Modeling and Analysis of Ethiopian Banking Sector Performance using BSC and AHP Approaches

Abstract

We live in a world of information superhighway where the physical world is frequently transforming into a virtual one and so is banking service. More often than not the banking business has replaced physical transaction and paper money with an online transaction and virtual money, leading to a cashless society. However, the same can’t be said about the Ethiopian banking sector as much of the aforementioned features represent its tomorrow; today the sector is faced with an urgent matter of attaining excellence in conventional banking service. Hence, the purpose of this study was to determine the performance of banking service in Ethiopia using the BSC and the AHP approaches considered arguably, more reliable measure as compared to conventional ratio analysis and the results indicated that CBE ranked first with the score of 34.47%, followed by AIB (19.82%) which performed slightly better than DB (19.49%) and standing fourth is OIB (14.87%) and occupying the last position was AdIB (11.36%) in terms of performance as rated by experts in contrast based on conventional ratio analysis AdIB stood first with a score of 78% followed by OIB at 63%, then AIB (58%) and the fourth place belonged to CBE (51%) and finally DB (50%). Thus, the most vital variable missing in financial ratio analysis were perhaps customers; not to mention the internal business processes and the learning and growth perspectives of the banking service. Consequently, in order to secure a fuller understanding of actual banking service performance a combination BSC and AHP was suggested.