This study intends to assess determinants of nonperforming loans. The mixed research approach was adopted for the study. Survey was conducted with professionals engaged in both private and state owned Banks in Ethiopia holding different positions using a self administered questionnaire. In addition, the study used structured review of documents and records of banks and in-depth interview of senior bank officials in the Ethiopian banking industry. The findings of the study shows that poor credit assessment, failed loan monitoring, underdeveloped credit culture, lenient credit terms and conditions, aggressive lending, compromised integrity, weak institutional capacity, unfair competition among banks, willful default by borrowers and their knowledge limitation, fund diversion for unintended purpose, over/under financing by banks ascribe to the causes of loan default.

This study intends to assess determinants of nonperforming loans. The mixed research approach was adopted for the study. Survey was conducted with professionals engaged in both private and state owned Banks in Ethiopia holding different positions using a self administered questionnaire. In addition, the study used structured review of documents and records of banks and in-depth interview of senior bank officials in the Ethiopian banking industry. The findings of the study shows that poor credit assessment, failed loan monitoring, underdeveloped credit culture, lenient credit terms and conditions, aggressive lending, compromised integrity, weak institutional capacity, unfair competition among banks, willful default by borrowers and their knowledge limitation, fund diversion for unintended purpose, over/under financing by banks ascribe to the causes of loan default.

Since the late eighties, BPR has established itself as one of the attractive radical change management option for coping and adapting to the new competitive market environment and become popular both in the public and private organisations throughout the world . Cognizant of this fact, all Ethiopian public (government owned) institutions including the public financial institutions have embarked on large-scale change projects since 2004 in which Business process re-engineering(BPR) is a central element . This research examined whether implementation of Business Process Reengineering (BPR) projects have improved operational performance of the selected case public commercial banks in Ethiopia by collecting and analyzing both quantitative and qualitative comprehensive data set, using mixed research approach through questionnaires, interviews, observations and review of secondary sources of information. The operational performance measures utilized in this study are cost reduction, speed of service delivery, service quality, customer satisfaction as well as innovation. A total of 837 (84% response rate) questionnaires were returned from respondents of the selected branches and head offices. In addition, in-depth interviews were conducted with eight senior managers of the respective banks, who were also members of their respective banks reform team and were involved in the design and implementation of BPR. The third method that was used to collect qualitative data was personal observation of the selected bank branches in order to measure the speed of service delivery and convenience of the waiting places. The researcher measured the service delivery time of selected busy bank branches for five consecutive days, for half an hour spent in each branch. This study found that the introduction of BPR in the case banks was met with mixed reactions from employees and some managers. The main achievements of BPR were: service delivery time reduced dramatically as a result of the new process redesign and introduction of information and communication technology services(introduction of e-banking); introducing a single customer contact point through employee empowerment to make all the necessary decisions at that point of contact which resulted in improving the satisfaction of employees and customers. The challenge was that resistance from employees and some managers (labelled the initiative as “Blood pressure raiser” due to their assumptions it will result in employee lay off or the change brings increased workloads for some remaining employees without compatible rewards following the new process redesign. The study also revealed that telecom infrastructure and power interruption considered as main problem areas in providing banking services efficiently and effectively through branch net workings. The researcher recommends that for a better BPR design and implementation as well as sustainability of improvement gains in the banking sector, a forum should be established to discuss and share good practices and technology in the banking sector ; establish strong change management offices to continuously assist and monitor results; and continuously involve and communicate key stakeholders in the design and implementation of change initiatives. / Business Management / D.B.L.

Since the late eighties, BPR has established itself as one of the attractive radical change management option for coping and adapting to the new competitive market environment and become popular both in the public and private organisations throughout the world . Cognizant of this fact, all Ethiopian public (government owned) institutions including the public financial institutions have embarked on large-scale change projects since 2004 in which Business process re-engineering(BPR) is a central element . This research examined whether implementation of Business Process Reengineering (BPR) projects have improved operational performance of the selected case public commercial banks in Ethiopia by collecting and analyzing both quantitative and qualitative comprehensive data set, using mixed research approach through questionnaires, interviews, observations and review of secondary sources of information. The operational performance measures utilized in this study are cost reduction, speed of service delivery, service quality, customer satisfaction as well as innovation. A total of 837 (84% response rate) questionnaires were returned from respondents of the selected branches and head offices. In addition, in-depth interviews were conducted with eight senior managers of the respective banks, who were also members of their respective banks reform team and were involved in the design and implementation of BPR. The third method that was used to collect qualitative data was personal observation of the selected bank branches in order to measure the speed of service delivery and convenience of the waiting places. The researcher measured the service delivery time of selected busy bank branches for five consecutive days, for half an hour spent in each branch. This study found that the introduction of BPR in the case banks was met with mixed reactions from employees and some managers. The main achievements of BPR were: service delivery time reduced dramatically as a result of the new process redesign and introduction of information and communication technology services(introduction of e-banking); introducing a single customer contact point through employee empowerment to make all the necessary decisions at that point of contact which resulted in improving the satisfaction of employees and customers. The challenge was that resistance from employees and some managers (labelled the initiative as “Blood pressure raiser” due to their assumptions it will result in employee lay off or the change brings increased workloads for some remaining employees without compatible rewards following the new process redesign. The study also revealed that telecom infrastructure and power interruption considered as main problem areas in providing banking services efficiently and effectively through branch net workings. The researcher recommends that for a better BPR design and implementation as well as sustainability of improvement gains in the banking sector, a forum should be established to discuss and share good practices and technology in the banking sector ; establish strong change management offices to continuously assist and monitor results; and continuously involve and communicate key stakeholders in the design and implementation of change initiatives. / Business Management / D.B.L.

Despite the fact that a preponderance of past studies in corporate finance mainly focus on capital structure decision of firms, the problems of “what factors determine the capital structure choice of firms and how firms adjust their capital structure dynamically” are still riddling. Hence, the aim of this study is to investigate the determinants of capital structure and capital structure adjustment dynamics of banks. To this end, the study employed a quantitative research approach. Specifically, secondary data have been collected through document review of annual reports of selected banks for longitudinal/panel research design. Besides, primary data have been collected through a self- administered questionnaire distributed to the selected Chief Financial Officers (CFOs) for the cross-sectional survey research design of the study. As the method of data analysis, the study estimates both static and dynamic panel models using fixed effect and GMM estimators respectively. Besides, in analyzing the cross-sectional survey responses, appropriate statistical techniques for order-ranked and nominal/categorical items of the responses have been employed. Specifically, in the univariate analysis of survey responses, mean scores and percentage of categorical responses have been computed for order-ranked and nominal items respectively. Moreover, to test the significance of differences of mean scores of order-ranked and percentage of responses of nominal items conditional on bank characteristics, the study employed the nonparametric Mann-Whitney test and the likelihood ratio test respectively. As the result, the tax shield from interest tax deductibility, profitability and/or size of free cash flows, growth opportunities and regulatory pressure factors are found to be significant determinants of capital structure decisions, consistently in estimations of panel models and cross-sectional survey. In iii examining the capital structure adjustment dynamics, both the regression estimation and survey results revealed the tendency of banks in Ethiopia to set target capital structure and adjust towards it at a relatively faster speed of adjustment. Besides, both regression model estimation and survey results disclose the asymmetrical target capital structure adjustment of banks. To be specific, overleveraged or undercapitalized banks adjust more quickly than underleveraged or overcapitalized banks. Further, the speed of target capital structure adjustment is found to be heterogeneous across banks that differ in their absolute deviations from target capital structure, size, regulatory pressure for capital adequacy and ownership. Hence, by empirically examining the determinants and dynamics of capital structure of banks in Ethiopia, the study contributes to the existing body of knowledge on the subject under study, and/or it fills a gap in the existing reference literature on the subject. Most importantly, the study tries to untangle the capital structure issues of banks, especially the dynamics, in the context of the least developed financial system where there are no secondary market and oligopolistic banking sector. / Graduate School of Business Leadership (SBL) / D.B.L.

Effective Governance of Enterprise Information Technology (GEIT) is very important for an enterprise that has a huge investment in IT infrastructure. Implementing effective GEIT helps an enterprise to meet stakeholder needs by creating business value through strategic business-IT alignment. This study focuses on the analysis of GEIT implementation related to strategic business-IT alignment using Control Objectives for Information and Related Technology (COBIT 5), using the Commercial Bank of Ethiopia (CBE) as a case study. Strategic alignment is found to be the main concern of GEIT and strong alignment between business objectives and IT capabilities as a means of creating an effective foundation for business execution. There are various internationally accepted GEIT good practices and standards. In this study, COBIT 5 is selected for its strong aspects of control objectives for strategic business-IT alignment that help enterprises’ security, risk and compliance guidance and serves as a tool for leveraging GEIT. COBIT 5 is the leading business framework for the GEIT by making clear that there is a separation between governance and management of IT. This is a single integrated framework that covers the enterprise holistically and integrates with other important frameworks and standards at an advanced level. In addition to this, the use of COBIT 5 Balanced Score Card (BSC) for performance measurement tool (goals cascade), Process Reference Model (PRM), Process Assessment Model (PAM), principles and enablers and Capability Maturity Model (CMM) tool also utilise IT investments more effectively and accurately and measure performance with lower costs through stronger governance. This study analysed how enterprises effectively implement GEIT practices using COBIT 5 to achieve strong strategic business-IT alignment. The target groups of the study were the top management and IT management of CBE. The researcher used explanatory sequential mixed methods (both quantitative and qualitative) data collection techniques and analysis procedures. In the quantitative data collection, data were collected and analysed using GEIT practices maturity assessment tool, Luftman Strategic Alignment Maturity Model (LAMM) tool and the data analysed using Statistical Package for the Social Science (SPSS). In the qualitative phase of the study, evidence was collected and examined from observation and participation, document review, focus group, formal and informal discussions with selected managements of CBE and gap assessment using COBIT 5. Finally, the researcher integrated results to combine the quantitative and qualitative methods. The finidngs of the quantitative analysis indicate that the maturity level of GEIT practices implementation was 1.77, around level 2 maturity level (repeatable but intuitive), whereas the business-IT alignment maturity level of 53.13% agrees that strategic alignment business-IT was good level 3 (established, focused processes) in the case of CBE. GEIT practices implementation regarding strategic business-IT alignment is found to be positive. The data qualitative analysis indicates that the achievement of the capability level of GEIT processes is not defined and deployed based on international best practices and also confirms that the GEIT BSC is not yet implemented. The achievement capability level of GEIT processes implementation using COBIT 5 is under level 2. In this study, the gap between the existing GEIT practices processes and desirable level 4 (managed and measurable) using COBIT 5 was identified and a method to fill the gap was proposed. / School of Computing / M. Sc. (Computing)

Ethiopia, a developing country on the African continent, has experienced double digit growth during the last decade. To sustain this growth, the country needs a sound and healthy banking sector. Consensus exists that trust is a valuable resource that can make a difference. It influences the quality of relationships between an organisation and its employees and management. It enables organisations such as banks, to retain their most valuable employees and customers, and improve organisational functioning. Most leaders agree that high levels of trust are critical to the success of their organisations. In this study, the existing theoretical principles and models relating to trust, were analysed in depth, and followed up by an empirical study to determine to what extent trust management practices were being applied. A quantitative survey was conducted on a probability sample of 405 participants from the eight largest banks in Ethiopia. From the measured items, 54 usable factors were identified by using exploratory factor analysis. The calculated Cronbach alpha values indicated a satisfactory internal consistency. While the Pearson product-moment correlation applied to the factors, indicated a dominance of statistically significant positive correlations. Various informative results emerged from the empirical survey, amongst which were, the relative weak application of trust management practices such as trust drivers and trust builders. Some barriers were also identified such as the trustworthiness of coworkers/ team members, the immediate supervisor and top management. Thus, it was evident that proper trust management practices had not been fully established within the banking sector in Ethiopia. There was thus a need for some guidelines in this regard. An integrated trust management model was therefore developed, and tested, through Structural Equation Modelling, and validated to satisfy this need. / Human Resource Management / D. Admin. (Human Resource Management)

The purpose of the study was to identify a comprehensive measure of performance by assessing the relationship between employee satisfaction and customer satisfaction on the profitability of the commercial banking industry in Ethiopia. The study adopted unidimensional path models, multivariate approach and factor analysis in predicting the dependent variable, determining the independent variables and the sample size and justifying the objectives of the sturdy. Primary data were obtained through structured questionnaires from valid sample responses of 180 employees and customers selected on convenient sampling method. Profitability (ROA & ROE) was measured based on the average data from the financial statements of 2007/8-2001/12 of the banks. Variant of empirical studies and theoretical frameworks, drawn from motivational, psychological and behavioural theories, were used to formulate the hypothesis and establish the relationship between internal service quality, employee satisfaction, customer service quality, customer satisfaction, customer loyalty and profitability. Results of the study indicated internal marketing influenced employee job satisfaction which in turn partially influenced customer service quality and customer satisfaction; customer service quality influenced customer satisfaction which then influenced customer loyalty. But, no relationship was observed between customer loyalty and profitability. However, due to the timing gap of the data on profitability and the data on customer satisfaction and customer loyalty, the relationship is apparently realizable in the long run. Therefore, due emphasis is required by the management of the banks to exert the necessary strategic effort on employee satisfaction, customer service quality, and customer satisfaction because of their implicit effects on profitability. Finally, the relevance of the research to the literature on performance measurement is demonstrated by contextualizing comprehensive models in the context of commercial banking industry in Ethiopia. / Business Management / D.B.L.