OUTSOURCING IN COMMERCIAL BANK OF ETHIOPIA: OPPORTUNITIES AND CHALLENGES

Abstract

The study aims to assess the opportunities and challenges of outsourcing in Commercial Bank of Ethiopia. It focuses on the benefits and challenges the bank faces in outsourcing its non-core activities. The research is a descriptive study applying quantitative approach in which data was collected across a population through cluster random sampling and uses descriptive statistics for the data analysis. The objective was assessing the major challenges and opportunities the bank gets out of outsourcing. It shows that the bank gets benefit from outsourcing though they have faced some challenges from outsourcing their non-core activities to outside providers. The findings shows that the Bank outsources to access special expertise, reduce overhead and operational costs, improve quality, spread commercial risk and get enough time to concentrate on their core activities. In the mean time the bank has also faced several challenges from outsourcing like low employee belongingness, conflict of interest among outsourced and permanent employees and low quality of service provided. But the bank tries to mitigate these challenges by negotiation and discussion with service provider. In conclusion, the bank has outsourced some of its activities expecting many benefits out of it. It has benefited in concentrating on core banking activities, but it has not been benefited as much as expected. It also faced different challenges but tries to mitigate those challenges by using different strategies or mechanisms. Based on the findings of the study, the research recommended that the bank has to concentrate on diversifying the type of services to be outsourced, the service providing company and strategies to mitigate challenges in order to gain the demanded benefits out of outsourcing.