Contribution of interest –free banking to economic development and its prospecting Ethiopia
Creators: name: Mekonnen, Teferi
Publisher: name: National Academic Digital Repository of Ethiopia
Year: 2015

description: This study is aimed at evaluating the contribution of IFB to economic development of the country-Ethiopia, the level of stakeholder awareness and attitude towards the IFB services, the comparative advantages of IFB, the factors that account for the growth of IFB, and challenges and prospect in the Ethiopian context by considering two banks that are providing IFB services: Oromia International Bank S.C. and Commercial Bank of Ethiopia. The study used both primary and secondary data. The secondary data was collected from clients' files, reports, directives and working documents while the primary data was collected through structured questionnaire having Likert scale and other forms of measurement. Out of 200 target population of the study, 150 individuals' sample was taken through stratified sampling techniques. The collected data was analyzed using descriptive analysis like tables, percentages and charts (using SPSS 20 version software) and t-test. The finding of the study depicts inadequacy of stakeholder awareness and experience in one hand, and limiting impact of the prevailing IFB provision on the service IFB on the other. Most respondents believe that IFB can potentially serve as an alternative banking channel in filling the gap left unaddressed by conventional banking and economic development: idle monetary resource mobilization and allocation, inviting to use banking system, creating employment opportunity, supporting GDP growth and assisting in stabilizing crisis and arresting inflation.. On top of that, the respondents suggested various factors that account for growth of IFB and forwarded valuable recommendations that help IFB to play the expected role in economic development. IFB prohibition on business dealings that are against the public interest is regarded by the writer as a new insight towards engaging in sustainable business while caring for the society. Some scholars around the world consider the use of IFB as more convenient for economic development. The result of this research also indicates that considering revisiting the infrastructure of IFB in Ethiopia could enhance its comfortable operation and its role in assisting economic development. In conclusion, IFB is deemed to play an integral role in Ethiopia in catalyzing the economic development subject to adequate awareness creation about its governing principles, compliance with prohibitions, familiarity with operating philosophies, expertise capacity building of operators-bankers, experience sharing from Islamic banking-pioneering countries, and devising enabling regulatory environment. Accordingly, plausible courses of action were forwarded by the researcher based on the conclusive results of the findings in conjunction with literature review reflections: creating awareness, providing tailored and sustainable training for practitioners, best-practice experience sharing from Islamic banking-pioneering countries, government support, revisiting the IFB provision for possible revision where applicable to an enabling level. Key words; IFB/Islamic banking/, CB, Sharia principle, economic development, Ethiopia