Opportunities and challenges of Islamic Banking Establishment in Ethiopia

Abstract

The significant role of banks in the facilitation of the economic movement and enhancing the wealth growth of a nation is so much clear. In recent years, the promotional packages of televised advertisements forwarded by banks both CBE and the other private banks draws ones attention interested in the field. The objective of this study is to assess the opportunities and challenges of Islamic Banking Establishment. To achieve the goal of this research a total of 150 questionnaires were prepared and distributed to bank managers, IFB directors, Bank employees, under - formation bank founders, shareholders of banks, Sharia’ah advisors and businessmen. 128 questionnaires were collected with a response rate of 85.3%. Nevertheless, only 120 questionnaires were found completed and valid for analysis. The findings of the questionnaire, interviews and documentary results reveals that the equity tied capital business makes up a huge market financial resource is the opportunity. However the current status of Islamic Banking in Ethiopia is very low which does not respond to recent demands of potential customers; and the policies yet to design to run the IFB and full-fledged ISB services. The lack of linking institutions, constraints in public awareness to ISB are among the major challenges. It is recommended that the public in general should avoid the negative attitude, understand the true sense of ISB along with its economic contribution, stakeholders in IFB and ISB should enhance the way their promotional package and the government should smooth the Islamic financial institutes as Islamic Banking services come up with alternative packages that will enhance the national economic growth.