Government policy and liberalization being practiced in Ethiopian banking industry

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Kampala International University, College of Economics and Management
Ensuring the efficiency and stability of the banking system can play a vital role for the successful implementation of the monetary and economic policies of a country. Yet, to achieve such objective it would be essential to place financial reform measures that enhance the contribution of the banking system towards economic development. An emblematic reform measure undertaken by the Ethiopian government commencing the year 1992 was “liberalizing “the financial sector. The aim of the study is to assess the Ethiopian Government policy and liberalization of the Ethiopian banking industry. The study was performed under descriptive research design. Key data were gathered using study of document and questionnaires administered to employee of the bank. The targeted employees were involved in credit, domestic banking, foreign banking, marketing and business development, human resource management, branch operations and risk management. The study found out that the reform has brought a lot of remarkable changes on the structure and performance of the banking sector as compared with the situations prevalent before the reform period. However, the reform has restricted the advantages that could be obtained from a diversified ownership structure via prohibiting operation of foreign banks and participation of the private sector to the ownership of government banks. Furthermore, as tested by both two firm concentration ratio and HHI using total deposits, loans, capital and assets, the banking industry in Ethiopia can still be distinguished by its market concentration towards the big government owned commercial banks and by a market characterized by little and insufficient competition. The study suggested that allowing the entry of foreign banks and participation of the private ownership in the government owned banks should be a concern of the Ethiopian banking industry. The capacity as well as the independence of the regulatory body has to be improved so as to positively contribute to the growth of the banking industry.
A Thesis Presented to the School of Postgraduate Studies and Research Kampala International University Kampala, Uganda in Partial Fulfillment of the Requirements for the Degree Master of Business Administration
Government policy, Liberalization, Ethiopian banking industry