ST.

MARY UNIVERSITY

SCHOOL OF GRADUATE STUDIES

MBA IN ACCOUNTING AND FINANCE

CHALLENGES AND OPPORTUNITIES OF E-BANKING IN ETHIOPIA:

THE CASE OF COMMERCIAL BANK OF ETHIOPIA

BY

MICHAEL MEKONNEN

Approved by the Board of Examiners:

Dean, Graduate Studies Signature & Date

Advisor Signature & Date

External Examiner Signature & Date

Internal Examiner Signature & Date

I
 Statement of Declaration

I Michael Mekonnen declare that this research titled “Challenges and opportunities of E-
banking in Ethiopia: The Case of Commercial Bank of Ethiopia” is done with my own effort. I
have produced it independently except for the guidance and suggestions of my research advisor.
I assure that this study has been submitted for any scholarly award in this or any other university.

Michael Mekonnen Signature Date

II
 Certification

Here with I state that Michael Mekonnen has carried out this research work on the topic entitled
“Challenges and opportunities of E-banking in Ethiopia: The Case of Commercial Bank of Ethiopia”
under my supervision. This work is original in nature and has not presented for a degree in any
university and it is sufficient for submission for partial fulfillment for the award of MSc degree
in Accounting and Finance.

Maru Shete (PhD & Associate Prof.) Signature Date

III
 Abstract

This thesis aims to examine expansion of E-banking in the commercial bank of Ethiopian with
respect to the barriers which can influence firm from taking advantage of E-banking system and
expected benefits derived by the expansion system. The study was conducted based on the data
gathered from bank with in its four branches located at Addis Ababa includes; (Gofa sefer,
Arada giorgis ,Addis Ababa and finfine) on E-payment staffs by distribute 160 questionnaire A
mixed research approach was used to answer the research questions that emerge through the
review of existing literature and the experiences of the researcher in respect of the E-banking
system in commercial bank of Ethiopia. The study statistically analyzes data obtained from the
survey questionnaire. A research framework developed based on technology-organization-
environment framework and Technology acceptance model to guide the study. The result of the
study indicated that, the major barriers commercial bank of Ethiopian faces for the expansion of
Electronic banking are, security risk, lack of trust, lack of legal and regulatory frame work, Lack
of ICT infrastructure and absence of competition between local and entire absence of foreign
banks. The study also identified perceived ease of use and perceived usefulness as a driver for
expansion of E-banking system. The study suggests a series of measures which could be taken by
the bank 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 banking industry by investing on ICT infrastructure and banks
needs to be focused on technological innovation competition rather than traditional bases of
retail bank competition.

IV
 Acknowledgements

First and for most I would like to thank the Almighty God for His help. The completion of this
thesis involved kindly contribution, support and encouragement of many people. I wish to
express my sincere gratitude to my advisor Dr. Maru shete for his encouragement, and support.
Without his understanding, patience and useful supervision, it could be more challenging for me
to complete this thesis. I am also very thankful to my beloved family’s, for their support my
Mother Zerfenesh Tadesse, my father Mekonnen Adal and all my brothers and sister .finally I
also show appreciation to Commercial Bank of Ethiopia staff for their patience and cooperation
in filling questioners’.

V
Abbreviations

CBE= Commercial Bank of Ethiopia

NBE = National Bank of Ethiopia

ICT = Information Communication Technology

EFT = Electronic Fund Transfer

ATM = Automated Teller Machine

POS = Point of Sale

PDA = Personal Digital Assistant

PC = Personal Computer

PIN = Personal Identification Number

SMS = Sort Text Message

ECX = Ethiopian Commodity Exchange

IT = Information Technology

TOE = Technology – Organization – Environment

TAM = Technology Acceptance Model

PEOU = Perceived Ease of Use

PU = perceived usefulness

CSF = Critical Success Factor

PSB = Public Sector Bank

SPSS = Statistical Package for Social Scantiest

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Table of Contents
Statement of Declaration............................................................................................................................... II
Certification.................................................................................................................................................. III
Abstract ........................................................................................................................................................ IV
Acknowledgements....................................................................................................................................... V
Acronyms and Abbreviations ....................................................................................................................... VI
List of Table ................................................................................................................................................... 3
Chapter One .................................................................................................................................................. 4
Introduction ................................................................................................................................................... 4
1.1 Background of the study ............................................................................................................... 4
1.2 Problem Statement .............................................................................................................................. 5
1.3 Objective of the study ......................................................................................................................... 6
1.3.1 General Objective ........................................................................................................................ 6
1.3.2 Specific objective of the study ..................................................................................................... 6
1.4 Research questions .............................................................................................................................. 6
1.5 Scope and Limitation of the study ...................................................................................................... 7
1.6 Significance of the study ..................................................................................................................... 7
1.7 Organization of the Thesis .................................................................................................................. 7
Chapter Two.................................................................................................................................................. 8
Literature Review.......................................................................................................................................... 8
2.1 Definition of E-banking .......................................................................................................................... 8
2.2 E-banking system in Ethiopian banking industry ............................................................................... 9
2.3 Challenges of Banks in adopting /expanding E- Banking system .................................................... 11
2.3.1 Technology- Organization- Environment (TOE) framework. ................................................... 12
2.3.2 Technology Acceptance Model (TAM) ..................................................................................... 14
2.4 Empirical studies related with adoption of E-banking in Ethiopia ................................................... 16
2.5 Barriers related to the adoption and expansion of E-banking ........................................................... 23
2.6 Challenges on expansion E-banking in Ethiopia .............................................................................. 23
2.7 Benefit of adopting and expanding E-banking system ..................................................................... 25
2.7.1 Benefit of E-banking for Banks ................................................................................................. 26
2.7.2 Benefit of E-banking for Customers .......................................................................................... 27
Chapter Three.............................................................................................................................................. 29
Research Methodology ............................................................................................................................... 29
3.1 Research Approach and Design ........................................................................................................ 29
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 3.1.1 Research Approach .................................................................................................................... 30
3.2 Research Design................................................................................................................................ 32
3.3 Research Strategy.............................................................................................................................. 32
3.4 Variables, Data Sources and Data Collection Methods .................................................................... 34
3.4.1 Type of Data .............................................................................................................................. 34
3.4.2 Data Sources .............................................................................................................................. 34
3.4.3 Method of data collection .......................................................................................................... 34
3.5 Population and Sampling .................................................................................................................. 36
3.6 Strategy Design ................................................................................................................................. 36
3.6.1 Sample Design ........................................................................................................................... 36
3.7 Method of data Analysis ................................................................................................................... 37
3.8 Summary of the Methodology ........................................................................................................ 38
Chapter Four ............................................................................................................................................... 39
Results and Discussion ............................................................................................................................... 39
4.1 Introduction ....................................................................................................................................... 39
4.2 Barriers to Expansion of E-Banking System in the Case of Commercial Bank of Ethiopia ............ 39
4.2.1 Technological factor .................................................................................................................. 39
4.2.2 Organizational Related Factors .................................................................................................. 41
4.2.3 Factors Related to the External Environment ............................................................................ 43
4.3 Perceived Benefits/Drivers on the expansion of E- banking System in Case of Commercial Bank of
Ethiopia ................................................................................................................................................... 48
4.3.1 Perceived Ease of Use .................................................................................................................... 48
4.3.2 Perceived Usefulness ..................................................................................................................... 50
4.4 Summary of the Chapter ................................................................................................................... 53
Chapter Five ................................................................................................................................................ 54
Summary of the findings, Conclusion and Recommendation .................................................................... 54
5.1 Summary of findings......................................................................................................................... 54
5.2 Conclusion ........................................................................................................................................ 55
5.3 Recommendations ............................................................................................................................. 56
References .................................................................................................................................................... IX
APPENDIX ................................................................................................................................................... XVI

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List of Table Page No
Description

Table 1. Research Strategy……………………………………..…………………………. .…. 32

Table 2. Technological factor affecting the Use of E-Banking by Customers of CBE……….. 39

Table 3. Organizational related factors Affecting the use of E – Banking in CBE………….... ..41

Table 4. Legal and regulatory framework as factor affecting expansion of

E-Banking in CBE………………………………………….………………………. 42

Table 5. Lack of adequate ICT Infrastructure as Barrier in the Expansion of E-Banking

Service in the case of CBE………………………………………………………….... 44

Table 6. Competition among Banks in Ethiopia as Barrier for E-Banking Expansion ……….. 45

Table 7. Lack of Government Support as Barrier of E-Banking Expansion in case of CBE…. .46

Table 8. Perceived Ease of use of E-Banking system among CBE Employees ……………. ... 48

Table 9. Time Saving Benefit of E-Banking System as Perceived by Employees of CBE... ... 50

Table 10. Cost saving Benefit of E-Banking system as Perceived by Employee’s of CBE…... 52

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 Chapter One

Introduction

1.1 Background of the study

The information communication technology (ICT) sector is the highly growing and significantly
influences the global economy. This day’s most activities in the financial sector are performed
through ICT and the Ethiopian banking industry cannot be exceptional. Among different
products banks are providing E- Banking has become one of the key service and used as a means
of competition among the industries.

Technological innovations play a crucial role in the banking industry by creating value for banks
and customers; it enables customers to perform banking transactions without visiting a brick and
mortar banking system. On the other hand, E-banking has enabled banking institutions to
compete more effectively in the global environment by extending their products and services
beyond the restriction of time and space (Turban 2008).However, mirroring the development of
E-commerce, the adoption and diffusion of electronic banking (E-banking) system is yet to be
introduced and developed in Ethiopia. In order to encourage further E-banking adoption in
developing countries, a better understanding of the barriers and drivers impacting E-banking
adoption is critical (Zhao et al. 2008).To address the current gap in the literature, this study is
designed to examine the E-banking adoption situation in Ethiopia and generally focusing on the
investigation of barriers and drivers of Expansion of E-banking system in Commercial Bank of
Ethiopia.

Banking in Ethiopia faces numerous challenges to fully adopt and adapt E-Banking applications
and seize the opportunities presented by ICT applications in general. According
GardachewWorku (2010), Key Challenges for E Banking applications includes Low level of
internet penetration and poorly developed telecommunication infrastructure, Lack of suitable
legal and regulatory framework for E-payment, High rates of illiteracy, Fear of risk, and
Resistance to changes in technology are some of the challenges described. Also Wondwossen
and Tsegai (2011), mentioned Lack of skilled manpower and frequent power disruption are
challenges observed in the industry during that time. Even though some studies has been
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conducted related to the topic in the past years , the researcher believes that these studies are
not in the position to show the ongoing challenges brought by different factors like
technological advancement. Therefore, more studies are still required to be carried out in order to
identify these enduring problems of E-banking in the country. Hence, this study aims to identify
and examine the current challenges and opportunities rise in the industry and also helps to
address the current gap in the literature .

1.2 Problem Statement

Even though E-banking has a lot of benefits in delivering service to customers, The giant state
owned commercial bank of Ethiopia had been issued only1,806,876 debit cards, and has mobile
banking user of 290,383 and internet banking user 9,781.00 till Dec.2014(Birittu no. 120).
Considering the low extent of development of ICT infrastructure in developing countries, when
compared with the developed countries E-banking has not really been able to diffuse into society
given the low rate of internet access (Banji& Catherine 2004). In Ethiopia to fill this gap, players
in the banking industries are aggressively promoting and advertising their products. According to
Gerrard & Cunningham (2003) one of the issues raised with adoption of new technology is
perceived risk or uncertainty about the outcome of the use of the innovation or uncertainty that
the use of the innovation is secure. Uncertainty arises from a predictive validity of the attributes
(for example functionality and security) that is, how well users of new technology will predict
future performance (Cox; 1967).Furthermore, the flip side of this technological boom is that
electronic banking is not only vulnerable to, but may intensify, some of the same risk particularly
governance, legal operational and reputational inherent in traditional banking. In addition, it
poses new challenges in response, many national regulators have already modified their
regulation to achieve their main objective ensuring the safety and soundness of the domestic
banking system, promoting market discipline and protecting customer right and the public trust
in the banking system (IJRBM, 2013); E-banking, which refers to the use of modern technology
that allows customers to access banking services electronically such as cash withdrawal, funds
transfer, bill payment and obtain mini-bank statements are not well-being useful. Therefore this
study intended to identify the threat and the related opportunities that come with e – banking
system in Ethiopia taking commercial bank of Ethiopia as researched area based on the research
problems discussed above.

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1.3 Objective of the study
The Ethiopian banking industry is one of the service industries crucial to the growth of its
emerging economy. Banking is important in the role it plays in capital mobilization and granting
of financial facilities that is crucial to business development and growth. As business always
need to find ways of improving its products and service deliveries, it will be useful to understand
how different factors affect the expansion of E-banking system and in which way the
technological innovations can benefit the banking industries to provide service to customers.

1.3.1 General Objective

The main objective of this study is to explore the challenges and opportunities in the expansion
of E banking in Commercial Bank of Ethiopia.

1.3.2 Specific objective of the study

This study aims at addressing the following specific research objectives:
 To identify the challenges in expansion of E-Banking service and products in the case of
commercial bank of Ethiopian in particular.
 To explore the opportunities available in the expansion of E-banking to customer.
 Assess the perceived benefit/drivers that can be obtained from the use of E-banking
system in Ethiopia.

1.4 Research questions

Based on the problem stated in this study, the researcher developed the following research
questions.
Main Question: - What are the challenges and opportunities of E – banking in Ethiopia.
To gain a comprehensive understanding of the phenomenon under investigation, and in order to
be able to provide a sufficient justification for answering that question, the following three
specific questions need to be addressed. For the purpose of the present research, these questions
are:
1) What are the challenges to the expansion of E-banking in commercial bank of Ethiopia?
2) What are the opportunities in the use of E-banking in commercial bank of Ethiopia?
3) What are the benefits that can be attained from the use of E- banking in commercial bank
of Ethiopia?

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1.5 Scope and Limitation of the study
It is important to define the boundaries of this study such that readers can aware the direction to
which this study is headed. Initially the research mainly focuses on Electronic Banking in our
case which consists of, card banking (ATM), mobile banking, internet banking and point of sale
(POS). In addition this research mainly depends on surveying, interviewing, documentary
analysis and observation on the purposely selected bank .i.e. Commercial Bank of Ethiopia. This
bank is selected from the total industries players for simplification and the findings of this
research can’t be generalized to the industries.

1.6 Significance of the study

The outcomes and results of this research have potential value to the institution in terms of
identifying the challenges and opportunities related with expansion of e banking and adoption of
relevant technology that facilitate e banking service to its customers . In addition, since much
was not done on the topic this study is expected to provide important background information for
researchers who would like to continue with the issue in a more detail and quantitative manner.

1.7 Organization of the Thesis

The research paper has divided into five chapters. Chapter one presents the introduction part,
which discusses, Background of the study, problem statement, research questions, objectives of
the study, research method adopted, scope & limitations of the study and significance of the
research paper. Chapter two presents related theoretical and empirical literature Chapter three
presents the research methodology, which includes description of the research design and
approach used in the study, the data source and collection methods and the data analysis
technique adopted in the study. .The results and discussion is presented in chapter four. The final
part summarizes and concludes the findings and also forwards some recommendations.

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 Chapter Two

Literature Review

2.1 Definition of E-banking

E-banking has a variety of definitions ,E-banking is a form of banking service where funds are
transferred through an exchange of electronic signal between financial institutions, rather than
exchange of cash, checks, or other negotiable instruments (Kamrul 2009). E-banking, also
known as electronic funds transfer (EFT), is simply the use of electronic means to transfer funds
directly from one account to another, rather than by check or cash (Malak 2007).

The term of E-banking often refers to online banking/Internet banking which is the use of the
Internet as a remote delivery channel for banking services (Furst&Nolle 2002,). With the help of
the internet, banking is no longer bound to time or geography. Consumers all over the world
have relatively easy access to their accounts 24 hours per day, seven days a week.

Yang (1997, p.2) defined E-banking as the use of a computer to retrieve and process banking
data (statements, transaction details, etc.) and to initiate transactions (payments, transfers,
requests for services, etc.) directly with a bank or with other financial service provider remotely
via a telecommunications network. It should be noted that electronic banking is a bigger platform
than just banking via the internet.

E-banking can be also defined as a variety of platforms such as internet banking or (online
banking), TV-based banking, mobile phone banking, and PC (personal computer) banking (or
offline banking) whereby customers access these services using an intelligent electronic device,
like PC, personal digital assistant (PDA), automated teller machine (ATM), point of sale (POS),
kiosk, or touch tone telephone (Alagheband 2006,). Different forms of E-banking system were
discussed as follows.

1. Automated Teller Machines (ATM) - It is an electronic terminal which gives consumers the
opportunity to get banking service at almost any time. To withdraw cash, make deposits or

8
transfer funds between accounts, a consumer needs an ATM card and a personal identification
number (PIN).

2. Point-of-Sale Transfer Terminals (POS) - The system allows consumers to pay for retail
purchase with a check card, a new name for debit card. This card looks like a credit card but with
a significant difference. The money for the purchase is transferred immediately from account of
debit card holder to the store's account (Malak 2007).

3. Mobile banking- Mobile banking is a service that enables customers to conduct some banking
services such as account inquiry and funds transfer, by using of short text message (SMS).
Banks offer Internet banking in two main ways. An existing bank with physical offices can
establish a Web site and offer Internet banking to its customers in addition to its traditional
delivery channels. A second alternative is to establish virtual branchless or Internet-only, Bank
almost without physical offices. Virtual banks may offer their customers the ability to make
deposits and withdraw funds via ATMs or other remote delivery channels owned by other
institutions (Furst&Nolle 2002,). In the context of this study E-banking were not considered as
only transferring of service by using internet connection rather it considered as multi channel
service provided through ATM, internet banking, Mobile banking (Modbirr system), point sale
terminal and telephone banking.

4. Internet / extranet banking- It is an electronic home banking system using web technology
in which Bank customers are able to conduct their business transactions with the bank through
personal computers (Malak 2007).

2.2 E-banking system in Ethiopian banking industry

The appearance of E-banking in Ethiopia goes back to the late 2001, when the largest state
owned, commercial bank of Ethiopia (CBE) introduced ATM to deliver service to the local
users. In addition to eight ATM Located in Addis Ababa, CBE has have Visa membership since
November 14, 2005. But, due to lack of appropriate infrastructure it failed to reap the fruit of its
membership. Despite being the pioneer in introducing ATM based payment system and acquired
visa membership, CBE lagged behind Dashen bank, which worked aggressively to maintain its
lead in E-payment system. As CBE continues to move at a snail's pace in its turnkey solution for
Card Based Payment system, Dashen Bank remains so far the sole player in the field of E-
Banking since 2006. (Gardachew 2010);.

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Dashen bank, a forerunner in introducing E-banking in Ethiopia, has installed ATMs at
convenient locations for its own cardholders. Dashen ATM is available 24 hours a day, seven
days a week and 365 days a year providing service to Debit Cardholders and International Visa
Cardholders coming to the country. At the end of June 2009, Dashen bank has installed more
than 40 ATMs in its area branches, university compounds, shopping malls, restaurants and
hotels. In the year 2011 the payment card services have witnessed significant strides, Dashen
ATM service expanded to 70 and 704 POS terminals (Annual report of Dashen Bank
2011).Available services on Dashen Bank ATMs are: Cash withdrawal, Balance Inquiry, Mini
statement, Fund transfer between accounts attached to a single card and Personal Identification
Number (PIN) change. Currently, the bank gives debit card service only for Visa cards. Dashen
bank clients can withdraw up to 5,000 birr in cash and can buy goods and services up to 8,000 to
13,000 birr per day. Expanding its leadership, Dashen Bank has begun accepting MasterCard in
addition to Visa cards. Dashen won the membership license from MasterCard in 2008. Annual
report of Dashen Bank 2011).

Harnessing its leadership with advanced banking technology, Dashen Bank signed an agreement
with iVery, a South African E-payment technology company, for the introduction of mobile
commerce in April 21, 2009. According to the agreement, iVery Payment Technologies has
licensed its Gateway and MiCard E-payment processing solution to Dashen Bank. Dashen
Modbirr users can transfer 500 birr to other Mobbirr users in 24 hours a day. This would make
Dashen Bank the first private bank in Ethiopia to acquire E-commerce and mobile merchant
transactions (Amanyehun 2011). Although Dashen‟s new technology is one step ahead in that it
allows transfer of funds from one’s account to others, the first ever E-banking gateway was
signed between Ethiopian Commodity Exchange (ECX) and Dashen Bank and CBE. The E-
banking system being developed with both banks is designed to give a secure electronic data
sharing gateway between clients, banks and ECX, by facilitating a smooth transaction (Abiy
2008)

By the end of 2008 Wegagen Bank has signed an agreement with Technology Associates (TA), a
Kenyan based information technology (IT) firm, for the development of the solutions for the
payment system and installation of a network of ATMs on December 30, 2008, Zemen Bank, the
only Ethiopian bank anchored in the idea of single branch banking, by launching full-blown
internet banking, a service which is new to Ethiopian banking industry in the year 2010. The
bank tested the venture through its first phase of the online service, and now it is already started
10
the full-fledged version, which enable customers to make online money transfer freely.
Previously, the online banking service, delivered by the bank, only gave access to bank
statements and exchange rate information. The new and never-been-tried service proposed by the

bank is to include free account money transfer, corporate payroll uploading system where
employers could upload payroll to the system and make payments to individual worker’s
accounts online and online utility bill settlement system, when utility companies are ready (Asrat
2010).

An agreement was signed by three private commercial banks such as Awash international Bank
S.C, Nib International Bank S.C and United Bank to launch ATM and POS terminal network, in
February 2009. This is a welcoming strategy to improve electronic card payment system in
Ethiopia. The three private commercial banks have agreed in principle to establish an ATM
network called Fettan ATM network. If everything goes as planned, Fettan ATM will install over
140 ATM machines and over 340 POS machines across Ethiopia. There will be one ATM at
every branch of the consortium banks, all domestic airports serviced by Commercial service,
shopping complexes and merchants. The agreement is the first significant cooperation between
competing banks in Ethiopia, which others should be encouraged to follow as there is no single
bank in Ethiopia that can afford to provide Extensive geographical coverage and access (Binyam
2009).

2.3 Challenges of Banks in adopting /expanding E- Banking system

Many researchers have been used different frameworks in the study of factors that affect banks
in the adoption of new technological innovation that facilitate E-banking services. Among the
frameworks that have been developed includes, the Technology-organization-Environment
framework (TOE) (Tornatzky & Fleischer, 1990) which identifies three basic factors for the
adoption of technological innovation, i.e., technological factors, organizational and
environmental factors. Technology Acceptance Model (TAM) (Davis, 1989), which posit the
two sets of beliefs, i.e. perceived ease of use (PEOU) and perceived usefulness (PU) to determine
individual’s acceptance of a technology. PEOU refers to the degree to which an individual’s
believes that using a particular system would be free of physical and mental effort, PU on the
other hand is related to users perception of the degree to which using a system will be beneficial
(Alsabbagh & Molla,2004).

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2.3.1 Technology- Organization- Environment (TOE) framework.
TOE framework was proposed by Tornatzky and Fleischer; it is designed for studying the
likelihood of adoption success of technology innovations. This framework is a comprehensive
and well received framework in the context of innovation adoption by organizations and has
been used in many studies (Zhu & Kraemer 2006; Chang et al 2007; Salwani, et al 2009, Ellis
2009). According to Tornatzky and Fleischer (1990), technology adoption within an organization
is influenced by factors pertaining to the technological context, the organizational context, and
the external environment. Based on this, the researcher adopts the TOE framework to summarize
possible key factors affecting E-banking adoption. The technological factor refers to adopter’s
perception of E-banking attributes. Typical characteristics of technology considered in
technology adoption studies are based on the assumption of Roger’s diffusion of innovation
(Rogers,2003), Which include relative advantages (perceived benefits), and relative
disadvantages (perceived risks).While the organizational factor refers to the organization’s
characteristics that influence its ability to adopt and use of E-banking system. The environmental
factor refers to the external environment in which an organization operates and its condition for
supporting the development of E-banking services. For each context, various factors have been
identified from the literature but only those that are considered relevant for E-banking adoption
are included in the framework. Details of factors considered in this study are discussed below.

Figure: 2:1. Technology-Organization-Environment framework

Environmental factors Organizational factors

 Legal framework
Financial and human resources
National ICT infrastructure
 Competitive pressure
 Government support

E-Banking
Adoption

Source: Tornatzky and Fleischer (1990, P 541)

Technological factors
 Perceived risks(relative disadvantage)
 Perceived benefits(relative advantage) 12
2.3.1.1 Technological Factors
It appears that there is a lack of consensus on what factors belong to this context. For example,
one study (Salwani 2009) includes technology competence covering existing technology
infrastructure and skills to utilize the technology in this context, while other studies (Chang 2007
& Ellias 2009) consider some relevant characteristics of technology. To avoid overlapping
between technology and organizational contexts, researcher chooses two basic factors related to
technology competence, which have relevant to the organizational factors, i.e perceived benefits
and perceived risks are considered in this study from the technological factors.
1. Perceived benefits: - Perceived benefits of E-banking cover both direct and indirect benefits
for the banking industry as well as for the consumers. Direct benefits include the savings on
operational cost, improved organizational functionality, productivity gain, improved
efficiency and increased profitability. Indirect benefits include the opportunity or intangible
benefits such as improved customer’s satisfaction through improved services, improved
banking experience and fulfillment of their changing needs and lifestyle (Lacovou 1995;
Kuan &Chau 2001& Lu et al 2005).
2. Perceived risks: - One of the important risks faced by banking institutions in offering E-
banking services is the customers resistance to use the services which significantly hinder
the growth of E-banking ( Laforet 2005 ; Zhao et al 2008). Issues related to security have
always been a concern when dealing with technologies related to online transactions such as
E-banking (Rogers 2003 ; Chang 2007). Therefore, the perception of the risks regarding E-
banking is expected to influence its adoption and further growth.

2.3.1.2 Organizational Factors.

Organizations are different in their preference to adopt technological innovation (Grover 1993;
Lacovou 1995) influenced by a number of factors, like firm size, top management support and
financial and human resources. In the framework for this study, researcher uses one basic
organizational factor as discussed below.

Financial and human resources: - Financial resources are an important factor in facilitating
innovation adoption for any organization and they are often correlated with the firm size
(Lacovou 1995; Kuan 2001).Therefore, it is expected that the availability of financial resources
within the adopting firms is important for E-banking adoption.

13
These resources enable banking institutions to obtain human related resources including the
required skills and expertise to develop and support provision of E-banking services.

2.3.1.3 Environmental factors

Researcher identified factors related to the environmental context that play a crucial role in
technology adoption and some factors in this category are arguably more influential than others,
especially when countries under study have an authoritative government leadership. The Four
factors relevant for E-banking adoptions included in this study are:-
1. Legal Frameworks: - The existence and maturity of E-commerce legal frameworks
within a country influence the diffusion of online transactions including E-banking as
demonstrated in various studies (Martinson & Trappey 2001; Tan & Wu 2002).
2. The National ICT infrastructure: - National ICT infrastructure is a major factor that
supports the adoption of E-banking as the case for other E-commerce initiatives. Without
an adequate development level and quality of a nation’s ICT infrastructure, E-banking
adoption and use cannot do well (Scupola 2003; Efendioghu 2004).
3. Competitive pressure: - Competitive pressure can strongly influence any bank to
develop and adopt E-banking initiatives and it may affect the bank’s perception towards
E-banking system. As implied in previous studies (Gibbs et al 2003; Quaddus &
Hofmeyer, 2007).
4. Government Support:-Government can either directly or indirectly affect the adoption
of E-banking in terms of creating a favorable environment and impetus for banking
institutions and their customers so that the services can be diffused with the community
(Lacovou 1995;Kuan, 2001)

2.3.2 Technology Acceptance Model (TAM)

TAM was developed by Davis (1986) to explain the computer-usage behavior. According to the
model, in explaining the adoption of any information system, perceived ease of use (PEOU) and
perceived usefulness (PU) are the two most important determinants.
1. Perceived ease of use: - refers to the degree to which a person that using a particular
system would be free from effort (Davis 1986).
2. Perceived usefulness: - refers to the degree to which an organization that using a
particular system would enhance or improve its job performance.

14
 According to Masrom and Hussein (2008), the adoption of whether to use an information system
for a particular individual is very much dependent on the perceived usefulness and perceived
ease of use of the information system. Figure 2.2 shows the links between all the factors found in
TAM.

Figure .2.2. Technology Acceptance Model (TAM)

Perceived usefulness

External variables Attitude towards using Behavioral

intention

Perceived ease of use Actual use

Source: Davis (1986, p251)

TAM was developed to explain and predict particular IT usages. However, this particular Model
has been using by many researchers in studying adoption and diffusion of various IT
technologies. For this study researcher uses two basic factors of TAM, i.e, perceived ease of use
and Perceived usefulness to analyze the perception of users on the adoption of E-banking system
in Ethiopia.

The frameworks discussed above have their own advantage and disadvantages based on the
nature of the study. In this study, Technology-organization-environment framework and
technology acceptance model were used to have a more precise forecast on the barriers and
drivers of adopting E-banking system in Ethiopian banking industry.

15
2.4 Empirical studies related with adoption of E-banking in Ethiopia
Some related studies are conducted by different researchers in different parts of the world.
However, there are limited numbers of studies conducted in Ethiopia on the adoption of
technological innovation. Specifically, Gardachew (2010) conducted research on the
opportunities and challenges of E-banking in Ethiopia. The aim of his study was focused on
analyzing the status of electronic banking in Ethiopia and investigates the main challenges and
opportunities of implementing E-banking system. The author conducted a survey on the existing
operating style of banks and identifies some challenges of using E-banking system, such as, lack
of suitable legal and regulatory frame works for E-commerce and E- payments, political
instability in neighboring countries, high rates of illiteracy and absence of financial networks that
links different banks. According to Gardachew (2010), opportunities offered by ICT through e-
learning programs and Commitment of the governments on development of ICT infrastructures
is considered as drivers of using E-commerce and E-payment systems.

Wondwossen and Tsegai (2005) also studied on the challenges and opportunities of E-payments
in Ethiopia; their objective was studying of E-payment practices in developing countries, Africa
and Ethiopia. The authors employs interview and on site observation to investigate challenges to
E-payment in Ethiopia and found that, the main obstacles to the development of E-payments are,
lack of customers trust in the initiatives, Unavailability of payment laws and regulations
particularly for E-payment, Lack of skilled manpower and Frequent power disruption. According
to Wondwossen and Tsegai (2005), an adequate legal structure and security framework could
foster the use of E-payments, which is contradicting with the finding of the previous study.

On the other hand Daghfous and Toufaily (2007) conducted a study on the success and critical
factors of adopting E-banking by Lebanese banks. Their study was conducted on the factors that
can lead to success the adoption of E-banking and the other factors that can constitute as barrier
to its adoption, it focus on the organizational, structural and strategic factors which can
accelerate or, on the contrary, slow the adoption of this electronic mode of distribution and
communication by the banks, through analyzing the case of the Lebanese market. In order to test
the validity of the theoretical framework, structured survey was used, interview questionnaire
that was given to E-banking managers or to information technology managers of all the banks on
the official list of institutions operating on the Lebanese market, with a total of 57 banks, 31 of

16
them operate internationally and 26 are strictly local were used to gather data. The results of their
study shows that the organizational variables (bank size, functional divisions, technical staff,

technical infrastructure, perceived risks, decision makers` international experience and mastery
of innovation) are variables which exert significant impact on the adoption of E-banking, among
the structural characteristics, the result revealed that internal technological environment of the
bank is a very important factor in determining the adoption of E-banking, also the result shows
that banks which are developing in the international scale are more likely to adopt E-banking
innovations. Finally the result of the study indicated that extent of penetration of E-banking in
the growth phase of an emerging market has an important correlation with the improvement of
commercial performance.

The other descriptive case study analysis conducted by Khalfan et al (2006), on Factors
influencing the adoption of internet banking in Oman, aimed to identify the main potential
factors or impediments that are currently inhibiting the incorporation or adoption of E-commerce
applications in the Omani Banking sector. Data, used in their study were collected using semi
structured interviews and survey questionnaire as well as reviewing some bank documents. The
results of their study provide a Pragmatic picture about the adoption of E-Commerce applications
in the core financial sector domain of Oman. One of the main findings is that security and data
confidentiality issues have been a major barrier. The banking sector was reluctant to use E-
commerce applications as they felt that transactions conducted electronically were open to
hackers and viruses, which are beyond their control. Lack of top management support is the
other inhibiting factor in the adoption of electronic commerce applications as per their finding.
Similarly the study of Ghazi and Khalid (2012), found that, the most important barriers for E-
business growth are technological issues, such as, security risk, quality of internet and cost of
implementation to be the most prominent.

The study of Shah et al. (2005) on critical success factors (CSF) in E-Banking conducted in
United Kingdom, aims to determine the critical issues related to financial sector organizations
when they establish businesses online. The survey method was used by researchers which target
the financial sector in the UK. The study indicates that Understanding the CSFs in E-banking is
important for senior management of banking related organizations, because it would potentially
help them improve their strategic planning process. The analysis of the study indicates two major
17
types of statistical analyses were conducted, descriptive statistical analyses and factor analysis.
In descriptive analyses, the factors (or variables) were ranked in order of their mean score, the
highest score being the most important and so on. The top six factors in order of importance
were: user-friendly website, systems security, support from top management, fast responsive
customer service, promotion of electronic commerce within organization, and all time
availability of services and rapid delivery of services. Factor analysis, which was done to group
together, related variables to uncover factors (in terms of factor analyses), found the following
factors to be critical for the success in E-banking. Issues related to organizational flexibility and
speed of services delivery were found to be at the top of the importance list. Issues related to
organizational flexibility and speed of services delivery were found to be at the top of the
importance list. Business processes and systems integration and enhanced customer services
were next in the list of importance.

Polatoglu & Ekin (2001); conducted a research on an empirical investigation of Turkish

consumer acceptance of internet banking and mention reliability as the prime factor in their
finding for the adoption of new technological innovations, reliability consists of security and
privacy in Internet Banking transactions. They go on to state that risks (security concern) include
financial, physical or social risks associated when trying an innovation. They say that security
risk is known to be as one of the major barriers in online banking adoption. Zhao et al. (2010) in
their study of adoption of internet banking service in china says trust in a bank is the
fundamental because it deals with customers financial activities. Trust is not only important to
reduce risk in Internet Banking in general but also it helps banks to build trust to be more
competitive in the industry.

Gerrard et al (2006), in their study in Singapore identified the risks associated to the adoption of
Internet Banking. All respondents who did not use Internet Banking services had a negative
perception of the security in Internet Banking. The respondents perceived that there were many
security risks when using the internet. They felt the privacy was a concern, feeling all their
financial information could be in jeopardy. Risk was one of the two most frequently mentioned
factors in their study concern about risk was mentioned by all respondents. An empirical
investigation conducted by Sathye (1999), on the adoption of Internet Banking by Australian
consumers also identified, security concerns as key factor in internet banking adoption. A report
18
on Internet Banking in Australia finds that, security concerns among banks and customers are
keeping both away from Internet Banking. According to Sathye (1999), security was identified
as the biggest obstacle in adoption it was found that 78 percent of personal and 73 percent of
business respondents had security concerns when it comes to the use of Internet Banking. Thus,
pointing out that personal users have more security concerns than business users. Sathye (1999)
further state that, a survey conducted by Thorton Consulting (1996) in USA concluded that 67
percent of banks in the USA felt that security is a key anxiety in Internet Banking adoption.
Banks tend to promote their security features in their services using technical terminology. This
makes it difficult for normal customers to comprehend and resulting to a squander in the whole
promotion.

Similarly the study of Yang (1997) on the security of electronic banking aimed to identify the
challenges that oppose electronic banking which are the concerns of security and privacy of
information. The study suggests that solutions to the security issues require the use of software-
based systems or hardware-based systems or a hybrid of the two. These software based solutions
involve the use of encryption algorithms, private and public keys, and digital signatures to form
software packets known as Secure Electronic Transaction used by MasterCard and Pretty Good
Privacy. Hardware-based solutions such as the Smartcard and the Me Chip provide better
protection for the confidentiality of personal information. Software-based solutions have the
advantage over hardware-based solutions in that they are easy to distribute and are generally less
expensive. In Laukkanen (2008) research, risk is considered as the most intense barrier and the
greatest concern in the adoption of Internet Banking. However, in this study consumers feel
human errors by themselves could cause a threat to their financial services. For example, losing
their Personal identification number (PIN) codes and it may get it to the wrong hands and result
in crime or theft. “A higher determinant of resistance appears to be the risk related to the
individual’s perceived ability to use the innovation successfully, i.e. self-efficacy” Laukkanen
(2008,p.788-797; Sathye (1999) suggests that banks use positive publicity to its customers to
help ease the response from customer on security.

One of the major banks in Australia has taken responsibility in undertaking losses for any
unauthorised use, with exception of certain circumstances. However, in an empirical
investigation in Turkey by Polatoglu & Ekin (2001) states that Internet Banking services
introduced by large, well-known and trusted banks, because customer perceived security risk in
these banks is assumed to be decreasing significantly. On the other hand the risk factor is a
19
barrier to corporate customers of banks as well. Balachandher et al (2010) have completed a
study on the barriers to internet usage on a corporate customer perspective and found that lack of
trust on security issue is the main barrier. The study shows that corporate customers only use
Internet Banking to a certain extent and feel banks should invest more on security infrastructure
and banks should be willing to take full responsibility. These results are similar to the findings of
different studies. For example in the study of Booz et al (1997), security concern was the top
ranked factor for users not adopting Internet Banking in Latin America.

Ram and Sheth (1989) argue that consumer resistance to the innovation is caused by functional
barriers and psychological barriers. Functional barriers can be divided into three: the usage
barrier, the value barrier and the risk barrier, where as psychological barriers can be divided into
tradition barrier and image barrier. According to Ram and Sheth (1989) functional barriers arise
when consumers perceive changes would take place when adopting innovation and the
psychological barriers are caused by consumer’s beliefs. On the other hand Khanfar et al (2006)
conducted study on the customer satisfaction with internet banking web site in the Arab Bank.
The study identified some factors which can determine customer‟s satisfaction in the use of
internet banking service. Such as; customer supports, security, ease of use, digital
products/services, transaction and payment, information content, and innovation. Researchers
employ a survey questionnaire to gather data and their results showed that there is a narrow-
based satisfaction with internet banking in all factors through a multi-regression; the researchers
found out that all factors have an impact on the customer satisfaction, and they have found that
the relation was positive.

A research conducted by D’Souza (2002) on the comparative performance of public and private
sector banks in the decade of the 1990s shows that though the turnover ratio rose in public sector
banks (PSBs), the turnover per employee in private and foreign banks doubled relative to the
ratio for PSBs. Also, this is not due to the presence of a large rural and semi-urban concentration
of bank branches amongst PSBs but rather due to technological up gradation in the private and
foreign banks. Private and foreign banks have changed the structure of their employment towards
a higher skilled workforce by increasing the recruitment of officers and reducing clerical and
subordinate staff. The combination of higher technology and higher skills have posted a higher
turnover for these banks as they have been able to provide better customer support and have
managed their assets well.
20
The study of Aghdassi et al (2007) on the association between strategic values and E-banking
adoption in Iranian banks attempted to understand strategic value of E-banking for Iranian banks
and examine the causal effect of perceiving E-banking as a value and its adoption. The
researchers propose an E-banking adoption model that is identifying five factors that have been
found to be influential in the perception of strategic value of IT: performance support,
operational support, managerial productivity, and strategic decision aids. They also identified
eight factors that influence electronic banking adoption: organizational readiness, Infrastructural
readiness, external dependency, Intangible pressure, persuasive pressure, perceived ease of use,

and perceived usefulness. Data are collected via a questionnaire-based survey from Decision
maker unit of Iranian Banks. In order to test the model, a statistical analysis was conducted in
two stages. The first step employed factor analysis to measure whether the number of factors and
loadings of items involved in the two main constructs (perceived strategic value and adoption)
conform to the proposed model, canonical analysis was utilized in the second step in order to
explore how the perceptions of strategic value influence the decision to adopt E-commerce. The
finding of their study indicated, that in a developing country like Iran and a big industry like
banking, although the items of the adoption factors model are applied, the story is a bit different.
In Iran the E-commerce adoption specifically E-banking adoption is in its beginning stages and
still there are lots of gaps. These gaps could be technological, economical, socio-cultural,
geopolitical and other gaps. Also the result of their study expressed, that bank managers'
perception through E-commerce is very positive and effective in their adoption trend.

The other study reviewed was the study of Kassim (2005) focused on E-banking service quality
gaps in the Qatari banking industry investigates the discrepancy between customer's expectation
and perception towards the E-banking services in Qatar. A questionnaire was distributed to 100
retail-banking customers in Doha. Out of a total of 100 questionnaires, only 62 were useable. A
cross-sectional survey design was adopted which questioned respondents on E-banking services.
The findings of the study showed that there were some differences in magnitude of gap score
among the five items of the E-banking services: Internet/Telephone/SMS, personnel assistance,
instructions, ATM machines and functionality of the ATM machines. The result also showed that
one item of E-banking services had positive gap score, that is, the quality of the
21
Internet/Telephone/SMS banking services. All the other four items indicated that the quality of
service fell short of the customer's expectation; customers were generally not satisfied with the
service providers. Nevertheless, each item of quality of the E-banking services showed
differences with respect to the size and gap score. On the other hand, the study of
Leelapongprasut et al (2005) on the quality of Internet Banking in Thailand aimed to assess the
level of Internet Banking services quality in Thailand and compared the overall services quality
of Internet Banking and the factors of Internet Banking service between each bank and each
dimension of quality.

The study examined the following dimension of quality such as performance, Features,
Reliability, Conformance, Durability, Aesthetics, Serviceability and Perceived quality. The result
of the study revealed that the quality level of internet banking service of commercial banks in
Thailand in the perspective of performance was different in each bank and by weighting the
importance of criteria used to evaluate the Internet Banking service quality in Thailand, the most
important was the dimension of reliability, serviceability and durability. The less important was
in dimension of perceived quality.

The study of Kerem (2003) on the adoption of electronic banking: underlying consumer
behaviour and critical success factors conducted in Estonia, was intended to study how
consumers perceive electronic banking in the heyday of interactive channels in Estonia, as
Estonia is internationally renowned for being a pioneer in the acceptance of new technologies. A
series of an in depth interviews was conducted with leading industry experts in Estonia. The
selection criterion for the respondent was mainly their involvement with the development of
Internet banking systems from the early days of its emergence. Two factors that the respondents
did not consider relevant to their adoption decision were banks' marketing activities and personal
recommendations from friends and colleagues. Also the survey conducted six main obstacles
(computers are difficult, no access to internet, internet banking is expensive, low security, have
had no chance to try and I prefer personal contact) in adopting Internet banking (results of a
preliminary study, 100 respondents), the most important factors discouraging the use of Internet
banking are lack of Internet access and not having a chance to try out Internet banking in a safe
environment. Finally the research indicates that banking activities alone may not be sufficient in
achieving growth if general infrastructure, economic environment and government initiatives are
not supportive. The research conducted on identifying the attitudinal, social and perceived
behavioral control factors that might influence the adoption of Internet banking by Hoppe et al.
22
(2001) were based on theory of planned behaviour (TPB) and the diffusion of innovations theory
(DIT) developed by a previous research in Singapore. The aim of the study was to collect South
African data in order to test out the hypotheses regarding the factors, which affect adoption of
Internet banking and compare these results with those collected in other countries. Online
questionnaire was used to collect empirical data and the results of the study shows that intention
to adopt Internet banking can be predicted by attitudinal factors, perceived behavioral control
factors to a lesser degree, and not by subjective norms. All attitudinal factors except banking
needs are found to be significant, with complexity and risk showing a negative relationship.

2.5 Barriers related to the adoption and expansion of E-banking

There are a lot of reasons which hinders the popularity of E-banking services in spite of the fact
that bankers and customers can get benefit from online banking. The majority of private banks
are still lacking behind the online banking channel. According to Pikkarainen et al. (2004) the
reasons behind banks are not using the online banking services are as follows:
1. The internet connection is very important prerequisite for customers to use online
banking services.
2. Before using these online banking services the new users need to learn how to use these
internet services.
3. Some non user’s complaint that the face to face banking situation is quite different from
doing banking online so there are no social dimensions while doing online banking
(Mattila, 2003).
4. The security issue hinders some customers to use the online banking services.

Mattila (2003) noted that perceived difficulty in using computers combined with the lack of
personal service in electronic banking were the main barriers while Sathye (1999) identified the
security concerns and lack of awareness about Internet Banking as the main obstacles to non
adoption. He pointed that young, educated and wealthy groups of customers were the most
relevant customer segments for the rapid development of Internet banking market.

2.6 Challenges on expansion E-banking in Ethiopia

According to Gardachew (2010) Ethiopian banking industry faces numerous challenges to adopt
E-banking system and grab the opportunities presented by ICT applications in general. The Key
Challenges for E-banking applications are:

23
 Low level of internet penetration and poorly developed telecommunication infrastructure:
Lack of infrastructure for telecommunications, Internet and online payments impede
smooth development and improvements in e-commerce in Ethiopia. Most rural areas of
the country, where the majority of small and medium businesses are concentrated, have
no Internet facilities and thus are unable to engage in e-commerce activities.

 Lack of suitable legal and regulatory framework for e-commerce and e-payment:-
Ethiopian current laws do not accommodate electronic contracts and signatures. Ethiopia

has not yet enacted legislation that deals with e-commerce concerns including
enforceability of the validity of electronic contracts, digital signatures and intellectual
copyright and restrict the use of encryption technologies.

 Inadequate banking system.

 Political instabilities in neighboring countries: - Political and economic instabilities in

Somalia, Southern Sudan, and Eritrea are threatening traits that do not provide a very
conducive environment for e-banking in Ethiopia. Political instabilities inevitably disturb
smooth operations of business and free flow of goods and services.

 High rates of illiteracy:- Low literacy rate is a serious impediment for the adoption of E-
Banking in Ethiopia as it hinders the accessibility of banking services. For citizens to
fully enjoy the benefits of E-Banking, they should not only know how to read and write
but also possess basic ICT literacy.

 High cost of Internet:- The cost of Internet access relative to per capita income is a
critical factor. Compared to the developed countries, there are higher costs of entry into
the e-commerce market in Ethiopia. These include high start-up investment costs, high
costs of computers and telecommunication and licensing requirements.

 Absence of financial institutions networks that links different banks (Banks are not yet
automated):- Most of the banking-transactions currently taking place use credit and debit
cards supplied by Visa and MasterCard. For conducting e-banking, the use of credit or
24
 debit cards is mandatory thus requiring the need for specialized systems which are not
currently available.

 Frequent power interruption: - Lack of reliable power supply is a key challenge for
smoothly running E-banking in Ethiopia (Gardachew, 2010).

2.7 Benefit of adopting and expanding E-banking system

It is essential for the banks to have the official bank website providing the possibility to do
transactions so that banks can be qualified as providing the online banking services (Pikkarainen
et al, 2004). According to Giglio (2002) and Robinson (2000) in delivering banking products the
cheapest way can be done only through the Online Banking. According to Karjaluoto et al.
(2002) with the help of online banking services, the branch networks of banks have reduced and
also the staff for working in banks and customers are satisfied to use the online banking services
as it will save a lot of time and effort to go to branch of bank and perform these transactions. So
the main reason behind accepting the E-banking system is that the service is the time and cost
saving and freedom from the place (Polatoglu and Ekin 2001).

Business organization’s are trying to uncover the new technologies coming from the E-
commerce applications which has a lower transaction cost resulted to eliminate association in
distributing channels (Salman & Kashif 2010). The cost can be reduced to zero in some services
like information and manufactured goods information. Transaction of low cost and easiness
provides to adopt the new trend of technology to trade information among different groups and
business parties. Information and Communication technology adoption transformed business to
go from local and global. However it has been said that E-banking is vital in the banking sector
of developing countries (Polatoglu and Ekin 2001).The online payment system is quite new in
banking institutions and dispersion of these innovations can result in more competent online
banking systems which resulted in lots of changes in the technologies of the banking sector.

Polatoglu and Ekin (2001) argued that early adopters and heavy users of E-banking services were
more satisfied with the services compared to the other customer groups. According to Joseph and
Stone (2003), the ability of delivering services via technology appears to be correlated with high
satisfaction with services deemed most important to customers. Furthermore, Joseph & Stone
(2003) emphasized that human and technology based delivery channels were greatly linked with
the customers perceptions of how these bank services were delivered to them and pointed out

25
that these perceptual outcomes would affect the level of bank customer satisfaction, retention,
and switching. Before the shift of technology, customers were facing a lot of problems like
handling a lot of money and transferring of that money, submission of utility bills and waiting in
a long queue as there was no online transferring facility, and there was no information about new
services offered by banks and mostly deposit holders were unaware of how to get benefits from
bank products and services like bank loans, credit cards, ATM cards etc.

2.7.1 Benefit of E-banking for Banks

It should be noted that E-banking can bring about various benefits for banks and their customers
as well. It is obvious that cost savings, efficiency, gaining new segments of customers,
improvement of the bank’s reputation and better customer services and satisfaction are primary
benefits to banks (Jayawardhena & Foley, 2000). In addition, Jayawardhena & Foley (2000)
noted that setting up a specialized E-banking infrastructure costs about US $1 to $2 million,
which is much lower than setting up a banking branch. In addition, the authors conclude that
costs for running a traditional bank account for 50% to 60% of its revenues. Under the view of
Robinson (2000), relevant costs for conducting a banking transaction via online are much lower
than via a brick and mortar branch. Moreover, Sheshunoff (2000) contends that one of the most
important factors influencing the adoption of E-banking by banks is the need to build up strong
barriers to customer exiting. Under the view of the author, once customers become familiar with
the utilization of full service E-banking, it is unlikely that they will change to another financial
institution.

Such an argument can be supported by the consumer behavior theory that switching costs are
often very high in terms of time and efforts by consumers. Finally, the author emphasizes that the
implementation of E-banking can bring about many competitive advantages for banks in today’s
highly competitive banking market.

A research on E-banking has been carried out in Denmark by Mols (1998). The author argues
that E-banking can play an important role in enhancing cross-selling and price differentiation. E-
banking can make favorable conditions for banks to provide customers numerous services 24
hours a day and 7 days a week. E-banking can improve customer satisfaction with the bank due
to the fact that it makes customers less price sensitive, and improve their intention to repurchase,
and more loyalty to the bank via providing more positive words of mouth about the bank than
other bank customers.
26
2.7.2 Benefit of E-banking for Customers
It should be noted that E-banking is not only brings about benefits to banks but also to their
customers. Thanks to the emergence of the Internet, banking transactions are no longer limited to
time and geography. It is very easy for consumers throughout the world to access to their bank
accounts 24 hours per day and seven days a week. Customers can enjoy a variety of services,
especially services which are not provided by traditional bank branches (Pham 2010).It is argued
that one of the greatest benefits that E-banking brings about is that it is not expensive or even
free for customers to utilize E-banking products/services. However, some people believe that
prices appear to be one factor that is impedimental to the diffusion of E-banking (Sathye 1999).
The price debates often revolve around geographical differences and disparities between costs of
Internet connections and telephone call pricing. It has also been believed that E-banks have been
changing to respond to customers increasingly changing demands (Pham 2010). There has been a
tendency that customers don’t want to travel to or from a bank branch to conduct some banking
transactions. In other words, they want to utilize E-banking to save time and money. E-banking
can bring about convenience and accessibility, which will have positive effects on customer
satisfaction and loyalty (Pham 2010). It is totally possible for customers to manage their banking
transactions whenever they want and to enjoy improved privacy in their interactions with the
bank. In addition, customers can enjoy more benefits at lower cost levels by utilizing E-banking
(Mols, 1998).
It is contended by Turban (2008), that E-banking is really beneficial to customers in terms of
cost savings, no limit on time and space, quick response to customer complaints, and better
services/products. Such benefits are believed to elevate customer satisfaction.

Summary
E-banking is a form of banking where funds are transferred through an exchange of Electronic
signal between financial institutions or/and customers, rather than exchange of cash, checks, or
other negotiable instruments and it is an online banking/Internet banking which is the use of the
Internet as a remote delivery channel for banking services. E-banking innovation was traced back
to 1970s when the computerization of financial institutions gained impetus. Innovative banking
has grown since then, aided by technological developments in the telecommunications and
information technology industry. The early decade of the 1990s witnessed the emergence of
automated voice response technology. The security first network bank was the first internet
banking in the world that was built in 1995, in USA.
27
In Ethiopia E-banking system was started by the largest government owned commercial bank
(CBE). CBE introduced to use ATM to deliver service to customers beyond their brick and
mortar banking system in 2001. Following the introduction of ATM in commercial bank of
Ethiopia, Dashen bank, the largest private bank in the country started to use ATM machine to
deliver service to its customers in 2006, and the bank adopts mobile banking (Modbirr) in the
year 2009. Another two private banks, Zemen bank and Wegagen bank also use different
technological innovation in their banking system.

In relation with the study of technology adoption different frame works were used by different
researchers, in this study two basic frame works has been reviewed, which can guide the study,
these are: Technology-organization-environment (TOE) framework and Technology acceptance
model (TAM), Some of the challenges deals with adoption of E-banking are lack of personal
service in E-banking, security concerns, Lack of enough IT infrastructures and lack of legal
frame works. However, some of the barriers such as, lack of competition between local and
foreign bank and lack of social awareness were not addressed. Despite the stated challenges E-
banking has advantages for both banks and customers, by saving time and costs.

28
 Chapter Three

Research Methodology

In the previous chapter, the literature review, which shows the factors affecting expansion of E-
banking system and review of issues related with barriers and benefits of E-banking, has been
presented. This chapter presents the detail methodology, showing the logical frame work that
discusses research purpose, research approaches, Research strategy, data collection and data
analysis method (research method adopted).

3.1 Research Approach and Design

Overview of the Methodology
Many researchers have written extensively on research methodology. The underlying factor in
most studies on research methodology is that the selection of methodology is based on the
research problem and stated research questions. Methodologies cannot be true or false, only
more or less useful (Silverman, 2001). Nachamias et al (1996) for instance states that
methodologies are considered to be systems of explicit rules and produced, upon which research
is based, and against which claims for knowledge are evaluated. Conducting any type of research
should be governed by a well-defined research methodology based on scientific principles.
Eldabi (2002), suggested that a series of steps as a research paradigm to be followed in a
methodology part of a research. Based on this suggestion researcher basically try to follow and
collaborate it with the guide line of this basic framework of research paradigm developed by
Foster

29
 Figure 3.1.Frame work for the research paradigm
Source: Foster (1998)

Research Paradigm

Research purpose Research approach Research strategy Data collection Data analysis
Method Method

Quality standard for research

3.1.1 Research Approach

Research approach is selected by researcher(s) based on the research purpose, the nature of the
research, the problem area, and research questions (Alhamdani et al. 2006). The research
approach in this study is chosen based on the purpose and the research questions set out to be
addressed. According to Creswell (2003, P.13-15) There are three basic types of research
approaches, quantitative, qualitative, and Mixed approach.

1. Quantitative research approach

Quantitative research approach is based on the philosophy of post positivism world view. It is
also reductionist in that the intent is to reduce the ideas into a small, discrete set of ideas to test,
such as the variables that constitute hypotheses and research questions. In addition, quantitative
approach uses statistical methods in describing patterns of behavior and generalizing findings
from samples to population of interest, and employs strategies of inquiry such as experiments
and surveys (Creswell, 2003).

30
2. Qualitative research approach
Under qualitative approach or social-constructivist world view, inquirers generate or inductively
develop a theory or pattern of meaning rather than starting with a theory as in post positivism.
Qualitative researchers tend to use open-ended questions so that participants can express their
views and meanings are constructed by human beings as they engage with the world they are
interpreting (Creswell 2003).

3. Mixed research approach

Mixed research approach or pragmatist world view is not committed to any one system of
philosophy and reality. In this approach, inquirers draw liberally from both quantitative and
qualitative assumptions. In order to achieve the objective of this study and answer the research
questions researcher adopts mixed research approach to examine the Barriers and drivers of
expansion E-banking in Ethiopian banking industry to converge across qualitative and
quantitative methods (triangulating data sources). Employing this approach is used to neutralize
or cancel the biases of applying any of a single approach and a means to offset the weaknesses
inherent in a single method with the strengths of the other method (Creswell 2003). Mixed
research approach opens door to multiple methods of data collection and helps to generate the
findings to a population and develop a detailed view of the meaning of a phenomenon or concept
for individuals (Creswell, 2003; pp. 12-22). this research approach pose the researcher to the
challenges that need for extensive data collection, the time-intensive nature of analyzing both
text and numeric data, and the requirement for the researcher to be familiar with both
quantitative and qualitative forms of research (Creswell, 2003; pp. 210). Mixed methods
approach can be implemented in different ways. The literature identifies three strategies in
integrating the two approaches, i.e quantitative and qualitative methods (Wollela, 2009, P.92).
First concurrent, in which the quantitative and qualitative phases occur simultaneously; second,
sequential, in which the researcher starts with gathering qualitative data and then gathers
quantitative data or vice versa in two different phases; and third, transformative where the
researcher (either concurrently or sequentially) may be able to give voice to diverse perspectives,
to better advocate for participants or to better understand a phenomenon or process that is
changing as a result of being studied.

31
In this study, Concurrent procedure will be employed to triangulate quantitative and qualitative
data to provide a comprehensive analysis of the research problem. Moreover, the researcher
collect both forms of data at the same time during the study and integrates the information in the
interpretation of the overall results.

3.2 Research Design

There are three types of academic researches depending on the problem area and the nature of
the phenomenon that it studies. The purpose of the research can be exploratory which deals with
unknown problem, Descriptive in which there is an awareness of the problem and explanatory,
where the problem is clearly defined (Ahmed, 2011).

The purpose of this thesis is to conduct an exploratory and descriptive research in order to gather
as much information as possible concerning the expansion of E-banking as an option in a
competitive business environment in Ethiopia. Specifically this will be in respect of the
perspective of commercial bank of Ethiopia. According to Yin (1994) exploratory research is
designed to allow a researcher to just look around with respect to some phenomenon, with the
aim to develop suggestive ideas. Exploratory research is often used when a problem is not well
known, or the available knowledge is not absolute. The technique that is best suited for
information gathering when performing an exploratory research is interview (Yin, 1994). In this
study researcher aimed to explore the main barriers and drivers on the expansion of E-banking in
Ethiopia. To do that, an exploratory type of the study was selected. Because it gives valuable
insight of the problem and result drawn from this study resolve firms grasp of essential
characters. It has also been demonstrated that exploratory research provides suggestive ideas
through reviewing information from problem area. On the other hand this research were focused
on describing the current situation of the problem and answer the research questions which are in
the form of “what” and to highlight the most important factors that can negatively or positively
affect the expansion of E-banking in Ethiopia. Moreover, this research aims to explain the
phenomenon and assess the current situation of E-banking. Therefore, Descriptive research is
being used in to fulfill this approach.

3.3 Research Strategy

The most important condition for differentiating among the various research strategies is to
identify the type of research question being asked (Yin, 1989; Leedy, 1989; Creswell, 2003;
McNabb, 2004; and Hair et al. 2006). It is possible to identify some situations in which all

32
research strategies might be relevant and other situations in which two strategies might be
considered equally attractive. We can also use more than one strategy in any given study.

To this extent, the various strategies are not mutually exclusive. But we can also identify some
situations in which a specific strategy has a distinct advantage (Yin, 1989; p. 20).
According to Yin (1994), there are five strategies to collect data and get results: experiment,
survey, archival analysis, history and case study. In addition, there are three criteria to determine
the research strategy: types of research questions, control over behavioral events, and focus on
present events. But it is important to notice that boundaries among the above methods are not
completely clear, they may overlap each other. The relevant situation for different research
strategy was summarized in table 3.1 as follows.

Table 3.1 Research strategy

Strategy Nature of questions Requires control over Focus on contemporary

behavioral events event

Experiment How, Why Yes Yes

Survey Who, what ,where, How No Yes/No

many, How

Archival Who, What, Where ,How No Yes/No

Analysis many, How much

History How, Why No No

Case Study How, Why, What No Yes

Source: Ahmed, 2011

33
3.4 Variables, Data Sources and Data Collection Methods
In this study, survey approach has been chosen, because the research questions are focused on:
What are challenges on expansion of E-banking? What are the opportunities on expansion of E-
banking? And what are the drivers for expansion E-banking in Ethiopia? So the types of
questions are in the form of “what‟. This research does not require control over behavioral
events but it focuses on current issues.

3.4.1 Type of Data

Primary data is used in this study. The data was collected through, interviews, and
questionnaires. This gives specific responses to the research questions. Primary data is
recognized as data is gathered for a specific research in response to a particular problem through
interviews and questionnaires. Additional data was obtained by examining various documents,
including, banks annual reports on related information, local and international news paper related
with issues of E-banking system, Research reports, books and journal articles.

3.4.2 Data Sources

This research paper intended to examine the main barriers and drivers on the expansion of E-
banking at purposely chosen state owned commercial banks. To undertake this research, the
specific methods of data collection were survey, semi-structured interview and document
sources. Survey for the quantitative strategy was used through distributing self-administered
questionnaires. Questionnaires are distributed to all E-payment department professional staff of
the selected branches. These respondents were selected because, the researcher believes they are
deemed to be knowledgeable about E-banking system and could provide important perspectives
on its expansion.

3.4.3 Method of data collection

In order to collect sufficient data that can answer the research questions, researcher designed two
surveys; the first was a questionnaire to get quantified results. The second survey was interviews
aimed to collect data from E-payment/IT managers. In addition to questionnaire and interview,
data collected from different published and unpublished materials can also been used.

34
1. Questionnaires
As indicated in the above, the staffs of the purposely sampled four branches were included in the
survey. A questionnaire were being distributed to all 160 professional staffs of CBE, Questions
present in the form of affirmative statements, relating to the concepts on E-banking and to
identify their intention on the challenge and opportunities of using electronic banking system, in
such a way to enable measurement of the respondent’s opinions.

The questionnaires was structured in close-ended type and responses to the questions will be
measured on a five Liker rating scale where: Strongly Agree (SA) = 1; Agree (A) = 2; Neutral
(N) =3, Disagree (D) = 1; and Strongly Disagree (SD) = 5; the use of Liker scale is to make it
easier for respondents to answer question in a simple way. In addition, this research instrument
will permit an efficient use of statistics for the interpretation of data. Moreover, the central issue
to argue that liker scales is that it produce ordinal data. Johns (2010) noted that in statistical
terms the level of measurement of the liker response scale is ordinal rather than interval: that is,
we can make assumptions about the order but not the spacing of the response options. Thus, the
permissible descriptive statistics that can perform on ordinal data is median (or average
response) and mode (or more frequent responses) (Hole, 2011).

2. Interviews
In the qualitative strategy, semi-structured interview were conducted with two managers from
each of the four chosen branches to have sufficient information regarding the research problem
and with the relevant body at National Bank of Ethiopia (NBE). The major purpose of this
interview was to substantiate certain facts, According to (Yin, 1989; P. 89). Semi-structured
interviews were conducted to enhance and supplement the results of questionnaires.

3. Other Information
The most important use of this information is to corroborate and augment evidence from other
sources (Yin, 1989; P. 86). Thus, the document examination helps to support the patterns that
evolved from the data collected via questionnaires and interview, so that the validity of the
findings could be enhanced. Some of the data will be obtained mainly from records and reports
of the industry, from the website, magazine, books, articles and journals.

35
3.5 Population and Sampling
This section describes the banking environment in Ethiopia with respect to the policy and legal
framework under which the banking industry operates. The banking industry in Ethiopia is controlled
by the National bank of Ethiopia (NBE) acting as the central bank of the country. There are 18 banks
registered under the NBE up to 2015(Access Capital 2015), these comprises 2 state owned banks and
16 other private commercial banks. One bank and four of its branch’s is selected for this study and
they are found in the capital city of the country, Addis Ababa.

3.6 Strategy Design

Since the research questions mainly focus on “what” questions; it is justifiable for conducting an
exploratory study and more likely to favor survey than others (Yin, 1989; pp. 17-18). Survey design
provides a quantitative or numeric description of trends, attitudes, or opinions of a population by
studying a sample of that population. Its purpose is to generalize from a sample to a population so
that inferences can be made and it is also economical and rapid turnaround in data collection
(Creswell, 2003; pp.153-154); and this method is important for collecting large amounts of raw data
using question and answer formats (Hair et al. 2006). Survey had conducted via self-administered
questionnaire from the purposely sampled bank staff; because questionnaire is a common place
instrument for observing data beyond the physical reach of the observer (Leedy, 1989; pp. 142). The
main advantage of survey is its ability to accommodate large sample sizes at relatively low costs,
ease of administration and ability to tap in to factors that are not directly observable (Hair et al.,
2006).

As briefly discussed in the above, questionnaire were distributed to the purposely sampled
commercial bank staffs, and semi-structured interview will be conducted with the management (E-
payment/IT managers) commercial bank.

The questionnaire was divided into two sections. Section I captures basic demographic information
of the respondents such as age and educational back ground, Section II have information about the
nature of the barriers faced in the adoption and expansion of E-banking services and sought to
determine the perceived benefits of using E-banking system.

3.6.1 Sample Design

Sampling is the process of choosing, from a much large population, a group about which wish to
make generalized statements so that the selected part represent the total group (Leedy, 1989; pp.
158). According to Access Capital (2015), the total number of Commercial Banks which had

36
been operated in the year 2015 is 16 private banks and 2 state-owned banks. Moreover, looking
ahead Ethiopian banking industry enjoying high growth, high profits, and high dividends, From
this participants of the industry commercial bank of Ethiopia (CBE) is the one and it’s the largest
player comparing from the other by having more than one thousand branches all over the country
so that, to undertake this research paper, the researcher purposely sampled one bank i.e. CBE and
four of its branches called Gofa sefer, Arada giorgis ,Addis Ababa and finfine .

The procedure used for drawing the sample from the available lists was based on the branches
current size and transaction volume to deliver service to customers Thus, this research paper
used purposive sampling method to draw the sample from the population.

From the entire bank four braches was selected as a sample units that can be based on the
responsible for E-banking and the total of 160 staff, Will be sampled to see their intention on the
challenges and benefits of expansion of E-banking system in Ethiopia. The researcher chooses to
take 4 branches; because it is often impossible or too much expensive to collect data from all the
potential units. Hence samples are chosen to represent the relevant attributes of the whole
population. In this respect we can note the caution by Graziano and Raulin (1997) because the
samples are not perfectly representative of the population from which they are drawn, therefore
the researcher unlikely to be able to generalize the conclusions to the entire population.

3.7 Method of data Analysis

Data analysis consists of examining, categorizing, tabulating, or otherwise recombining the
evidence, to address the initial proposition of a study (Yin, 1989; pp. 105). The researcher will
analyze the data collected by survey thorough statistical population concerning the expansion of
E-banking system. The data collected via questionnaires will be analyzed with descriptive
statistics using statistical package for social scientists (SPSS) by taking median and mode as
specific analytical tool. Furthermore, Wolcott (1994) cited in Creswell (2003; pp. 184),
suggested that qualitative research is fundamentally interpretative i.e. the researcher makes an
interpretation of the data. Thus, the data that will be collected from the interview and reviews of
documents will be interpreted qualitatively. To sum, the analysis of quantitative data and
interpretation of qualitative data combines to seek convergence among the results (Creswell,
2003).

37
3.8 Summary of the Methodology
The methodology part of this study was based on the research paradigm developed by Foster
(1998) and the guide line as: Research purpose, research approach, Research strategy and
specific research methods employed. The purpose of the study was to explore the main barriers
and drivers on expansion of E-banking system and describe the current situation in the expansion
of the system in Ethiopian banking industry. The research approach in use in this study will be
both quantitative as well as qualitative (mixed) approach. The research strategy choose in the
study is survey study. In the case of research method used in this study, data will be collected by
using questionnaire and interview. Finally data collected from various sources will be analyzed
by using statistical package for social scientists (SPSS).

38
 Chapter Four

Results and Discussion

4.1 Introduction
Data collected by using different techniques were analyzed and presented in this chapter by using
a triangulation approach. A total of 160 questionnaires were distributed to four purposely
sampled commercial bank branches, such as: - Gofa sefer, Arada Giorgis, Addis Ababa and
Finfine branches employees. Out of the total 160 questionnaires, 126 useable questionnaires
were obtained with a 79% response rate. In addition to the questionnaire survey the researcher
conducted interviews with employees working in the E-payment and reviewed documents
regarding E-banking system. The analysis results by using descriptive statistics of the responses
from the qualitative analysis of the interviews are presented in the following sections.

4.2 Barriers to Expansion of E-Banking System in the Case of Commercial Bank of

Ethiopia
Although there are many associated benefits with the expansion of E-banking, there are many
reasons which obstruct implementation of the system. In this study factors identified as
hindrance include, lack of appropriate infrastructure for E-payment, lack of internet facilities and
low customers learning skill how to interact with new technology are some of barrier identified.
As for the expansion of E-banking in the country regarding the technological factor,
organizational factor and Environmental factor were analyzed in the following sections.

4.2.1 Technological factor

The issues raised in this study in relation with technological factor are the perceived relative
advantages benefit that the firm gains from expansion of E-banking system and the relative
perceived disadvantages or risk which hinder banking industries from the expansion of new
technological innovations.
Perceived risk is one of the basic barriers a firms face, while expanding technological innovation
is the perceived risks. This also supported on the outcome that E payment manager’s
participated. In this study respondent were asked whether security issue is raised with the use of
technological facility in the banking industries, and all of them stated that security is the main
concern that hinders our bank to use technological facilities similarly example the study of
39
Sohail and Shanmugham (2003) suggests that one of the barriers in the expansion and adoption
of electronic banking is fear of security risks. These were also supported by the survey result
shown on table 4.1, as follows.
Table 4.1:- Technological Factor Affecting the Use of E-Banking by Customers of
Commercial Bank of Ethiopia (n= 126)
Items related to
Technology Median Mode

Customers fear risk to use 2 2

ATM

Lack of confidence with the

security 2 2

In the case of using mobile

banking, ATM and others,
security risk affect users
decision to use the system 2 2

Customers do not trust the

technology provided by 3
banks 2

Lack of trust is considered as

barriers for the expansion of 2 2
E-banking system
Source: Own Survey (2016)

1= Strongly Agree, 2=Agree, 3-Neutral, 4=Disagree and 5=Strongly Disagree.

Customer respondents were asked whether they fear risk to use ATM, and the descriptive
statistics result shows median and mode value of 2 that means the largest number of respondents
agreed that they fear risk to use ATM; therefore fear of risk is one of the factor that should be
considered when planning to expand and adopt. Similarly the result shown on the above table
revealed that lack of confidence with the security issue is considered as barrier for the expansion

40
of E-banking system, with a median and mode value of 2. This result is consistent with the
findings of Ghazi and Khalid (2012, p.9) and Khalfan et al 2006) in which all indicted that,
security risk as a technological hindrance factor for the adoption and expansion of E-banking.
Lack of trust among bank customers on the use of technological facility provided by bank is
another factor that hindered the expansion of technological innovation by the Ethiopian banking
industry. This is confirmed by a considerable proportion of respondents (29%) who agreed that
trust in the use of technological innovations as one of the basic factor in the expansion of E-
banking system. This result confirms the finding of Sathye (1999) which argued that the greatest
challenge among the electronic banking sector is winning the trust of customers in the issue of
security or perceived security risk as a key inhibitor in the expansion of online banking.

4.2.2 Organizational Related Factors

One of the basic issue related with organizational factor is, the availability of financial skilled
human resource to implement the system and technical or managerial skills required to
implement E-banking system were considered as organizational factors.

As presented in table 4.2 considerable proportion of the respondent ( 40%) did not agreed that
the cost incurred in using internet /online and mobile banking system as factor hindering the use
the service. Similarly the descriptive statistics result shows that, the value for the questions raised
as, does using internet banking increases cost to do banking task and Relatively using Mobile to
get banking service is expensive for customers have 4 median and mode. On the other hand the
result presented on table 4.2, revealed that unfamiliarity with the service provided though ATM,
Internet banking, telephone and mobile phone by customers, lack of technical and managerial
skills on the use of technological innovation and lack of skills to implement E-banking system
viewed as barriers for the expansion of E-banking system.

41
Table 4.2:- Organizational related Factors Affecting the use of E-banking in commercial bank
of Ethiopia.
Items related to
Organizational factor Median Mode

Using internet banking 4 4

increases cost to do banking
task.

Relatively using of Mobile to

get banking service is 4 4
expensive for customers.
Customers of our bank were
not familiar with service
provided though ATM,
Internet banking, telephone 3 2
and mobile phone.
Lack of technical and
managerial skills on the use 2 2
of technological innovation
Lack of skills to implement
E-banking system 3 2

Source: Own Survey (2016)

The above results were also supported by an interview script received from all respondents,
which indicated that compared with traditional banking system, using different technological
innovation in banking industry is used to perform banking activities at lower costs. This finding
is consistent with the finding of Rasoulina & Javaheri(2006) in Iran who argued that, costs in
addition to other factor such as level of infrastructure development, socio-cultural factors and
factors related to legislation and, regulation are the most important factor that affect the
expansion of electronic banking activities. These factors can be either drivers or barriers. For
instance, if a country has managed to achieve a cost reduction greater than the investment made
in expansion of new technology, then the cost factor can be considered as a driver rather than as

42
barrier. On the other hand lack of social awareness/lack of familiarity with different technology
and lack of sufficient skills to use and implement E-banking system were considered as barriers
for the expansion of E-banking system in the case of commercial bank of Ethiopia.

4.2.3 Factors Related to the External Environment

Another factor which may affect the expansion of technological innovation in banking industry
is external environment: In this study four basic environmental factors such as the legal frame
work, national ICT infrastructure, competitive pressure and government support were
considered. The result obtained from survey, interview and literature regarding those four issues
were presented in the following sections.

1. Poor legal and regulatory framework

Electronic payments are not currently covered in Ethiopian legal system. Lack of such legal
framework may thus hinder the introduction of cost effective modern electronic payment
instrument such as ATMs, credit and debit cards, mobile/telephone/internet banking. Other
policy initiative which is currently under consideration is the development of securities market,
particularly, that of long term debt instruments (Getahun 2008). Similarly the study of
Gardachew (2010) revealed that lack of legal frame work is one of the challenges for E-banking
system in Ethiopia. The result of survey presented in Table 4.3 revealed that lack of legal frame
works and cross country legal and regulatory difference is considered as barriers faced by
banking industries for the adoption of E-banking system in Ethiopia.

Table 4.3:- Legal and regulatory framework as factor affecting expansion of E banking in
Commercial Bank of Ethiopia

Item related to Legal and regulatory Framework Median Mode

Poor legal frameworks that enforce banking

industries to adopt technological innovation
Cross-country legal and regulatory differences 2 2
will have impact on the expansion of new
technological innovation in the banking sector
like, ATM, internet banking, mobile banking
and Point of sale terminals (POS). 2 2

Source: Own Survey (2016)

43
Results reported on table 4.3 shows that the median and mode value about the item that enquired
about the lack of legal and regulatory framework supports the expansion of E-banking service in
Commercial Bank of Ethiopia, and a mean and median of 2.00 revealed for the question raised as
Does the existence of Poor legal frameworks that enforce banking industries to adopt
technological innovation and acquire 33% out of the total, So that respondents were agreed there
is lack of legal framework, also Gardachew (2010) revealed that lack of legal frame work is one
of the challenges for E-banking system in Ethiopia. Likewise, the median and mode value for
question raised as does the Cross-country legal and regulatory differences will have impact on
the expansion of new technological innovation in the banking sector like, ATM, internet
banking, mobile banking and Point of sale terminals (POS) were 2.that means greater number of
respondents 53% agreed that the differences on banking regulation in different country will have
impact on the expansion of new technological innovation, According to OECD (2004) lack of
reliable trust and redress systems and cross country legal and regulatory differences was also
impede e-commerce adoption and expansion in addition the result of an interview conducted
with one of the bank supervision manager at national bank of Ethiopia (NBE) also shows that,
Ethiopia is now on the way to implement special rule on the use of E-banking system or it will
be included in the banking regulation. So that lack of legal frame work for the implementation of
E-banking system is raised as basic barrier for the Bank. The finding of this study were also
consistent with the study of Tan and Ouyang (2002), Who argued that lack of legislation is an
initial barrier that influence E-banking expansion in china.

2. Lack of adequate ICT infrastructure

Despite the recent improvements made by Ethiopian government on the national infrastructure,
the overall ICT infrastructure in Ethiopia remains inadequate. Card-based payment systems in
Ethiopia have been growing fast in recent years. Commercial bank of Ethiopia also cited plans to
use new technologies for remittance transfers, including mobile-phone transfers and remittance-
linked financial products such as prepaid cards CBE (2014), However, significant challenges to
these plans include, lack of adequate financial and telecommunications infrastructure for the new
technologies (Alemayehu & Jacqueline 2011). Similarly the study of Wondwossen and Tsegai
(2005) stated that lack of sufficient telecommunication infrastructure is one of the basic
challenges in the development of E-payment in Ethiopia.

44
Table 4.4:- Lack of adequate ICT Infrastructure as a Barrier in the Expansion of E-
Banking Service in the Case of Commercial Bank of Ethiopia
Items related to ICT Median Mode
infrastructure
Using internet banking is
difficult due to low internet
access in Ethiopia 2 2

Internet connection was not

good enough to perform
online transactions in 2 2
Ethiopia
Lack of available ICT
infrastructure 2 2
Mobile banking services may
not perform well because of
network problems 2 2
Source: Own Survey (2016)

The above table shows that poor ICT infrastructure in Ethiopia for sufficient hindered to use
online banking service, with median and mode value of 2.00. Similarly the others question raised
as does Internet connection was not good enough to perform online transactions in Ethiopia, Is
there lack of available ICT infrastructure and does mobile banking service may not perform well
due to network problem have the median and mode value of 2.00, which indicated that lack of
available ICT infrastructure in the country inhibits to use E-banking system. Similarly, according
to an interview script received from the CBE E-payment manager indicates that the poor quality
of telecommunication network service is a major obstacle for all banks in Ethiopia to effectively
deliver some services such as internet banking, mobile banking and others.
.
3. Poor Competition in the Banking Sector
As it is stated in different E-banking literature, competitive pressure is considered as driver for
the expansion of E-banking in developed country. For example, the study of Laforet & Lu (2005)
and Salwani (2009) suggests that, the foreign funded banks are more competitive in securing
corporate clients over the Chinese banks because they are perceived to offer better services and

45
more stringent security measures given their longer experience in E-banking development.
However, poor of competition among local banks and the entire absence of foreign banks in
Ethiopian that perhaps improve completion hinder the expansion of E-Banking system.
Respondents were asked whether poor competition among banks in Ethiopia influence expansion
of E-banking and the result obtained from survey is presented in Table 4.5.

Table 4.5:- Competition among Banks in Ethiopia as Barrier for E-Banking Expansion
Frequency Percent
(%)
Strongly agree
20 15.9
Agree
59 46.8
Neutral
13 10.3
Disagree
29 23.0
Strongly Disagree
5 4.0
Total
126 100.0
Source: Own Survey (2016)

A considerable proportion the respondent 46.8%, agreed that poor competition in the Ethiopian
banking sector and absence of foreign bank operators as barrier as one of the barriers for the
expansion of E-banking system in the country. Similarly, an interview result revealed that, the
Ethiopian banking industry did not consider about competition with foreign banks and such
policies could discourage the banking sector of the country to adopt and expand state of the art
E-banking system in the country.

46
4. Lack of adequate Government Support
The questionnaire result about government support was shown on table 4.6 as follows.
Table 4.6:- Lack of Government Support as Barrier of E-Banking Expansion in the Case of
Commercial Bank of Ethiopia
Items related to Median Mode
government support
Lack of sufficient
government support will
affect customers
willingness to use 3 4
technological innovation

Customers may not willing

to accept E-banking 4 4
service

Source: Own Survey (2016)

Respondents were asked whether lack of government support is an inhabiting factor for the
expansion of E-banking system in commercial Bank of Ethiopia, The result revealed a median
and mode value of 3 and 4 respectively from this result the mode value is the better to relay for
conclusion rather the median because the mode value shows as the most frequency occurring
respondents values. If we examine the mode value 25.2% of them disagreed with the idea that
the poor expansion of E-banking system in the commercial bank of Ethiopia is linked to the lack
of government support rendered to the Bank, the other issue raised as the willingness of customer
to accept E-banking service have a median and mode value of 4 which implies that unwillingness
of customers to accept E-banking system is not an important factor in affecting the expansion of
technological innovation in the case of commercial Bank Ethiopia.

Similarly the interview result conducted with E-payment managers confirms that, the
commitment of Ethiopian government improving the national ICT infrastructure encourages the
commercial Bank of Ethiopia to adopt different technological innovation and the sluggish
development in this respect has much to do with other factors.
47
4.3 Perceived Benefits/Drivers on the expansion of E- banking System in Case of
Commercial Bank of Ethiopia
An advantage that is expected to be gained from the expansion of E-banking covers both direct
and indirect benefits for the banking industries. Direct benefits include savings on operational
cost, improved organizational functionality, productivity gain, improved efficiency, saving of
time and increased profitability. Indirect benefits include the opportunity or intangible benefits
such as improved customer’s satisfaction through improved services, improved banking
experience and fulfillment of their changing needs and lifestyle (Iacouou 1995 & Lu 2005; Kuan
2001).

Perceived benefits from the expansion of E-banking system considered in this study were
classified based on Technology Acceptance Model (TAM), such as Perceived Ease of Use (PEU)
and Perceived Usefulness (PU). PU was classified in terms of time and cost saving. In addition
other benefits beyond cost and time saving were analyzed at the end.

In order to access online banking services, it is important that bank should have ICT
infrastructure and internet facility available to facilitate their customers with all kinds of online
banking services. Polatoglu et al. (2001) suggests many benefits associated with online banking.
Customer can pay their bills, can pay their loans, credit and debit card facilities. In other words it
provides freedom from location, saves time and cost.

4.3.1 Perceived Ease of Use

One of the basic benefits related with the use of E-banking system is the perceived ease of use.
Giglio (2002) suggests that expansion on online banking services reduce the workload over the
banking staff and it is easy to have more satisfied customers. Similarly Robinson (2000)
indicated that online banking provides convenience not only to bankers but also to customers.

48
Table 4.7:- Perceived Ease of use of E-Banking system among Commercial Bank of Ethiopian
Employees

Items related to ease of use of Median Mode

E-Banking

E banking makes it easier for

me to do banking 2 2
In the case of mobile banking,
our customers can simply use
banking service by using their 2 2
cell phone

From the bank perspective it is

easy to use mobile banking to 2 2
accomplish banking task
Using E-payment system (like
debit card, salary card, ATM or
visa card) simplify the activity 2 1
of workers to deliver service
Our bank provide guidelines
on the use of electronic
banking facility 2 2

The management of the bank

provides training courses for
its staff when introducing new
services. 2 2

E-banking system helps to

perform banking task in a
simple way 2 2

Source: Own Survey (2016)

49
Respondents were asked to rate the level of agreement/disagreement to seven items that were
deemed to measure the perceived ease of use of E-Banking system. The result for all statements
indicated that the median and mode values are 2, which means that respondents are agreed with
the idea that perceived ease of use in terms of simplifying banking activities is a factor that
facilitate the expansion of E-banking system in the case of Commercial Bank of Ethiopia. More
over the interview result also supported the result of questionnaire survey that it indicated, it is
an option less to implement E-banking system to simplify the banking activities and improve
customer satisfaction.

This result of this study are also consistent with the findings of Khalid et al (2006) who shows
that there is a clear agreement about the importance of making the E-banking service because it
is easy to deliver service to customers, The findings of this study is also in line with the result
found by Hoppe et al. (2001) which suggest that the more complex a new technology is
perceived to be, the less likely it will be to expand and the more ease of use the more likely to
easily spread out.

4.3.2 Perceived Usefulness

Perceived usefulness is a factor that helps measure the success of E-banking expansion. Hoppe et
al. (2001) indicated that perceived relative advantage has a positive influence on the expansion
of Internet Banking and it is compatible with their values to be expanded by users. Perceived
usefulness can be measured in terms of time and costs saving which both are examined in this
study and the results are presented and discussed below.

1. Time saving
According to an interview result, one of the basic benefits considered in the expansion of E-
banking system, is that it saves time to accomplish banking activities both for banks as well to
customers. Using the system to get banking service is fast and available 24 hours a day and 7
days a week. This were in line with the study of Karjaluoto et al. (2002), which identifies time
saving as a major benefit for to expand online banking system.

50
Regarding time saving as driver for the expansion of E-banking system, respondents were asked
whether they are strongly agreed, Agreed, Neutral, disagreed or strongly disagreed and the result
of survey were shown on the following table

Table 4.8:- Time Saving Benefit of E-Banking System as Perceived by Employees of

Commercial bank of Ethiopia
Item related to Time Median Mode
saving benefit of using E-
banking

Using E-banking such as,

Internet banking ,Mobile
banking, ATM and other
services enables users to
complete banking 2 1
activities more quickly and
easily

E-banking such as,

Internet banking ,Mobile
banking, ATM and POS
services are convenient, in 1 1
terms of time saving

E-banking such as,

Internet banking ,Mobile
banking, ATM and POS
services are convenient, in 1 1
terms of 7 days and 24
hours services

E-banking is more
accessible to users than
visiting a bank 2 1

Source: Own Survey (2016)

51
Respondent rated that using E-banking such as internet banking, mobile banking, ATM and other
services enables users to complete banking activities more quickly and easily with a medina and
mode value of 2 and 1 respectively. Respondent either agreed or strongly agreed about the
perceived usefulness of E- banking system in terms of saving the time needed to effect different
transaction. These result implies, that using online banking system helps to perform banking
activities within a short period of time. Clients can simply check their balance, transfer funds and
pay their bills on line with just a click of mouse and a touch of button. On the other hand using
internet banking is more convenient in terms of saving time and delivering of bank service to
customer 24 hours a day and 7 days a week. This was rated with median and mode value of 1.
The result shown on the above table 4.9 also revealed that the median and mode value for the
question using E – banking is more accessible for user than stopover to a bank is 2.00 and 1.00
respectively, which indicates that, without visiting brick and mortar, customers can get bank
service by using E-banking system. In line with the finding of Balachandher et al. (2010)
suggests that, one of the implications of E-banking is that it should reduce the need to visit bank
branches to get services.

2. Cost saving
Cost minimization is an important goal for business organization in addition to profit
maximization. We can see cost minimization as an advantage of using the system from two
perspectives. First from the bank perspectives, by using E-banking system like, ATM, internet
banking, mobile banking and others, banks can cut down substantial operation costs. Banks can
save huge amount of money by reducing costs associated to payment for tellers or for managing
branches. This way of cutting transaction cost results in higher profit margin for the banks.
D’Souza (2002) noted that, the combination of higher technology and higher skills have posted a
higher turnover for banks as they have been able to provide better customer support and have
managed their assets well. Second, customers can get banking service at lower costs compared
with traditional banking service, because, it is cheaper to make transaction over Electronic fund
transfer. Result regarding cost factor is shown on table 4.9 as follows.

52
 Table 4.9:-Cost Saving Benefit of E- Banking System as Perceived by Employees of
Commercial Bank of Ethiopia
Item related to cost saving Median Mode
benefit of using E-
banking
The transactions in
Internet banking are at a
lower price, or at no cost 2 2

Using technological tools

like ATM helps to perform
transaction at lower cost
2 2

Source: Own Survey (2016)

Respondent rated that Internet banking and using technological tools like ATM helps to perform
transaction at lower cost with median and mode scores of 2. The result implies that, using
technological tools such as internet facilities and ATM machines resulted in performing of
banking duties at lower prices. Similarly, an interview result also indicates that, the basic benefit
a firm or customers gained from the expansion of E-banking is its cost minimization. This
finding is consistent with the previous studies of Poon (2008), and Balachandher et al. (2010), in
which both studies found, cost minimization as an important factor for the expansion of E-
banking system.

4.4 Summary of the Chapter

In this chapter, data obtained from survey, interview and documents has been analyzed. Three
basic factors were used to analyze the barriers for the expansion of E-banking system,
technological factor, organizational factor and Environmental factor. On the other hand
perceived ease of use and perceived usefulness, are two basic factors used as a driver for the
expansion of E- banking.

53
 Chapter Five

Summary of the findings, Conclusion and Recommendation

5.1 Summary of findings
Guided by the technology-organization–environment (TOE) framework and technology
acceptance model (TAM), this study has identified a number of barriers and benefits/drivers for
E-banking expansion. TOE, is classified in to three factors to determine barriers for the
expansion of E-banking system. The technological barriers, identified in this study were security
risk and lack of trust on the technological innovation used by banking industries. The finding
identified under technological factor were also consistent with other studies on technology
adoption in different countries, Ghazi and Khalid (2012) & Sathye (1999), both of them found
that security risk is the major barrier for the expansion of E-banking system.
In the case of organizational factor, financial cost as well as human resource is considered, in this
study financial cost were not considered as barrier for the expansion of E-banking in Commercial
Bank of Ethiopia and it is consistent with the finding of Rasoulina (2006). On the other hand lack
of technical and managerial skills to use and implement the system is considered as barrier for
the expansion of E-banking in the Bank.
Most barriers to E-banking expansion identified in this study were come from external
Environments; specifically poor legal framework regarding E-banking system at national level,
lack of ICT infrastructure, and lower competition between local and entire absence foreign
banks. Interestingly, lack of Government support was not taken as barriers for the expansion of
E-banking system in Ethiopia.
The study also identified basic benefit a firm could get from the expansion of E-banking system.
Those benefits were considered as a driving force for the expansion of the system. The benefits
were classified based on technology acceptance model (TAM) as perceived ease of use and
perceived use fullness. Perceived ease of use is taken as a major benefit of using E-banking
system. At the same time this finding supports the study of Giglio(2002) and Robinson
(2000).The other benefit found in the study were based on its usefulness in terms of time and
cost saving. These are two basic benefits that drive banking industry to enlarge technological
innovations.

54
In general, the finding of the study, contributes to the expansion of E-banking, such as
enhancing customer satisfaction, reduce the number of customers come to banking hall, increase
the productivity of banks, increase reliability and accessibility of banking service, creating good
relationship between clients & bank and also used as a better information control.

5.2 Conclusion
This study aims at investigating the main barriers and drivers of expansion of E-banking in
Commercial Bank of Ethiopia. To achieve the proposed objective two basic frame works were
used, i.e. Technology-organization-Environment (TOE) and technology acceptance model
(TAM). On the other hand both quantitative as well as qualitative (mixed) research approach was
employed in the study E-banking system; such as ATM, mobile banking, internet banking and
others were not well inflate by Commercial Bank of Ethiopian. This is due to low level of ICT
infrastructure and poor legal frame works at NBE, which can initiate banking industry to
implement the system. In addition to the above two basic factors affecting expansion of E-
banking in the Bank, result of the study also shows that security risk and lack of trust on the use
of technological adoption are other major barriers for the system. The level of security risk
associated with E-banking product or service, such as ATM, internet banking, mobile banking
and others, pose different challenges Bank. Improvements are required to ensure client
confidence. Lack of competition among local and entire Absence foreign banks is also another
challenge for the expansion of E-banking in the Bank.

Technical and managerial skills available in Bank for the expansion of E-banking are also
limited. This is influencing the choice of technology in Bank. On the other hand, the study
reveals that the benefits of technological innovation are well known to the bank and represent a
formidable force to drive expansion of the system. In general perceived Ease of use is one of the
basic benefits for E-banking, in which it enables bank staff to perform banking activities in a
simple way. The other driving force for the expansion of the system is perceived usefulness, in
which, it is used for time saving and cost reduction. This and the other benefit identified in the
study were considered as a very great potential for bank to improve their public image.

In general, the findings of this study offer additional insights into the current E-banking
expansion situation and its implications for E-banking growth for the bank. Furthermore, the

55
understanding of the barriers to E-banking expansion identified in this study may help to identify
the best course of actions to promote its development. It will also be valuable to all banking
industries of the country to increase their awareness and understanding of E-banking benefits.

5.3 Recommendations
E-banking system is a new financial evolution in Ethiopia, but it’s an important issue, because it
has a great impact on the whole banking system, at the same time it’s difficult and need a lot of
efforts to be spread out and accepted by the banking industry, so it need a lot of efforts to
succeed. Based on the above conclusion, the researcher recommends the following points:

 In order to successfully facilitate E-banking expansion in Commercial Bank of Ethiopia,

national bank of Ethiopia, (NBE) needs to urgently execute a clear set of legal frame
works on the use of technological innovation in banking sector.

 For the successful implementation of E-banking system ICT infrastructure, is a major

prerequisite, so government, should support banking sector by investing on ICT
infrastructure development since the only net work provider ETHIO TELE COM is
owned by government.

 In order to survive, Commercial Bank of Ethiopian need to move away from traditional
bases of retail bank competition to a new technology based form of competition by
focusing on cost reduction, customer retention, awareness, credibility, security, ease of
use, and wider scope of products and services.

 To exploit the benefit of E-banking system, Commercial Bank of Ethiopia needs to

familiarize its customers with the processes and benefits of the system.

 The Bank should pay special attention to deliver service to customers by using E-
banking system, which can easily be accessible.

56
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XV
APPENDIX
General Instruction
This questionnaire contains two sections and 6 pages that will be expected to take approximately
15 to 20 minutes to complete. Please provide your responses to the questions based on the
instructions under each section. If you have comments or if you want to provide further
explanations, please use the space provided at the end of the questionnaire.
Section I: Demographic profile of respondents
Please indicate the following by ticking (√) on the spaces in front of the response options:

1. Gender: Male Female

2. Age: 20-30 31-40 41-50 51-60

3. Educational level: Diploma holder First degree holder

Masters degree Above

4. Position on the Bank: Customer Service Officer (CSO) Customer Service Manager

Other

5. Monthly income (in Eth. Birr): 1200-2400 2401-3000 3001-4000

4001 - 6000 Above 6000

Section II

Questionnaires related with challenges and drivers of expansion Electronic banking system.

Below are lists of statements pertaining to Adoption of E-banking? Please indicate whether you
agree or disagree with each statement by ticking (√) on the spaces that specify your choice from
the options that range from ‟‟strongly agree‟ to „‟strongly disagree‟ .Each choice was
identified by numbers ranged from 1 to 5.
Note: SA- Strongly Agree, A- Agree, DA- Disagree, N- Neutral, SD- Strongly Disagree

XVI
Part one: Questionnaires related with barriers of expansion of E-banking system

The following are some barriers the company faces, when SA A N DA SD

adopting E-banking system, please indicate level of your
choice 1 2 3 4 5

I. Technological factors(Perceived risk)

1 Customers of our bank fear risk to use automated teller

machine(ATM)

2 Lack of confidence with the security aspects considered

as barrier for the expansion of E- banking system

3 In the case of mobile banking, ATM and other services

security risk affect user’s decision to use the system.
4 Customers do not trust the technology provided by the
banks

5 Lack of trust is considered as barriers for the expansion

of E-banking system in Ethiopia.

II. Organizational factors

6 Using internet banking increases cost to do banking task

7 Relatively using of mobile to get banking service is

Expensive for customers

8 Lack of sufficient government support will affect

customers willingness to use technological innovation

9 Customers of our bank were not familiar with service

provided though ATM, Internet banking, telephone and
mobile phone

10 Lack of technical and managerial skills on the use of

technological innovation.

11 Lack of skills to implement E-banking system

XVII
III. Environmental factors

12 Using internet banking is difficult due to low internet

access in the Ethiopia

13 Internet connection was not good enough to perform

online transactions in Ethiopia

14 Lack of available ICT infrastructure

15 Lack of legal frame works that enforce banking

industries to adopt technological innovation

16
Customers may not willing to accept E-banking service

Any other barriers? Please specify below

XVIII
Part two: Questionnaires related with the drivers on the expansion of E-banking system in
Ethiopia.

The following are some of the perceived benefits the SA A N DA SD

company derived from the expansion of E-banking system,
please indicate your choice. 1 2 3 4 5

IV. Perceived Ease of Use

17
E- banking makes it easier for me to do banking
activities

18 In the case of mobile banking, our customers can

simply use banking service by using their cell phone

19
From the bank perspective it is easy to use mobile
banking to accomplish banking task
20
Using E-payment system (like debit card, salary card,
ATM or visa card) simplify the activity of workers to
deliver service

21
Our bank provide guidelines on the use of electronic
banking facility

22
The management of the bank provides training courses
for its staff when introducing new services.

23 E-banking system helps to perform banking task in a

simple way

V. Perceived Usefulness

24 E-banking such as, Internet banking ,Mobile banking,

ATM and POS services are enables users to complete
banking activities more quickly and easily

25 E-banking such as, Internet banking ,Mobile banking,

ATM and POS are convenient, in terms of time saving

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26 E-banking such as, Internet banking ,Mobile banking,
ATM and POS are convenient, in terms of 7 days and
24 hours.
27 E-banking is more accessible to users than visiting a
bank

28 The transactions in Internet banking are at a lower

price, or at no cost

29 Using technological tools like ATM helps to perform

transaction at lower cost

30 Improve customer service

31 Improve Speed and efficiency

32 Reduce number of customers come to the banking

lobby

33 Increased the productivity of bank

Increase reliability and accessibility

34

35 Create better relationship among banks and clients

36 Used as better information control tools

37 No time limit to access bank account and information

Any other benefits? Please specify

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II. Interview

Please indicate the position on the spaces in front of the response options:
I. position, please
Specify_____________________________________________

Section one: Interview questionnaires designed for the managers of the four selected
Branches.

I. Barriers of expansion E-banking system.

1. What type of Electronic banking service do you provide? ATM, Internet banking,
mobile banking or others? Please specify.
2. What are the basic barriers on the expansion of new technological innovations like
ATM, internet banking and mobile banking?
3. Is the following factors considered in your institution as barriers for the expansion of
technological innovation?

A. Security risk

B. Customers reluctance

C. lack of social awareness

D. cost incurred in the purchase of technological instruments

E. lack of competition

F. inadequate ICT infrastructure

4. In your opinion what are the key factors that hinder your institution to expand
automated teller machine (ATM).
5. Do you see any social, Economic and legal barriers for the expansion of ATM, internet
banking and mobile banking in your institution?
6. Do you think that government policy have impact on the expansion of E- banking
system? (Please Specify/explain)

7. What sort of support would you expect from the government in relation to the E-
banking improvement in Ethiopia?

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II. Drivers that Expand E-banking system.

8. What are the benefits your institution gained from the expansion of ATM, internet
banking and mobile banking system in the delivery of service to customers?
9. Concerning the drivers I want to talk about. One of these is the perceived advantages,
so what are the advantages derived from the usage of technological tools like ATM,
internet and mobile to deliver service to customers instead of using the traditional tools.
10. In your opinion what are the key factors that push your institution on the expansion of
ATM, internet banking and mobile banking system?
11. As Your opinion, what are the advantages / reasons that you consider of
implementing E-Banking system?

Interview questionnaires designed for the NBE

1. As your opinion what are the barriers and drivers on expansion new technological
innovation?
2. Is there any legal frameworks at central bank to enforce banking industries to use E-
banking system, such as ATM/debit card, telephone/mobile banking/internet
banking?
3. Is there any special rule that guide banking industries in implementation of E-
banking system?
4. Why Ethiopian government did not allow foreign banks to operate in the country? Do
you think it discourage Ethiopian banking industry, on the expansion of technological
innovation and compete with foreign banks?

XXII