. The study has used both primary and secondary data which are quantitative and qualitative in nature and have been collected through structured and semi structured questionnaire and interview. A total of 200 sample respondents were taken through multistage sampling. Of the total sample interest free banking customers and staffs of the bank constitutes 170 and 30 respectively. The data was analyzed using descriptive statistics of mean, frequency and percentage using SPSS version 20software. Based on the analysis of the obtained data, this research has found out the opportunities of IFB are the existence of Potential customer and the diplomatic advantages. The challenges were poor institutional framework, inadequate legal framework and supervisory policies, poor supervisory framework, disparity in accounting standards, lack of equity institutions, absent of organized secondary financial market, and lack of short term market placement of funds.Accordingly, the following recommendations were forwarded by the researcher based on the results of the findings in conjunction with literature review reflections: aggressive promotion and marketing campaign about IFB products, provide sustainable and continuous training to build the capacity of the manpower, the bank shall increase accessibility of its products within branches.