ASSESSMENT OF INTERNATIONAL TRADE SERVICE OPERATION AT COMMERCIAL BANK OF ETHIOPIA

Abstract

International trade is the exchange of capital, goods, and services across international borders or territories, In most countries, such trade represents a significant share of gross domestic product (GDP). Global and local banks support international trade through a wide range of products that help their customers manage their international payments and associated risks, and provide needed working capital. The research, a descriptive study using the survey method, aimed to assess the trade service practices of Commercial Bank of Ethiopia, identify challenges that affect the processes, find out possible instances of non-compliance with international and local standard banking practices and identify familiarity and information gaps among the bank staff with regards trade service operations. Data was collected through questionnaire from a total sample of 273 employees; Data collected from the questionnaire were analyzed using SPSS version 20. The study has identified there are instances of non compliance with international rules and regulations, this occurred due to lack sufficient balance at foreign correspondent banks. Lack of good communication skill of TS personnel, unable to update TS procedure manual as per specified schedule and the schedule of foreign currency approval time are the challenges that affect the trade service process at CBE. delay of payment to remitting banks after releasing the collection document to customers , lack of proper knowledge about the buyers and sellers specially in case of advance payment, lack of assessment about the credibility of the issuing bank and lack of follow up to collect guarantee claim and commission are the risk areas in which expose the customers to the risk of making payment to unreliable sellers and also exposed the bank to loss of goodwill with foreign correspondent banks, In the study, it is recommended that, to overcome the incompliance with international rule and regulation in relation to payment, the bank should made payment to foreign banks who send complying document without delay. This should be done by keeping sufficient balance of foreign currencies at correspondent banks .It is also recommended that CBE should support employee by training and development their TS staff communication skill with foreign banks and TS staff at branches should have required knowledge and skill to clarify and support customers in relation to trade service operation.