PRACTICE OF ELECTRONIC BANKING

(A CASE STUDY ON COMMERCIAL BANK OF ETHIOPIA, BISHOFTU BRANCH)

A RESEARCH PAPER SUBMITTED TO THE DEPARTMENT OF BUSINESS

BY

DAGEMAWIT HAILE

EJIGAYEHU AYELE

HENOK TESHOME

KALKIDAN KEDESE

MAHLET TSEHAYE

Advisor: LEMMA W. (MBA)

ADMAS UNIVERSITY- BISHOFTU CAMPUS

FACULTY OF BUSINESS

DEPARTMENT OF BUSINESS MANAGEMENT

NOVEMBER, 2020 G.C

BISHOFTU ETHIOPIA
 DECLARATION

We, the undersigned, declare that this thesis is our original work, prepared under the guidance of
Lemma Woriyo (MBA). All sources of materials used for the thesis have been duly
acknowledged. We further confirm that the thesis has not been submitted either in part or in full
to any other higher learning institution for the purpose of earning any degree.

NAME ID.NO SIGNATURE

Dagemawit Haile 0099/17

Ejigayehu Ayele 0234/17

Henok Teshome 0238/17

Kalkidan Kedese 0639/17

Mahlet Tsehaye 0173/17

Advisor: Lemma W.

Signature: _____________

Date: _________________

Examiner 1: Mr. (Ms.) ________________ Examiner 2: Mr. (Ms.)____________

Signature: _________________ Signature: _________________

Date:__________________ Date:______________________

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 ENDORSEMENT

This thesis has been submitted to Admas University, Bishoftu campus Business faculty for
undergraduate program with my approval as a university advisor.

_________________________ ______________________________

Advisor Date & Signature

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 Acknowledgement

We are most grateful to Almighty God who through His infinite mercy and love
guided us throughout the duration of the study.

Our most sincere and heartfelt thanks go to Lemma Woriyo, our thesis advisor, for
his unreserved and timely support in checking, commenting and giving
constructive advice all along our activities. Had it not been for his genuine
professional and scholastic approach the successful completion of this paper could
have been in doubt. Last but not least, we would like to express our deep gratitude
to the staffs and managers of the Commercial Bank of Ethiopia, Bishoftu branch
who participated in this study during the data collection process.

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List of Tables

Table 4.1.1.2 E-banking in CBE, selected Bishoftu branches

Table 4.1.2 Growth of ATM number per year in CBE, Bishoftu town

Table 4.2.1 Respondent’s demographic profile

Table 4.3.1.1 Benefit of E-banking for customers

Table 4.3.2.1 Benefit of E-banking for banks

Table 4.3.3.1 Benefit of E-banking for the economy

Table 4.4.1.1 Problems in implementation of E-banking

Table 4.4.2.1 Challenges of E-banking practice in CBE, BIshoftu branch

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Acronyms

ATM Automated teller machine

ATS automated transfer system

AVR Automated voice response

CBE Commercial bank of Ethiopia

CSFs Critical success factors E-banking Electronic banking E-commerce Electronic commerce

ECX Ethiopian commodity exchange

EFT Electronic fund transfer E-payment Electronic payment

ICT Information communication technology

IT Information technology

NBE National bank of Ethiopia

NPS National payments system

PC Personal computer

PDA Personal digital assistance

POS Point of sale

PSS Premium Switch Solution

SME Small and Medium enterprise

SMS Short message service

SPSS Statistical package for social science

TA Technology associates

TAM Technology acceptance model

TOE Technology organization Environment

Ethiopian banking system is still underdeveloped compared to the rest of the world. In Ethiopia
Cash is still the most dominant medium of exchange and electronic payment systems are at an
embryonic stage. This study is aimed to assess the main practice and challenges of E-banking in
Commercial Bank of Ethiopia, Bishoftu branch. The study was conducted based on the data
gathered from five branches Ada’a branch, Kajma branch, Kuriftu branch, Kurkura branch, and
Hijra branch. Qualitative and quantitative research approach was used to answer the research
questions that emerge through the review of existing literature. The study statistically analyses
data obtained from the survey questionnaire and interview. The study used descriptive statistics
and Data was analyzed using a statistical package for social sciences (SPSS). The study also
identified basic benefit E-banking for the customers, banks and for the economy which helps to
enhance other banks to engage in such activity. It also indicated that the major barriers CBE
faces in the practice of Electronic banking are absence of skilled man power, absent well
organized ICT infrastructure, cost incurred during the purchases of the software and the device,
absence of legal frame work, high rates of illiteracy, frequent power interruption, fear of risk and
unavailability of competent and skilled employee. The study suggests a series of measures which
could be taken by the CBE and by government to address various challenges identified in the
thesis. These measures include: Establishing a clear set of legal frame work on the use of
technology in banking industry, supporting the bank by investing on ICT infrastructure and CBE
needs to be focused on technological innovation competition rather than traditional bases of
retail bank competition.

Key: E-banking, Qualitative & quantitative research method, Random sampling approach
Table of Contents Pg.No

Declaration i

Endorsement ii

Acknowledgement iii

List of tables iv

Acronyms vi

CHAPTER ONE

1. INTRODUCTION 1

1.1 Background of the study 1

1.2 Background of the organization 2

1.3 Statement of the problem 3

1.3.1 Basic research questions 3

1.4 Objective of the study 4

1.4.1 General objective 4

1.4.2 Specific objective 4

1.5 Significance of the study 5

1.6 Scope (delimitation) of the study 5

1.7 Organization of the paper 5

CHAPTER TWO

2. LITERATURE REVIEW 6

2.1 Theoretical literature 6

2.1.2 Types of E-banking 7

2.1.3 Need for E-banking 8

2.1.4 Benefit of E-banking 8

2.1.4.1 Benefit of E-banking for banks 9

2.1.4.2 Benefit of E-banking for customers 10

2.1.4.3 Benefit to general economy 11

2.1.5 Factors influencing banks to practice E-banking system 12

2.1.5.1 Technology- Organization Environment (TOE) framework 13

2.1.5.1.1 Technological factors 14

2.1.5.1.2 Organizational factors 14

2.1.5.1.3 Environmental factors 15

2.1.5.2 Technology Acceptance Model (TAM) 16

2.2 Empirical studies related with E-banking 16

CHAPTER THREE

3. RESEARCH METHODOLOGY 19

3.1 Description of the study area 19

3.2 Research approach 20

3.3 Research design 20

3.4 Population &sample size 20

3.4.1 Population 20
3.4.2 Target population 21

3.4.3 Sampling frame 21

3.5 Sampling Method & Sampling Technique 21

3.6 Data sources & Types 21

3.7 Data collection Methods 22

CHAPTER FOUR

4. RESULTS & DISCUSSION 23

4.1 Practice of E-banking in CBE, Bishoftu branch 23

4.2 Demographic information of the respondents 24

4.3 Benefits of E-banking 25

4.3.1 Benefit of E-banking for customers 25

4.3.2 Benefit of E-banking for banks 28

4.3.3 Benefit of E-banking for economy 31

4.4 Challenges of E-banking practice 32

4.4.1 Problems of E-banking in introduction stage 32

4.4.2 Challenges of E-banking after the introduction of the service 34

CHAPTER FIVE

5. SUMMARY OF THE FINDINGS, CONCLUSION, & RECOMMENDATION 39

5.1 Summary of findings 39

5.2 Conclusion 40

5.3 Recommendations 41
Bibliography 42

Appendices 46