Challenges and Opportunities of Expansion of Islamic Banks in Ethiopia: Case of Commercial Bank of Ethiopian Dire Dawa Interest Free Branch

Abstract

This study assessed the challenges and opportunities of expansion of Islamic banks in Ethiopia in case of commercial bank of Ethiopia Dire Dawa interest free branch. For sake of obtaining sufficient data, the researcher mainly used primary data that would be collected through open ended and close ended questioner from employees of commercial bank of Ethiopia Dire Dawa interest free branch. In addition to questioner, interview was conducted with branch manager of Dire Dawa interest free branch and higher officials of Islamic banks in the process of establishment. The secondary data also would be gathered through document review to support the primary data. To analyze the questioner SPSS soft ware would be used. Based on the analysis and interpretations the main findings of this study was an Islamic bank have both opportunities and challenges in their expansion. The main challenges are higher computation  from conventional banks that open interest free banking service in branch and window level, lack of awareness of the society regarding Islamic banks, professional skill gap regarding Islamic banks operation and lack of awareness of the society regarding Sharia based financing. The main opportunity of Islamic banking expansions are there is high demand in the market, the banking industry in Ethiopia is in growth stage and  Islamic banks can mobilize more addition deposits from Muslim society which was out banking industry.

Keywords: Islamic banking, Conventional banks and Interest free banking

DOI: 10.7176/RJFA/11-3-05

Publication date: February 29^th 2020