COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

THE ROLE OF COMMERCIAL BANK IN PROMOTING PRIVATE

INVESTMENT (IN CASE OF BAHIR DAR CITY)

A RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF ACCONTING AND

FINANCE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
AWARD OF BACHELOR OF ART DEGREE (BA) IN ACCOUNTING AND FINANCE

PREPARED BY: ID
Miki Endris……………………………………………..1010475
Samuel Tadele…………………………………………..1010253
Yihalem Fekadu…………………………….……….….1010011
Nigus Abebaw…………………………………………..1010199
Tewodros Ashenafi……………………………………...1010093

ADVISOR: Shumbeza B. (MSc)

FEBRUARY, 2020

BAHIR DAR, ETHIOPIA

i
 ABSTRACT

The general objective of this study is to examine the role of commercial bank in
promoting private investment in case of commercial bank of Ethiopia in Beg Tera
branch. Both primary and secondary data will be considered. Primary data will be
collected through questionnaire, while secondary data will be collected from the main
library of business and economics of Bahir Dar University, the document from
Commercial Bank of Ethiopia in Bahir Dar city, Published and unpublished document
reports, journal, magazine, and internet. The population of this study is the total
number of employees concerned with the role of commercial bank in promoting private
investment in commercial bank of Ethiopia in Beg Tera branch. The sampling technique
we will use in this study will be purposive sampling technique. The researchers are
expected to collected data from sample of 22 respondents. These respondents are only
those who are in a position concerned with giving services for private investors. The
collected data will be analyzed by using both quantitative and qualitative data by
employing descriptive type of analysis which will use percentage and tables.

ii
ACRONYMS

CBE------Commercial bank of Ethiopia

CB--------Commercial bank

LC---------Letter of credit

GDP-------Gross domestic product

NBE--------National bank of Ethiopia

CDS--------Certificate deposits

iii
Table of contents

List Page

ABSTRACT……………………………….…......................…………….…..ii

ACRONYMS………………….…………………………………...............................iii

CHAPTER ONE……………………..………….………....................…..........…1

1. Introduction………………………....…..………….........................…….........….1

1.1 Background of the study…………………...…….......................……………...1

1.2 Background of the organization……….……………….............………………....2

1.3 Statement of the problem…….……….……………................………………...3

1.4 Objective of the study……………….…………..........……………………….4

1.4.1 General objective…….………….……………................….…………………4

1.4.2 Specific objectives………………….….……...................….………………..4

1.5 Significance of the study…………….…….…….........……..………………..4

1.6 Scope of the study…………………..………………..........……..……………….4

1.7 Limitation of the study………………..….........................................……………5

1.8 Organization of the study……………………..…...............……….……………..5

CHAPTER TWO…………………………...................……………….………..……6

2. Literature review……………….……………………........………….……………..6

2.1 Theoretical review……………......................................…….……………..6

2.1.1 An overview of commercial bank of Ethiopia………...........……..…................6

2.1.2 Investment and commercial bank……………..................………..…………….6

2.1.3 The roles of commercial bank……………..……...............………....................9

2.2 Functions of commercial bank…………………....................…………..………..9

2.2.1 Acceptance of deposit……………………………………….......…......……….9

2.2.1.1 Time deposit…………………………......................………………….……...9

2.2.1.2 Demand deposit………………….......................…………………….....…..10

iv
2.2.2 Advancing of loan………………………...........………………………......….11

2.3 Benefits of commercial bank activities for private investor….........…………..12

2.4 Empirical review……………....................................…………………………13

2.4.1 Credit assessment………………..............................………………………….13

2.4.2 Credit appraisal……………………...............................…………………13

2.4.3 Interest rate……………............................………………………......13

2.4.4 Disbursement………................................…………………………..............13

2.4.5 Repayment of loan…………...........................…………………......14

CHAPTER THREE………………....................................……………………....15

3. Research design and methodology…....................…………………………...15

3.1 Research methodology……………................................……………………...15

3.2 Research design………………………................................………………15

3.3 Type and source of data…………………….....................…………....................15

3.4 Target population………..............................……………………………...16

3.5 Population sample and sample determination……………....................…...…16

3.7 Method of Data analysis ……………..........................……………..…....16

CHAPTER FOUR…………………….......................…………............................17

4. Time and Cost Budget......................................................................................17

4.1 Cost Budget....................................................................................................17

4.2 Time Budget..................................................................................................17

REFERENCE........................................................................................................19

v
 CHAPTER ONE

1. Introduction

1.1 Back Ground of the Study

Commercial bank is bank which collect fund from the public and places them in
financial asset, such as deposit, loan and mortgage other than tangible asset. Thus
commercial bank contribute to private investment through money management and
banking service which include credit service, deposit service, and financial advisers
service. Commercial bank can extend loan to private investors while, at the time making
reasonable profit (M.KabirHassan, 2002).

Commercial bank is the type of financial intermediary and type of bank. Thus bank are
two possible meanings, commercial bank is the term used for a normal bank to
distinguish it from an investment bank. This is what people normally call a bank. The
term commercial was used to distinguish it from an investment bank. The two types of
bank no longer have to be separate companies; some have used the term commercial
bank to refer to banks which focus mainly on investment (Jonathan Dodoo, 2000).

Investment is the process of exchanging income during one period of time for an asset
that is expected to produce earning in the future. Similarly compel defined investment
as the placing capital on lying out of money in way intended to income or profit to
secure from its employment. Private investment contributes a lot to sustain economic
growth, decent job creation, more sustainable production process and technological
transfer. Therefore, strengthening partnership with private investor would be urgent
tasks for the country to ensure fair business transaction, create more middle class
society and strengthen better local and foreign market chain (The new encyclopedia
1997).

Private investment composes economic resource for future benefit but in developing
country they lack those resources especially finical resource due to low saving culture
of society. The solution to this problem is the arrangement of linkage between
commercial bank and private investors. For our country to achieve the goal commercial
bank of Ethiopia have a vital role and formidable role in increasing the GDP through
promoting all productive sector of investment.

1
1.2 Back ground of the organization
Commercial Bank of Ethiopia was legally established as a share company in 1963 to
take over the commercial bank activities of the State Bank of Ethiopia, which was
founded in 1942 with twin objective of performing the duties of both commercial bank
and central banking (www.deepethiopian.com, 2014). During the 1974 revolution
Commercial Bank of Ethiopia got its strength by merging with the owned Addis Ababa
Bank. Since then, it has been playing a significant role in the development endeavors
of the country.

The bank has been playing a pivotal role in advancing economic development of the
country for 70 years now. This role can be maintained only when it is able to keep-up
its good image by providing service that are most demanded by customers in the way
they like it. To attain this, it has to continue improving the way it does business i.e. the
way it provides service to its customers and the image it creates in the eyes of
stakeholders have to go on improving.

Its strong capital base , for the last seven decades of rich experience in the market and
wide branch network throughout the country have enabled the bank to accommodate
the large demand for its service and increase its overall revenue on sustainable basis.
The bank with its employee and management has aspiration to promote sound liquidity
management framework which enables the bank bring itself to standard of modern
international business practice and be competent enough in the national and
international market.

Today, more than ever before, CBE aggressively expanded its presence in all directions
of the country. Despite the flourishing of private commercial banks in the country, CBE
has remained potent and is in the lead in terms of assets, deposits, capital, and customer
base.
Commercial Bank of Ethiopia, in Beg Tera Branch which is striving to become a world
class bank, is rendering state of art and reliable service to its millions of customers both
at home and abroad. The business strategy of the bank focus on the interest of the public
it serves.
Accordingly, Commercial Bank of Ethiopia envisions becoming world class
commercial bank by the year 2025. In its strategic document too, it is clearly stated that
the bank values both its customers and employees as not only important but also
essential actors in all its endeavors of fulfilling public expectations.
2
1.3 Statement of problem

Commercial bank of Ethiopia needs for the economic, social and environmental
dimension of sustainable development are precise, studies conclude, without exception
that needs are extremely large. Because, the achievement of development goal can only
be realized with the development of the commercial bank which is engine of many other
banks to rise the country’s economy. Commercial bank of Ethiopia is a bank that
facilitate the technological innovation through intermediation role and opened that the
allocation of saving identifications and funding of entrepreneurs are veritable tools for
achieving the micro economic objectives be realized with the development of CB which
is the engine of many other banks to rise the countries’ of economic expansion.
Commercial bank is intermediate between the surplus and deficit sector of the economy
(Oluita, 2009).

The commercial bank also regulated, still determine the strategies for allocating funds
their by playing significant role in determining the type of investment activities, the
level of employment generation and distribution of income. The development of private
investment sector is strongly correlated with the development of commercial bank
lending (Athanasio2010).

This implies that financing of private investment through the credit form commercial
bank portends that investments are associated with level of credit expansion. As one of
major role of commercial bank of Ethiopia is lending money by over draft, installment
loan or other means, the study seeks to find out how those CBE help the private
investment in Bahir Dar city by facilitating them to assess to credit and advising them,
how to use those credit efficiently so as to up lift standard of living and develop
investment through commercial activity. Commented [h1]:

The research raised the following basic question that should be answered in this course
of the study.

 What are factors affecting private investments?

 What is the role of commercial bank in promoting private investment?

 How commercial bank gives service regarding with deposit or saving money to
investors?

3
1.4 Objective of the study

1.4.1 General objective of the study

The main objective of the study is to identify the role of commercial bank of Ethiopia
in promoting private investment in case of Bahir Dar city.

1.4.2 Specific objective of the study

 To identify factors affecting private investment
 To identify the role of commercial bank of Ethiopia in private investment
 To assess how commercial bank gives service regarding with deposit or saving
money to investors

1.5 Significance of the study

This paper lay out the role of commercial bank in promoting the private sector
investment in Bahir Dar city with the aim of better identifying the role for bank’s policy
to leverage private resources for investments in sustainable developments. Police
should be attentive to the possibility of the private sector being crowded out financial
constraint, especially as markets become more developed.

The finding of this study is expected to be significant for following reason. Government
and other party involved in the promotion of the development of private sector
investment may use the finding of the study as additionally input in designing policy
towards private investments. Academicians, consultants and governments agencies
may use the study has stepping stone for further study in the area at advanced level.

Both graduated and under graduated students may find the study for their academic
work. The finding may also be considered as important addition to the existing relevant
body of knowledge in the area.

1.6 Scope of Study

The geographical concentration of the study is limited to Bahir Dar city, found in
Amhara region. The focus of the study is limited to the clear and detail identification of
the role of commercial bank of Ethiopia in promoting private sector investment in Bahir
Dar city.

1.7 Limitation of the study

In under taking the study the researcher anticipate the following possible problems.
This include time constraint: givens the period allocated to the completion of this senior
4
essay, almost three months, we found it difficult to make a more comprehensive study
that take in to account enough sample from commercial bank in Beg Tera branch. Again
there is financial constraint in which the researcher was constrained by availability of
fund, mainly from our pocket. More than this the researchers face lack of sufficient data
which was constrained by shortage of materials such as reference books, stationery
materials, organized report in accessibility of internet service.

1.8 Organization of the study

The paper will be classified in to five chapters. The first chapter provides general
introduction information about the topic of the study. In this part, back ground of the
study, statement of problem, and objective of the study, significance of the study and
scope and limitation of the study. The second chapter outlines the related literature
review of data about the subject matters under the study. The third chapter explains
about the methodology to be adopted in the process of research undertaking. The fourth
chapter deals with data analysis and presentation. Finally the fifth chapter will sum up
all the points that will be raised in the paper, draw conclusion and raise sound
recommendation.

5
 CHAPTER TWO

2. Literature e review

2.1 Theoretical review

2.1.1 An over view of commercial bank of Ethiopia

The state bank of Ethiopia was founded in 1942 with twin an objective, performing the
duties of both commercial and central banking .In 1963, the commercial bank of
Ethiopia was legally established as Share Company to take over the commercial
banking activities of the state bank of Ethiopia. In the 1974 revolution, commercial
bank of Ethiopia got its strength by merging with privately owned Addis Ababa bank.
Since then, it has been playing significant role in the development endeavor of the
country. The commercial bank of Ethiopia which is striving to embark in to a world
class bank is rendering state of the art and reliable service to its millions of investors of
both locally and abroad. The business strategies of the bank focus on the stake holder
it serves. The commercial bank of Ethiopia, still dominants the market in terms of asset,
deposits, capital, customer base, branch network and despite the growing completion
from private banks over the last 15 years. This makes it one of the most reliable and
strong commercial bank, both in the country and region. Its strong capital base, above
68 years of rich experience in the market and having different branch networks
throughout the country enabled the bank to accommodate large demands for banking
services, both from private and public companies and to increase its overall revenue on
sustainable basis. In addition the bank had to branches in Djibouti and in Juba, southern
Sudan which ceased operation recently (www.deepethiopian.com, 2014).

2.1.2 Investment and commercial bank.

An investment is the current commitment of resource for a period in the expectation

of receiving future resource that will compensate the investor for the time the resource
are committed, the expected rate of inflection and the uncertainty of the future
payment (K.RElly and Narton ,2004).

Investment financed by commercial bank is made through the provision of credit

facilities to the potential investors for the production of capital good (Money, banking
and financial market). Capital good is one aspects of what are called investment good.

6
Commercial bank of Ethiopia contribute to the operation and growth of investment
through various roles including that of intermediary and provide of payment
settlement facilities and they must also execute these roles faultlessly in order to
promote confidence and stability in the system.

Commercial bank accept deposits from individual and businesses, deposits are then
made available to the business which make use of them for productive purpose in the
country. The banks are, therefore, not only the store houses of the country’s wealth
but also provide financial resource necessary for private investor (SayedJanan 2009).

The business men normally hesitate to invest their money in risky enterprises. The
commercial bank generally provide short and medium term loans to entrepreneurs
to invest in new enterprises and adopt new methods of production. The provision of
timely credit increases the productive. The provision of timely credit increases the
productive capacity of the economy. Commercial banks perform many functions they
satisfy the financial needs of the sectors such as agriculture, industry , trade
communication, so they play very significant role in process of economic social needs
(Richard, E.B 1998).

Commercial bank can extend to the poor while at the same time making a reasonable
profit by charging high interest rate. It can afford the high transaction cost of processing,
large volume of loans small as a few dollars. CB provide clients from house hold with
arrange of money management and service which include credit service, where by
small loans are allocated against collateral substitutes , such as group guarantees or
compulsory savings deposit service designed to offer alternative saving option and
risk are managed as active partnership (M. kabir Hassan , 2002).

Commercial bank are mobilization of financial resources has led to capital formation
since capital formation requires the release of domestic goods and service which
promote the real investment . Then any economy that wants to increase the real capital
formation must be able to provide a climate respective to the impact of resource from
overseas and the encouragement of domestic savings. This requires a financial
arrangement of domestic savings. This requires a financial arrangement that encourage
the mobilized savings and productive investment (Josiaetal, 2012).

The commercial bank of Ethiopia is bank that provides financial services to surplus
speeding unit to deficit speeding unit (borrowers). The most important commercial
bank are financial intermediaries; Various services such as, saving and loan
7
association and credit unions that serve as go between to link up surplus speeding
unit and deficit speeding unit. Economic growth and development of any country
depend up on a well join financial system. It provide a mechanism by which saving are
transformed in to investments (Burton nasibaLombra, 2003).

Banks as the most important of our financial intermediaries- institutions that serves as
“ middle men” for transfer of fund from the millions of individual house hold, investors
and other entities with surplus funds to those who borrow in order to purchase
consumer goods or invests in real assets such as houses, business plants and equipment.
The statement of condition shows that principal financial contracts issued by banks are
demand deposit, saving deposit and time deposits.

The decision to save and decision to invest is typically made by different individuals
and group. Many house hold and firms engage investment. The difference groups of
individuals and firm purchase investment goods to realize investment goals. The saving
of the masses must be transferred to investors in capital goods. The key role in
commercial bank and market is to facilitate the transfer of funds. Banks have developed
system to facilitate the transfer of funds, such that money can be transferred almost
instantaneous lousily and used the minimal risk (Money , banking and financial
market).

Commercial banks are bank which financial intermediation raise funds primary by
issuing checkable. Deposits (deposit on which checks can be written, saving deposits,
deposit that are payable on demand but do not allow their owner to write checks, and
time deposit (deposits with fixed terms to maturity).They then use this funds to make
commercial, consumers and mortgage loans and to buy government security and
municipal bonds (Frederic S, 2004).By almost any measures CB is the most important
financial intermediaries serving the public today. For example commercial banks sold
more asset than any other financial institution. Banks although represent a vital link in
the transmission of government economic policy (particularly monetary policy) to the
remainders of the economy. Bank deposits represent the most significant component of
the money supply used by the public, and changes in money growth are highly
correlated with changes in the price of the goods and services in the economy
(Roseetali, 1993).

2.1.3 The roles of commercial bank of Ethiopia

 Accepting money on term of deposit.

8
  Lending money by over draft installment loan or other means, cash management
and treasury.
 Safe keeping of documents and other items in safe deposit boxes.
 Processing of payments by way of telegraphic internet banking.
 Issuing bank drafts and bank check.
 Merchant banking and private equity.
 Sales, distribution or brokerages with or without advises of insurance, unit trust
and similar financial products and financial super market.

Traditionally large commercial bank also under write bonds and make markets in
currency, interest rate and credit related securities but today large commercial banks
usually have an investment bank arm that is involved in the aforementioned activity.

2.2 Functions of commercial bank of Ethiopia are;

The commercial banks serve as the king pin of the financial system of the country.
They render many valuable services. The important function of the commercial banks
can be explained with the following.

Primary function: -The primary function of the commercial banks includes the
following:

2.2.1 Acceptance of deposits

2.2.1.1 Time deposits:-

These are deposits repayable after a certain fixed period. These deposits are not
withdrawn able by check, draft or by other means. It includes the following.
Fixed deposits: The deposits can be withdrawn only after expiry of certain period say
3 years, 5 years or 10 year. The banker allows a higher rate of interest depending up on
the amount and periods of time. Previously the rates of interest payable on fixed deposit
were determined by reserve bank.

Presently banks are permitted to offer interest as determined by each bank. However,
banks are not permitted to offer different interest rate to different customers for deposits
of same maturity period.

These days the banks accept deposits even for 15 days or one month etc. In times of
urgent need for money, the banks allow premature closure of fixed deposits by paying
9
interest at reduced rate. Depositors can also avail of loans against fixed deposits. The
fixed deposit receipt cannot be transferred to other persons.

Recurring deposits: In recurring deposit, the customer opens an account and deposit a
certain sum of money every month. After a certain period, say 1 year or 3 years or
5 years, the accumulated amount long with interest is paid to the customer. It is very
helpful to the middle and poor sections of the people. The interest paid on such deposits
is generally on cumulative basis. This deposit system is a useful mechanism for regular
savers of money.

Cash certificates: - Cash certificates are issued to the public for a longer period of
time. It attracts the people because its maturity value is in multiples of the sum invested.
It is an attractive and high yielding investment for those who can keep the funds for a
long time.

It is a very useful account for meeting future financial requirements at the occasion of
marriage, educations of children etc. Cash certificates are generally issued at discount
to face value.

2.2.1.2 Demand deposits:-

These are the deposits which may be withdrawn by depositor at any time without
previous notice. It is withdraw able by check/draft. It includes the following:

Saving deposits:-The savings deposit promotes thrift among people. The savings
deposits can only be held by individuals and non- profit institutions. The rate of
interests paid on savings deposits is lower than that of time deposits. The saving account
holder gets the advantage of liquidity (as in current account) and small income in the
form of interests.

But there are some restrictions on withdrawals. Corporate bodies and business firms are
not allowed to open SB accounts. Presently interest on SB accounts is determined by
RBI. It is 4.5 percent per annum. Co- operative banks are allowed to pay an extra 0.5
percent on its savings bank deposits.

Current account deposits:-These accounts are maintained by the people who need to
have a liquid balance. Current account offers high liquidity. No interest is paid ion
current deposits and there is no restriction on withdrawals from the current account.

10
These accounts are generally in the case of business firms, institutions and co- operative
bodies. Nowadays, banks are designing and offering various investment schemes for
deposit of money. These schemes vary from banks to banks.

It may be stated that the banks are currently working out with different innovative
schemes for deposits. Such deposit account offer better interest rate and at the same
time withdraw able facility also. These schemes are mostly offered by foreign banks.

2.2.2 Advancing of loan

The commercial banks provide loans and advances in various forms.

Overdraft: -Occur when money is withdrawn from a bank account and the available
balance goes below zero. In this situation the accounts is said to be overdrawn is
within authorized over draft limit, the interest is normally charged at the agreed rate.
If the negative balance exceed the agree terms, then additional fees may be charged and
high interest rate may apply. Over draft occur varieties of reason this may include.
Internal short term loan the account holder over may occur for variety reason this may
include. Internal short term loan; the account holders find themselves short of money
and knowingly make an insufficient fund deposit. They accept the associated fees and
cover the overdraft with their the associated fees and cover the overdraft with their
next deposit.

Failure to maintain accurate account register; the account holder doesn’t accurately
account for activity on their account and over spends through negligence.

Letter of credit:-This document issued by commercial bank, or assuring payment to a

seller of goods and / or service provided certain documents have being presented to the
bank.

These are documents that provide that the seller has performed the duties under an
underlying contract (example sales of goods or service) and the goods or service have
been supplied as a greed. In return for these documents the beneficiary relieves
payment from the commercial bank that issued the letter of credit. The letter of credit
receives payment services as a guarantee to the seller that will be paid regardless of
when their buyer ultimately fails to pay. In this way the risk that the buyer will fail to
is transferred from the seller to the letter of credit issuer.

Loan:-An arrangement in which a lender is given money or property to a borrower

and the borrower agrees to return the property or repay the money usually long with
11
interest at future point in time. Usually there is a predetermined time for repaying the
loan and generally the Leander has to bear the risk that borrowers may not repay a loan
through modern capital market have developed many ways of managing this risk.

The terms of standardized loan are formally presented to this party in the transaction
before any money or property changes hands. If lenders require collateral, this will be
stipulated in the loan documents as well. Most loan also have legal stipulation
regarding the maximum amount interest that can be changed as well as other
convenient such as the length of time before repayments is required. Loan can come
from individuals, corporation, commercial bank and government they are way to
grow over all money supply in an economy as well as open up competition , introduce
new products and expend business operations.

2.3 Benefit of commercial bank activities for private investor

The deposit and loan service provided by commercial banks are benefit for private
investors in many ways. First, checking account, because the act like cash, make it is
much easier to buy goods and services and therefore help both consumers and
businesses who find it inconvenient to carry or send through the mail huge amount of
cash.

Second, loans enable investors to improve their standard of living and economy by
borrowing money to purchase materials important for investments. Third, loans help
investors through plant expansion and production of new goods and services therefore
increase employment and economic growth.

Finally, since commercial bank is want loans repaid, they choice borrowers carefully
and monitor performance of company’s manager very closely. This helps ensure that
only the best project get finance and that companies are run efficiently.

In addition since the owners of company receiving a loan want their company to be
profitable and managed efficiently, bankers act as surrogate is present on a regular basis
to watch the company’s manager. This flow of money from savers through bank to
ultimate borrowers is called financial intermediation, because money flows through
intermediary that is the bank (James, M.J, 2009).

2.4 Empirical Literature Review

According to the 1993 national survey of small business finance, commercial banks are
the most important single source of small firms (Cole and Wolken. 1995). Issues
12
whether certain borrowers are dependent on bank’s loans and whether banks’ lending
is directly affect money policy action.

Therefore, there is different research try to find out the problems and try to explain the
essentiality of the credit for ones country. However, this research tries to assess the
credit provision mechanism of commercial bank.

2.4.1 Credit Assessment

According to Nsereko (1995) credit assessment is the first stage in the lending process.
It is the process through which the credit application presents the necessary
documentation to the organization in order to obtain a loan.

2.4.2 Credit appraisal

According to Santamero and Kim (1993); the 'heart' of a high quality portfolio is credit
appraisal. The principles are designed to ensure that actions that will facilitate
repayment and reduce default rate are taken by lending institutions. Financial
institutions take measures like requesting for collateral, shorter loan repayment period,
high interest rates and other form of payment when the information gathered signals the
possibility of the borrower to default payment According to Santamero and Kim (1993)
the performances of financial institutions are highly affected when they do not
adequately appraise loans.

2.4.3 Interest rate

According to Ross (1991) it is price of land able funds service to allocate credit and
moderate the level of investment. Interest rates are locked at form the borrowers and
lenders risk premium to the price of the loan to cover loan losses. The risk premium
results from fact that at the same time of the loan request. The lender is unable to clearly
identify which borrower will repay and which borrower will be default loss are known
until a scheduled repayment are due.

2.4.4 Disbursement

Disbursement on the hand that money is not available until approvals and
documentations are obtained before fund is disbursed. According to Ross (1995) and
Nsereko (1995), if disbursement control is week, the whole integrity of the credit
process can be weekend and abused.

2.4.5 Repayment of Loan

13
According to Motoru and akuman (2004) each institution has different repayment
mechanism based on the specific of the institution of the customer pay weekly or
installments.

CHAPTER THREE

3. Research Design and Methodology

3.1 Research methodology

In the previous chapter the literature review which shows the distribution of study and
review of issue related with the role of commercial bank in promoting private
investment has been presented. In this chapter detail methodology showing the logical
frame work that discuss research design and research method would be presented. To
achieve the object of this research the appropriate method will be adopted. Basically
there are three type of research approaches qualitative, quantitative and mixed approach
(Cress well, 2003). The choice of this method is dependent of several factors including
researcher’s interest and experience, nature of the study etc. The researcher will use
both qualitative and quantitative techniques. The study tries to quantify some of the key
issues regarding each role of commercial bank of Ethiopia in promoting private sector
investment in Bahir Dar city.

3.2 Research Design

The researcher will use a descriptive type of study. The researcher chose this method
to describe, summarize and present the data. The data will be presented on the
14
descriptive bases by using table and percentage that can facilitate interpretation which
focuses on result that are relevant to the study

3.3 Types and Source of Data

The required data will be gathered from both primary and secondary data sources for
the purpose of achieving objectives of the study.

Primary data will be collected to obtain relevant information from sample respondents
among the whole population under study through questionnaire. The questionnaire will
be addressed to selected respondents under the study and expected to contain both
closed and open ended questions.

The secondary data will be collected from the main library of business and economics
of BDU, the document from commercial bank of Ethiopia in Bahir Dar city, review of
published and unpublished documents report, journal, magazine and internet which
were greatly assistance for successful and fruitful for completion for the study.

3.4 Target population

Target population of the study will be total number of employees concerned with the
role of commercial bank in promoting private investment in commercial bank of
Ethiopia in Beg Tera branch.

3.5 Population Sample and Sample Determination

The sampling technique will be purposive sampling techniques. We use this technique
because we have to exclude those who not compatible with what we are searching for.
We will collect the data from 22 respondents who are placed in a position with giving
services for private investors.

3.7 Method of Data Analysis

After the relevant data were collected, descriptive method of data analysis will be used.
The result of the analysis will be presented using tables, percentages, charts and graphs
and finally, conclusion and recommendations the researchers will be drawn based on
the analysis and summarized data.

15
 CHAPTER FOUR

4. TIME AND COST BUDGET

4.1 COST BUDGET

There are different costs expected to be incurred to undertake this study. We estimates
the following minimum cost per item.

Item Unit Cost/Unit(Birr) Total cost(Birr)

Memory card 16GB 180 180
Pen 10 12 120
Paper 1 pad 150 150
Printing costs 45 page 1 45
Transport cost 5 person 4 120
Mobile card 5 10 50
Miscellaneous - - 50
expense
Internet cost - 30
Total cost 745

16
 4.2 Time Budget

Time plan or time budget is a time table explaining how the researcher expected to carry
out his project. It is a plan in a term of months and expected completion.

It is presented in the table form or charts in the following schedule.

NO. Activities Nov. Dec. Jan. Feb. March Apr. May June

1 Title selection

2 Preparation of
proposal
3 Developing
Questionnaire
4 Distributing
Questionnaire
5 Collecting
questionnaire
6 Data analysis

7 Writing up the
paper
8 Presentation of
the paper

17
 Reference
 Athanasio and Lekshmy shekhar 2010; Banking theory and practice,

9thedition.

 Creswell,JW 2009, Research design; quantitative, qualitative and mixed

methods approaches, 3rdedition,sage publication, California.

 Christopher W. Anderson and Luis Garcia, Feijoo. VOL.LXI, No 1 Feb 2006

 DE, Albuquerque, Martim (1855) and Queries: London;George Bell

(p.431)Encyclopedia New (1997)

 Financial market and institution, New Burton NASIBA LOMBRA,

2003(P.8)

 Fikru 2014, Studied loan and advance management system in case CBE.AA

 K. Relly and Narton 2004,P5 Levine, 1991, mishkin 2007.

 Money, Banking and Financial market, Lloyd Thomas (2006), Kheker,1998

 M.Kabir Hassan, 2002 Technical scale and allocative efficiencies of Turkish

banking industry.

 Oluita (2009).’’Financing of investment through credit market.

 R,R paul 2004 money Banking and International Trade 5th Edition, India

 Richard, E,B 1991. Deposit composition and commercial bank earnings.

USA. America finance association.

18
 Schumbeter (1911), Athanasius & Antonios(2010), Gross (2001)

 Sayedjanan, 2009,The role of commercial bank in Economic Development

of a country.

 Liyod Thomas (2006), kherker, Money banking and financial market.

19