Proposal 202

COLLEGE BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

RESEARCH PROPOSAL THE ROLE OF COMMERCIAL BANK

IN PROMOTING PRIVATE INVESTMENT (IN CASE OF
HAROMAYA TOWN

A RESEARCH PROPOSAL PAPER SUBMITTED TO

DEPARTMENT OF ACCOUNTING AND FINANCE FOR THE
PARTIAL FULFILLMENT OF (BA) DEGREE IN ACCOUNTING
AND FINANCE

PREPARED BY: MILKESA LEMA ARARSA

ID NUMBER …….. 0942/12

ADVISOR: MR. NESRU.K

JANUARY, 2023

HARAMAYA UNIVERSITY
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ABSTRACT

This paper tries to examine the role of commercial bank in promoting private
investment in case of commercial bank of Ethiopia Haromaya branch. Various
literatures assert that private investments are the back bone of economy. They
contribute to the economic development of the country through creating jobs and
reducing unemployment, generating revenue and enhancing skill, knowledge and
technology innovation development. Those sectors have a major problem of finance
related activities from lack of financial sector development. Financial sector have
many contribution to the development of private sector investment through many
activities like provision of deposit, transfer of money, overdraft etc. In Ethiopia
private sectors investment has been given a due attention and grand works such as
financial provisions, infrastructure development, and other technical support service
has been given to boost the sector. Despite the many opportunities, the sector faces
major financial sector challenges that bottleneck its swift development. . In light of
this problem, this study is conducted with an objective of identifying the role of
commercial bank in promoting private investment in Haromaya town. The researcher
collected data from sample of 22 respondents. This is contains the role of different
kind of service for private investors. In addition, the researcher have also analyzed
there are some problems faced by commercial bank. Accordingly, the researcher
found that commercial bank is the backbone for the growth of private investment; the
researcher also found that in Haromaya town commercial bank provides different kind
of service for private investor. However, commercial bank does not give enough
amount of money for the investors. Based on the findings of the study increasing
interest rate of deposit and decreasing interest rate of loan, is better to increase private
saving and decrease loan for private investment; commercial banks should have to try
to solve the problem of money shortage in order to give enough amount of money for
private investors; government have take corrective actions to decrease the inflation
rate; commercial banks should give advice for investors so as to they use their funds
appropriately for intended purpose were suggested as recommendations.

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ACKNOWLEDGMENT

First of all I would like to thank the almighty God who gives to me the opportunity
and health throughout the study in order to cover all necessary activities and to pursue
senior research study at Jimma University.

Again, I would like to express my sincerely appreciation and deep gratitude to my

advisor Mr. Nesru.K for his valuable and constructive advice and suggestion for my
success in this proposal paper.

At last but not least, I want to thanks employees in CBE Haromaya branch and
efforts and support of those individual that led to the success of the study.

ACRONYMS

CBE------Commercial bank of Ethiopia

CB--------Commercial bank

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

GDP-------Gross domestic product

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

CDS--------Certificate deposits

Contents
ABSTRACT..............................................................................................................................I

ACKNOWLEDGMENT..........................................................................................................II

ACRONYMS...........................................................................................................................II

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

1. Introduction..........................................................................................................................1

1.1 Back Ground of the Study...........................................................................................1

1.2. Back ground of the organization................................................................................2

1.3. Statement of problem.................................................................................................3

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

1.4.1. General objective of the study.........................................................................4

1.4.2. Specific objective of the study........................................................................4

1.5 . Significance of the study...........................................................................................5

1.6. Scope of Study...........................................................................................................5

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

1.8 .Organization of the proposal......................................................................................6

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

2. Literature Review................................................................................................................6

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

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2.1.1. An over view of commercial bank of Ethiopia................................................6

2.1.2. Investment and commercial bank....................................................................7

2.1.3 .The roles of commercial bank of Ethiopia.....................................................10

2.2. Functions of commercial bank of Ethiopia...............................................................10

2.2.1. Acceptance of deposits..................................................................................10

2.3. Benefit of commercial bank activities for private investor.......................................14

2.4. Empirical Literature Review....................................................................................14

2.4.1 .Credit Assessment.........................................................................................15

2.4.3. Interest rate....................................................................................................15

2.4.4. Disbursement................................................................................................15

2.4.5 .Repayment of Loan.......................................................................................15

HAPTER THREE...................................................................................................................16

RESEARCH DESIGN AND METHODOLOGY...................................................................16

3.1. Research methodology.............................................................................................16

3.2. Research Design......................................................................................................16

3.3.Types and Source of Data.........................................................................................16

3.4. Target population.....................................................................................................17

3.5. Population Sample and Sample Determination........................................................17

3.6 .Data Presentation.....................................................................................................17

3.7. Data Analysis...........................................................................................................17

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

TIME AND BUDGET PLAN................................................................................................17

Table 4.1 time plan.................................................................................................................17

Table 4.2: Budget or costs......................................................................................................18

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Reference................................................................................................................................19

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CHAPTER ONE

1. Introduction

1.1 Back Ground of the Study

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

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

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

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

1.2. Back ground of the organization

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

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

Its strong capital base , for the last seven decades of rich experience in the market and
wide branch network throughout the country have enabled the bank to accommodate
the large demand for its service and increase its overall revenue on sustainable basis.
The bank with its employee and management has aspiration to promote sound

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liquidity management framework which enables the bank bring itself to standard of
modern international business practice and be competent enough in the national and
international market.

Today, more than ever before, CBE aggressively expanded its presence in all
directions of the country. Despite the flourishing of private commercial banks in the
country, CBE has remained potent and is in the lead in terms of assets, deposits,
capital, and customer base.

Commercial Bank of Ethiopia, in Bekoji Branch which is striving to become a world

class bank, is rendering state of art and reliable service to its millions of customers
both at home and abroad. The business strategy of the bank focus on the interest of
the public it Serves.

Accordingly, Commercial Bank of Ethiopia envisions ‘becoming world class

commercial bank by the year 2025. In its strategic document too, it is clearly stated
that the bank values both its customers and employees as not only important but also
essential actors in all its endeavors of fulfilling public expectations.

1.3. Statement of problem

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

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banks to rise the countries’ of economics expansion. Commercial bank is intermediate

between the surplus and deficit sector of the economy (Oluita, 2009).

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

This implies that financing of private investment through the credit form commercial
bank portends that investments are associated with level of credit expansion. As one
of major role of commercial bank of Ethiopia is lending money by over draft,
installment loan or other means, the study seeks to find out how those CBE help the
private investment in Bekoji town by facilitating them to assess to credit and advising
them, how to use those credit efficiently so as to up lift standard of living and develop
investment through commercial activity. The research raised the following basic
question that should be answered in this course of the study.

What are factor affecting private investments?

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

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

1.4. Objective of the study

1.4.1. General objective of the study

 The main objective of the study is to identify the role of commercial bank of
Ethiopia promoting private investment in case of Haromaya town.

1.4.2. Specific objective of the study

 To identify the impact of saving on investment
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 To identify the role of commercial bank of Ethiopia in private investment

 To examine the impact of commercial bank of Ethiopia in credit extension

system of investment

 To identify the impact of deposit interest rate on investment

 To identify the impact of loan interest rate on investment

1.5 . Significance of the study

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

The finding of this study is expected to be significant for following reason.

Government and other party involved in the promotion of the development of private
sector investment may use the finding of the study as additionally input in designing
police towards private investments. Academicians, consultants and governments
agencies may use the study has stepping stone for further study in the area at
advanced level.

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

1.6. Scope of Study

 The geographical concentration of the study is limited to Arsi zone, Bekoji
town, found in Oromia region 230 km away from Addis Ababa. The focus of
the study is limited to the clear and detail identification of the role of

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commercial bank of Ethiopia in promoting private sector investment in Bekoji

town.

1.7. Limitation of the study

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

1.8 .Organization of the proposal

The paper was classified in to four chapters. The first chapter provides general
introduction information about the topic of the study. In this part, back ground of the
study, statement of problem, and objective of the study, significance of the study and
scope and limitation of the study. The second chapter outlines the related literature
review of data authors about the subject matters under the study. The third chapter has
explained about the methodology to be adopted in the process of research under
taking. The fourth chapter mainly the analyze part of study diagnosis the data
collected and relates them to different aspects. Method so as to provide sound
conclusion and recommendation area applied. Finally the fifth chapter was sum up all
the points that are raise in the paper, draw conclusion and raise sound
recommendation

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CHAPTER TWO

2. Literature Review

2.1. Theoretical review

2.1.1. An over view of commercial bank of Ethiopia

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

2.1.2. Investment and commercial bank.

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

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

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

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

Commercial bank of Ethiopia contribute to the operation and growth of investment

through various roles including that of intermediary and provide of payment
settlement facilities and they must also execute these roles faultlessly in order to
promote confidence and stability in the system.

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

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

Commercial bank can extend to the poor while at the same time making a reasonable
profit by charging high interest rate. It can afford the high transaction cost of
processing, large volume of loans small as a few dollars. CB provide clients from

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house hold with arrange of money management and service which include credit
service, where by small loans are allocated against collateral substitutes , such as
group guarantees or compulsory savings deposit service designed to offer
alternative saving option and risk are managed as active partnership (M. kabir
Hassan , 2002).

Commercial bank are mobilization of financial resources has led to capital

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

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

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

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

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

2.1.3 .The roles of commercial bank of Ethiopia

Accepting money on term of deposit.

Lending money by over draft installment loan or other means, cash management and
treasury.

Safe keeping of documents and other items in safe deposit boxes.

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Processing of payments by way of telegraphic internet banking.

Issuing bank drafts and bank check.

Merchant banking and private equity.

Sales, distribution or brokerages with or without advises of insurance, unit trust and
similar financial products and financial super market.

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

2.2. Functions of commercial bank of Ethiopia

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

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

2.2.1. Acceptance of deposits

2.2.1.1. Time deposits:-

These are deposits repayable after a certain fixed period. These deposits are not
withdrawn able by check, draft or by other means. It includes the following.

Fixed deposits: The deposits can be withdrawn only after expiry of certain period say
3 years, 5 years or 10 year. The banker allows a higher rate of interest depending up
on the amount and periods of time. Previously the rates of interest payable on fixed
deposit were determined by reserve bank.

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

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

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

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

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

2.2.1.2. Demand deposits:-

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

Saving deposits:-The savings deposit promotes thrift among people. The savings
deposits can only be held by individuals and non- profit institutions. The rate of

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interests paid on savings deposits is lower than that of time deposits. The saving
account holder gets the advantage of liquidity (as in current account) and small
income in the form of interests.

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

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

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

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

2.2.2. Advancing of loan

The commercial banks provide loans and advances in various forms.

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

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short of money and knowingly make an insufficient fund deposit. They accept the
associated fees and cover the overdraft with their the associated fees and cover the
overdraft with their next deposit.

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

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

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

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

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

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

The terms of standardized loan are formally presented to this party in the transaction
before any money or property changes hands. If lenders require collateral, this will be
stipulated in the loan documents as well. Most loan also have legal stipulation
regarding the maximum amount interest that can be changed as well as other
convenient such as the length of time before repayments is required. Loan can come

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from individuals, corporation, commercial bank and government they are way to
grow over all money supply in an economy as well as open up competition ,
introduce new products and expend business operations.

2.3. Benefit of commercial bank activities for private investor

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

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

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

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

2.4. Empirical Literature Review

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

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

2.4.1 .Credit Assessment

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

2.4.2 Credit appraisal

According to Santamero and Kim (1993) credit appraisal is defined to lender take
action which facilitate repayment makes the financial institution does do it nell; its
performance is highly affected.

2.4.3. Interest rate

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

2.4.4. Disbursement

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

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2.4.5 .Repayment of Loan

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

HAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1. Research methodology

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

3.2. Research Design

The researcher will be descriptive study. The researcher selects this method to
describe, summarize and present the data. The data was presented on the descriptive
bases by using table and percentage that can facilitate to interpretation which focused
on result that are relevant to the study
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3.3.Types and Source of Data

In conducting the research study the required data were gathered from both primary
and secondary data sources for the purpose of achieving objectives the study.

Primary data, during the survey primary data were collected to obtain relevant
information from sample respondents among the whole population under study
through questionnaire. The questionnaire was addressed to selected respondents under
the study and contained both closed and open ended questions.

Secondary data, the source of data for this study were the document from commercial
bank of Ethiopia in Haromaya town, review of published and unpublished documents
report. journal, magazine and internet which were greatly assistance for successful
and fruitful for completion for the study.

3.4. Target population

Target population of the study would be total number of employees concerning with
the role of commercial bank in promoting private investment in commercial bank of
Ethiopia in Haromaya branch.

3.5. Population Sample and Sample Determination

The sample techniques where uses through census sampling techniques because the
population for the study is small in number. The researcher is uses census is not
difficult to collection and gets information easily from the employees or the manager
of the bank.

3.6 .Data Presentation

After the process of data collection, the data is analyzed by arranging and organizing
them properly so as to be easily interpreted. To analyze the data, the researcher use
editing, coding and tabulation.

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3.7. Data Analysis

Data were analyzed after editing, coding and tabulation. This analysis based on
percentage that was obtained to show the relationship between the study variability.
The information was summarized according to the study

CHAPTER FOUR

TIME AND BUDGET PLAN

Table 4.1 time plan

Research time table is a table which the researcher will follows while doing research.
its detail is presented in the following tabular form.

In order to manage the overall research process, it will need time plan. The table
given below shows that the time that will be taken from topic selection to final
presentation.

No activity Start date End date

1 Title selection December 2022 December 2022

2 Preparation of research proposal January 01, 2023 January 26, 2023

3 Waiting for research proposals January 27,2023 January 31, 2023

comment by Advisors

4 Responding to the comment February 01,2023 February 05, 2023

5 Submission of final research February 06, 2023 February 10, 2023

proposal and presentation

6 Data collection February 25, 2023 April 25, 2023

7 Data analysis April 26, 2023 June 10, 2023

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8 Preparing final report June 11, 2023 June 20, 2023

9 Submission of final report June 21,2023 June 22, 2023

10 Final research defence - -

Table 4.2: Budget or costs

In order to undertake the research process it is necessary to prepare cost/financial budget.
The table given shows that is expected will be incurred in the research process.

No Items(units) quantity Price per unit Total costs

1 Note book 2pcs 75 150

2 pen 6pcs 15 90

3 pencil 2pcs 10 20

4 flash 1pcs 200 200

5 bag 1pcs 400 400

6 Questionnaire 100*3 3 900

duplication

7 Transport cost - - 800

8 internet 20hrs 10 200

9 Photocopy service 100 3 300

10 Phone calls - - 50
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11 total 3110

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

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(p.431)Encyclopedia New (1997)

Financial market and institution, New Burton NASIBA LOMBRA, 2003(P.8)

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

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

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

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

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