PERFORMANCE EFFECT OF INTEREST FREE BANKING SERVICE: THE CASE OF COMMERCIAL BANK OF ETHIOPIA (WEST ADDIS ABABA DISTRICT)

Abstract

The main objective of this study is to empirically examine performance effect on 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 100 sample respondents were taken through multistage sampling. Of the total sample interest free banking customers and staffs of the bank constitutes 60 and 40 respectively. The data was analyzed using descriptive statistics of mean, frequency and percentage using SPSS version 20 software. Based on the analysis of the obtained data, this research has found out the performance effects to IFB services as: lack of commitment of the bank, lack of Shariah advisor, lack of supportive regulatory directives , Problem related to Ethiopian Commodity Exchange (ECX) law, lack of capacity to deliver IFB product at full rage, lackof awareness of customer about IFB products, lack of trust and confidence of customers, inadequate marketing and promotion, double taxation, nature of IFB products, unavailability of IFB products in all of its branches and the IFB being delivered in a Window model. 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 with the expected services attached to the products, the bank has to have Shariah advisor, give the required attention and focus for the business and the bank has to be transparent in its IFB business undertaking, in addition to these NBE directives, tax and ECX law shall include exceptions for IFB business undertaking