School of Business and Economics Department of Business Administration

Challenges and Opportunities of Electronic Banking in

Ethiopia, Case of Oromia Bank S.C.

Research proposal Submitted to Collage of Business and Economics in Partial Fulfillment of the
Requirements for the Degree of Master of Business Administration.

By: Gut Get chew

Mulugeta Adugna

Advisor: Sheet Geber (PHD)

December 26, 2021
Addis Ababa, Ethiopia
Contents
CHAPTER ONE.............................................................................................................................................1
1. INTRODUCTION........................................................................................................................................1
1.1Background of the Study.........................................................................................................................1
1.2 Background of Oromia Bank S.C and Its E-Banking Services.....................................................................2
1.3. Statement of the Problem......................................................................................................................3
1.4 Objectives of the Study..........................................................................................................................4
1.4.1 General Objective...........................................................................................................................4
1.4.2 Specific Objectives.........................................................................................................................4
1.5. Research Questions.............................................................................................................................5
1.6. Scope of the Study...............................................................................................................................5
1.7. Significance of the study.......................................................................................................................5
1.8. Limitation of the study...........................................................................................................................6
1.9. Organization of the Research Paper.......................................................................................................6
CHAPTER TWO.........................................................................................................................................7
2. LITRATURE REVIEW.............................................................................................................................7
2.1 Concept and Definition of E-banking........................................................................................................7
2.3 Types of E-banking...............................................................................................................................8
2.3.1 Plastic cards/Automated Teller Machines (ATM).............................................................................9
2.3.2. Point-of-Sale Transfer Terminals (POS).........................................................................................10
2.3.3. Internet banking...........................................................................................................................10
2.3.4. Mobile banking............................................................................................................................11
2.3.5. Tele-banking...............................................................................................................................11
2.4 Role of E- Banking........................................................................................................................11
2.4.1. Benefits to Consumers.................................................................................................................12
2.4.2. Benefits of E-Banking for Bank industry...................................................................................13
2.4.3. Benefits to General Economy:................................................................................................14
2.5. Disadvantages of E-Banking......................................................................................................14
2.6Challenges of E-banking.......................................................................................................................16
2.6.1. Legal and Regulatory framework.......................................................................................................18
2.6.2. Consumer Protection.............................................................................................................18
2.6.3. Loss of Audit Trail.................................................................................................................18
2.6.4. Security of Financial Transactions...........................................................................................18
2.6.5. Money Laundering and other Financial Crimes.........................................................................19
2.6.6. Systems and Infrastructure Failure..........................................................................................19

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 2.6.8. International developments...........................................................................................................19
2.6.8. Security Risks.......................................................................................................................20
2.7.1. Acceptance of Customer........................................................................................................21
2.7.2. Costly Technology................................................................................................................22
2.7.3. Issues in Security and Legal Issues........................................................................................22
2.7.4. Other business related restrictions..........................................................................................22
2.8. Adoption of E-banking Technology..............................................................................................23
2.9. Adoption of E-banking Technology in Ethiopia..................................................................................23
2.9.1 History of Banking in Ethiopia........................................................................................................23
2.8.2. E- Banking in Ethiopia..................................................................................................................24
CHAPTER THREE.......................................................................................................................................27
3. Research Methodology..............................................................................................................................27
3.1. Description of the study area...............................................................................................................27
3.2 Research Design................................................................................................................................27
3.3 sampling............................................................................................................................................28
3.4 Sampling design and size....................................................................................................................28
3.5. Sources of Data and Method of Data Collection...............................................................................29
3.5.1 Questionnaires.............................................................................................................................29
3.5.2 Interviews:...................................................................................................................................30
3.5.3 Secondary data Sources:..............................................................................................................30
3.6. Method of Data Analysis.....................................................................................................................31
4. BUDGET OF THE PROJECT.................................................................................................................31
5. WORK PLAN........................................................................................................................................32
References..............................................................................................................................................32

II
CHAPTER ONE
1. INTRODUCTION
1.1Background of the Study
Today, the Internet has penetrated every aspect of life, as exemplified by online entertainment, online
shopping, and Internet banking and these new technologies have affected and affected people’s lives in a
number of ways. The fast growth of e-banking may make life easier in some ways; however, it must be
considered that there is another side to the issue--it also changes lives and habits in unpredictable ways.

Like all other social entities financial institutions are being constantly shaken by technological innovations
and inventions (Shyamapada et al., 2011). For instance, till now bank customers were used to stand in line
to get financial services, but now because of development of the Information and Communication
Technology (ICT) and Introduction of electronic banking services they can perform it at anytime from
anywhere Even from home. In electronic banking system, funds are transferred through electronic Signals
between financial institutions and individual accounts, and between individual accounts (Shyamapada et
al., 2011).

The fast advancing global information infrastructure, information technology and computer networks such
as the Internet and Telecommunication systems, enables the development of electronic commerce at a
global level. The nearly universal connectivity which the Internet offers has made it an invaluable business
tool. These developments have created a new type of economy, which is called the digital economy. (Shah
and Clarke, 2009).Burr (1996) described e-banking as an electronic connection between the bank and
customer in order to prepare, manage and control financial communication or transactions.

Today e-banking starts a new phase in competition because of its characteristics like speed, efficiency,
diminishing the expenses, and gaining benefit of the unique opportunities. Obviously, if the bank`s
investment rises the profitability, the e-banking usage in banking industry would be beneficial (Torki et al.,
2004).
Electronic funds transfer has been described as the third of the great ages of payment, the first being
payment by cash (notes and coins) and the second being paper based payment (for instance, cheques)
(Kilonzo, 2007). E-payment systems refer to the automated Processes of exchanging monetary value
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among parties in business transactions and Transmitting this value over the Information and
Communication Technology (ICT) Networks. The common E-banking channels include the payment cards
(debit or credit), online web portals, Point of Sales (POS) terminals, Automated Teller Machines (ATM),
mobile phones, Automated Clearing House (ACH), direct debit/ deposit and Real Time Gross Settlement
System (RTGS) (Nnaka, 2009).

Till now in Ethiopia cash is the most leading medium of exchange, and electronic payment systems are at
an evolving stage. In the face of rapid expansion of electronic payment systems throughout the developed
and the developing world, Ethiopia’s financial sector cannot remain an exception in expanding the use of
the electronic banking system due to different shortage. In this context, the study will attempt to trace the
present status of e-banking.The banking industry in Ethiopia is embarking on capacity building preparations
and modernize the banking system by employing the state of the art technology being used anywhere in
the world (Gardachew Worku, 2010).

1.2 Background of Oromia Bank S.C and Its E-Banking Services

Oromia International Bank which is recently changed it is name as Oromia Bank is a privately owned share
company that was established in accordance with the pertinent laws, regulations and the 1960 Commercial
Code of Ethiopia, by the Monetary and Banking Proclamation No. 83/1994 and by the Licensing and
Supervision of Banking Proclamation No. 592/2008. Accordingly, on September 18, 2008, OB obtained a
banking business license. At the time of its establishment, OIB’s authorized capital was Birr 1.5 billion,
whereas its subscribed capital was Birr 279.2 million, and its paid-up capital Birr 91.2 million. OB began
operation on October 25, 2008 by opening its first branch at Dembel City Center, named Bole Branch. The
paid up capital of the bank by this time (December, 25 2021G.C) is scaled up to 3.46 billion out of the
authorized capital of birr six billion, its total asset reached birr 41.7 billion. With regard to branch expansion,
the bank has reached a total of 316 branches. Moreover, the bank has spread up the digital banking
service, with the total number of agents and ATMs reached 284 and 143, respectively, while the number of
mobile banking users and ATMs cardholders reached 335,435 and 289,615, respectively. The bank has
created job opportunity for 6,418 employees (4,259 permanent and the remaining 2,159 outsourced on
contractual basis), provide loan and advance service for more than 11,760 borrowers.

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In generally, formerly was called as Oromia International bank and latterly named as Oromia bank has
become highly growing in all direction such as, gross profit, branch expansion, introduction of modern
banking service, reduction of unemployment, paying high income tax, exerting effort for social responsibility
and contributing to the development of the country. Oromia Bank S.C is among commercial banks in
Ethiopia and it provide different services under E- Banking Department such as; ATM (Oro Card), mobile
Banking (Oro Cash, *840#), Agent Banking (Oro Agent) and internet Banking (Oro click).

1.3. Statement of the Problem

In this era, banks are growing using technology for providing services through self-service mode by using
different electronic payment channels. The services through these channels recommend numerous
advantages both to the banks and their customers (Ho and KO, 2008). The advantages of e-banking
services are decreasing in cost of transaction and lessening the burden of load on branches and also for
the customers feels easy to accessible as well as convenient , and time saving (Dawed,2004).
Nonetheless, E-banking service under developing nations like Ethiopia needs further considerations rather
than these pre-requisites. It is currently full of both an opportunity and a challenge in terms of being able to
provide the effectiveness, good organization, and success of electronic banking to its customers.

E-banking technology such as increase productivity, reduces paper work, reduce transaction cost, generate
foreign currency, increase reliability and reducing errors as operational benefits and facilitate development
of new products, facilitates marketing and market access, improve customer service, reduce long queues in
banking halls, increase accessibility of the bank services, create good relation among banks and clients
and encourages price transparency as services benefits. Among the different driving forces that initiate
Ethiopian banks to implement and extend E-banking technology: aspiration to improve performance,
aspiration to improve the relationship with customers, rapidly changing customers’ needs and preferences,
desire to improve organizational performance, desire to cover wide geographical area, desire to build
organizational reputation and desire to reduce transaction cost are among others.

For example, Karawish and Al-sa‟di (2011) made an attempt to assess the impact of e-banking on
profitability of the bank sectors, and results have shown that applying the e-banking services through the
internet had no significant effect on Return on Equity (ROE), but significant in terms of Return on Assets

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 (ROA). Three years later, a similar study conducted by Mensah Mawutor (2014) clearly elaborated that e-
banking has significant impact on profitability of banks both in terms of ROA and ROE. These researchers
reached a conclusion by inferring ROA and ROE, but the present research tried to encompass ROA, ROE,
and NIM which is more comprehensive than prior researches.

Challenges of Oromia bank during implementing and operating in the country are like lack of appropriate
technology, infrastructure, security, lack of specialized human power, internet, power and also lack of
awareness among clients about the significance of the product.
Currently, Oromia bank has been deploying large number of ATM and POS machines throughout the
country by investing huge amount of money and endeavoring to expand electronic alternative self-service
channels. However, customers are dissatisfied by ATMs for many reasons. Some of the justifications are:
because of problems related to the machine either defective or short of transactions (Hardware fault),
network failure, power interruption (OB ATM periodic performance reports), inconvenient location of ATM,
awareness gap and related problems that hinder the service quality and the bank’s profitability.

In the investigation area, there is not yet been detail research works made available to e-banking service
with its implication on profitability in Oromia bank. Therefore, the researcher is inspired to address and
show direction to concerned party in order to fill those aforementioned gaps (i.e. Methodological gap,
focused area gap and contextual gap),tried to show challenge and opportunity present in e-banking
industry in Oromia bank and conduct a research on e-banking services which will help to substantiate the
service quality, customer awareness and satisfaction level, along with its impact on profitability of Oromia
bank.

1.4 Objectives of the Study

1.4.1 General Objective
The main objective of the study will be to assess and identify the challenges and opportunities of Adoption
and development of E-banking technology in Oromia i banking industry.

1.4.2 Specific Objectives

 To explore the challenges encountered in the adoption and development of E-bankingin Oromia banking
industry.

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 To find benefits realized by Oromia bank in the adoption of E-banking technology to compliments their
service delivery channels.
 To identify the driving forces towards the adoption and development of E-banking Service in Oromia bank.
 To identify the existing opportunities for the adoption and development of E-banking Service in Oromia
bank.

1.5. Research Questions

1. What challenges affect adoption and growth of E-banking technology in the Oromia banking
industry?
2. What benefits realized by the banks in the adoption of E-banking Technology?
3. What are the driving forces towards the adoption and development of E-banking technology in the
Oromia banking industry?
4. What are the existing opportunities for the adoption and development of E-banking technology in
Oromia bank?

1.6. Scope of the Study

The major emphasis of this study will be to determine the challenges and Opportunities of electronic
banking in Oromia Bank S.C. by examining different issue. To conduct the investigation the researcher
purposely select different branches of Oromia Bank in Ethiopia, specifically on the OB branches found in
Addis Ababa. The research is confined on the 10 branches of OB; all of them are providing e-banking
services through ATM and POS machines, Mobile Banking, Agent Banking and Internet Banking channels.

1.7. Significance of the study

The result of study will have the following significance/importance;
 The finding will provide a framework for the Banks for the design of their future directions and to adjust their
goals and objectives as per real opportunities and challenges in providing E-banking service to their clients;
 The study will enables government organizations and trade associations to develop banks E-banking
assistance programs that are designed to address the factors identified by this research. This study will
assist all stakeholders in the banking industry identify and formulate strategies that will promote E-banking;
 This study will seek to address the lack of studies on E-banking adoption in developing countries such as

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 Ethiopia. In addition, the study will also provide input for further research on the area, especially with
respect to the challenges and opportunities related with the adoption and provision of E-banking services to
customers or the public at all;
 The outcome of the study is expected to assist other researchers for further studies in the area of electronic
banking. Expected to enhance the awareness level of stakeholders with regard to the challenges and
opportunities of implementing and using electronic banking in Ethiopia;
 In this regard, the study will have a great importance in filling the knowledge gap that exists among
stakeholders.
 The research will also identify the technical and operational challenges of electronic banking in Ethiopia
and suggests ways by which they could be tackled
1.8. Limitation of the study
During the study constraints will become upon, such as lack to access secondary data on revenue
generated from e-banking services restricted to one subsidiary account category on database, and
questionnaires may be not returned all at all. While when we conduct the study, the sample will be taken
only from 10 branches of Oromia bank and doesn’t include the remaining bank branches that are operating
in the bank.
Hence the generalizations may not be applicable to them. In addition the respondents will not accurately
answer to the whole content of the questionnaire due to lack of knowledge or commitment, they may
hesitated on, lack of financial and time of researcher to conduct the research. However, to minimize these
problems, the researcher will be use different technique and will exert maximum effort.

1.9. Organization of the Research Paper

The study is organized in to five chapters. The first chapter states the general introduction of the study.
Chapter two presents the literature review regarding the research area and sets out the theoretical
foundation for the research. The third chapter outlines the research methodology. The research results and
discussions are presented in chapter four. The last chapter draws conclusions and recommendations.

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CHAPTER TWO
2. LITRATURE REVIEW

The purpose of this chapter is to review the literature in the area of E-banking adoption and development
and mainly focused on the challenges, benefits, drivers and Opportunities of adopting E-banking
technology. This review of literature establishes a frame work, which can guide the study.

2.1 Concept and Definition of E-banking

Innovation in technology provides fast ground-breaking changes in people’s routine life. The most
significant recent technical advancement that drastically transformed the entire scenario of providing
services is the use of internet facility in service delivery. Number of people that are adapted this
technological advancement for different transaction. Gradually, more business organizations realized that it
can be utilized to facilitate growth through its advantages of easy accessibility to information and
technology transfer. The cut throat competitive environment and demanding customers compelled banks to
adapt e- banking concept.

According to Thulani et.al, 2009 and Henry, 2000, “Internet banking refers to systems that enable bank
customers to get access to their accounts and general information on bank products and services through
the use of bank’s website, without the intervention or inconvenience of sending letters, faxes, original
signatures and telephone confirmations”.

Hertzum et al. (2004) defined E-banking as web-based banking. In other words, e-banking refers to the
banking operations, which is done over the World Wide Web. More specifically, Internet banking refers to
the deployment over the Internet of retail and wholesale (corporate) banking services. It involves individual
and corporate clients. It also includes bank transfers, payments and settlements, documentary collections
and credits, corporate and household lending, and card business (Mai et al, 2007).

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Internet banking is enhanced by the ability of customers to conduct banking transactions anytime and
anywhere, faster and with lower fees compared with using traditional bank branches (Sayar and Wolfe,
2007). Therefore, banks have put themselves in the World Wide Web to take advantages of the internet’s
power and reach, to cope with the accelerating pace of change in business environment (Mai et al, 2007).
Banks use online banking as it is one of the cheapest delivery channels for banking products (Pikkarainen
et al., 2004). Internet banking allows direct access to financial information and it undertakes financial
transactions with no need to go to the bank (Rotchanakitumnual and Speece, 2003). Therefore, a banking
service is no longer bound to time or geographical areas.

In general, E-banking is an umbrella term for the process by which a customer may perform banking
transactions electronically without visiting a financial institution.

2.2 Evolution of E-banking

Since the late 1990s E-banking has developed from virtual insignificance to tens of millions of users
worldwide (OECD, 2004). However, E-banking is the product of different generations of electronic
transactions. The current web-based internet is the latest of several generations of systems: Automated
Teller Machine (ATMs), Phone Banking, PC or House Banking. Automated Teller Machines (ATMs) were
the first well-known machines to provide electronic access to customers where as in phone banking, users
call their bank’s computer system on their ordinary phone and use the phone keypad to perform banking
transactions.
PC banking superseded phone banking and allowed users to interact with their bank by means of a
computer with a dial-up modem connection to the phone network. Phone and PC banking entailed
maintenance costs associated with keeping up to date with diverse modems and with avoiding prohibitively
complex installation procedures. After those generations Deutsche Bank launched the very first Internet
banking project in Latin America in 1996 and Citibank has developed a special “e-toolkit” across all its
branches worldwide (UNCTAD,2002).
E-banking uses the web browser for the user interface and the Internet for data transfer and download of
software, and so has a potential for reducing maintenance costs. For users, E-banking provides current
information, access to banking services. The primary services provided by e-banks are transferring money
among one’s own accounts, paying bills, and checking account balances. Loans, share trading, service

8
bundling, and hosts of other financial services are being added to these primary services). E-banking is
widely used in, among other places (Dewan & Seidmann, 2001).

2.3 Types of E-banking

Today, internet has evolved as the prime medium of service delivery for various financial institutions.
Earlier to this, customers were not able to perform their personal and commercial banking transactions with
such fast speed as they can perform with internet banking. The internet facility enables banks to perform
their traditional activities on a virtual medium, which they use to perform earlier in their branches.

Initially, financial institutions were enthusiastic on identifying advantages of internet and were one of the
initiators to adapt e- commerce. After few years down the line, they transformed their websites from only
informational websites to dynamic transaction- oriented websites that are providing ‘anytime anywhere’
banking services.

Besides having a large internet user population, most of banks are still having a wide branch network that
delivers same products and services that are provided online as well.

The banking institutions were quick to take in the technological innovations taking place in the industry; so
much so that it can be said that the banking industry is completely revolutionized post 1991. The need for
change had been experienced for quite some time but the initiative of technological up gradation was taken
by the private sector banks that can be said to have revived the industry. New modes of providing banking
services can be summarized as under;

2.3.1 Plastic cards/Automated Teller Machines (ATM)

Automated Teller Machine (ATM) is the first well known machines to provide electronic access to
customers. With the advent of ATM, banks are able to serve customers outside the banking hall. ATM is
designed to perform the most important function of banks such as withdrawal of cash, deposits, printing of
mini statements settlements of bills.
Singh (2009) described ATM as ’Avoid Travelling with Money’ or ‘Any Time Money’ but certainly it implies
both. He asserts that Slim ATM cards are fast replacing compounding withdrawal form as a convenient way

9
 of getting your money from banks. A smart person no longer needs to carry a wallet-full of paper money on
his person. All he needs to do is fish-out an ATM card inserts it in the slot, punch in a few details and go
home with hard cash.
A. Debit cards: - Debit card is a banking card enhanced with ATM and POS features so that it can be used at
merchant locations. Debit cards allow you to spend only what is in your bank account. It is a quick
transaction between the merchant and your personal bank account. A debit card is linked to an individual’s
account, allowing funds to be withdrawn at the ATM and point of sale without writing a cheque. When using
a debit card to pay for goods and services, the purchase amount is deducted from the cardholder’s
checking account. (Okoye, 2013).
B. Prepaid debit cards: - These are debit cards not usually linked to a customers’ account. They must be
funded before being used by cardholders. Prepaid debit cards are identified with such names like cash
cards, value cards, and Naira cards etc. prepaid cards can be used as gift cards students ID cards,
Government payment card, payroll card, Bursary card, insurance cards, travel cards etc. (Ibid).

C. Credit Cards: - A credit card is different from a debit card in that it does not remove money from the
user’s account after every transaction. In the case of credit cards, the issuer lends money to the consumer
(or the user) to be paid to the merchant. A credit card allows the consumer to revolve their balance at the
cost of having interest charged. The parties involved in a credit card transaction include cardholder, card
issuing bank, merchant, acquiring bank, independent sales organization, merchant account, credit card
association, transaction network, and affinity partner (Ibid).

2.3.2. Point-of-Sale Transfer Terminals (POS)

A point-of-sale (POS) terminal is a hardware system for processing card payments at retail locations.
Software to read magnetic strips of credit and debit cards is embedded in the hardware. 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

2.3.3. Internet banking

The easy accessibility to internet facility and availability of computer lead the banks to provide their
products and services through new delivery medium i.e. internet.
 According to Booz, Allen & Hamilton (1999), “Internet banking” refers to systems that enable bank

10
 customers to access accounts and general information on bank products and services through a
personal computer (PC) or other intelligent device.

2.3.4. Mobile banking

Mobile Banking can be defined as an occurrence when customers access a bank’s networks using cellular
phones, pagers, personal digital assistants, or similar devices through telecommunication customer of a
financial institution with space to financial transaction in a public space without the need for a human clerk
or bank teller. It means performing banking activities which primarily consists of opening and maintaining
mobile/regular accounts and accepting deposits; furthermore, it includes performing fund transfer or cash-in
and cash-out services using mobile devices (NBE Directive, FIS-01-2012).

2.3.5. Tele-banking
According to Habibur, Mohammed and Sayeed (2012) Telephone Banking service is provided by phone. To
access an account it is required to dial a particular telephone number and there are several options of
services. Options included; Checking account balance Funds transfer between current, savings and credit
card accounts Bill payments Stock exchange transaction Receive statement via fax loan payment
information.

2.4 Role of E- Banking

Electronic banking (e-banking) is the newest delivery channel of banking services. The definition of e-
banking varies amongst researches partially because electronic banking refers to several types of
services through which a bank’s customers can request information and carry out most retail banking
services via computer and mobile phone.
The principal benefit of e-banking system is to reduce in operating cost per transaction. According to Sarel
& Mamorstein, 2003 and Nath et al., 2001, the estimate cost of per e-banking transaction is very high
comparatively to the e-banking transaction cost. Providing e-banking services is the only way to reduce the
operating cost without reducing existing service levels. These advantages lead to banks to take e-banking
as the most preferable mode of service delivery. Now, banks can deeply analyze all the information
gathered from bank customer interactions with the help of information technology. Rapid technology
advancements have introduced major changes in the worldwide economic and business atmosphere.
Information technology developments in the banking sector have sped up communication and transactions
for clients (Booz et al, 1997). Online banking is also one of the technologies which are fastest growing

11
banking practices nowadays. It is vital to extend this new banking feature to clients for maximizing the
advantages for both clients and service providers.

A reduction in the percentage of customers visiting the banks with an increase in alternative channels of
distribution will also minimize the queues in branches (Thornton and White, 2001). According to Thornton
and White (2001) this ultimately leads to improved customer satisfaction.
Kerem (2003) observed that banks are responding to electronic banking differently and that those which
see electronic banking as a complement and substitute to the traditional channels achieved better
communication and interactivity with the customers. Other benefits that have accrued because of the
adoption of electronic banking in developed countries include the ability to attract new customers and
widening the customer database, improving bank marketing and communication, and having the ability to
retain high profit customers (Farshad et al., 2013).
(Ibid) Harrison (2012) suggested that the commercial benefits of E-banking lie in five areas; firstly, firms
are able to expand their geographical reach. Secondly, important cost benefits lie in improved efficiency in
procurement, production and logistics processes. Thirdly, there is enormous scope for gaining through
improved customer communications and management. Fourthly, the internet reduces barriers to entry for
new market entrants and provides an opportunity for small firms to reorient their supply chain relationships
to forge new strategic partnership. Finally, e-commerce technology facilitates the development of new types
of products and new business models for generating revenues in different ways as well as different revenue
streams.

Generally the E-Banking has various benefits when we see from different point of view as stated below;

2.4.1. Benefits to Consumers

The main benefit from the bank customers’ point of view is significant saving of time by the automation of
banking services processing and introduction of an easy maintenance tools for managing customer’s
money. The main advantages of E-banking for corporate customers as per (Bank Away! 2001; Gurău,
2002) are as follows: - Reduced costs in accessing and using the banking services. Increased comfort and
time saving transactions can be made 7x24, without requiring the physical interaction with the bank.

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Quick and continuous access to information: Corporations will have easier access to information as, they
can check on multiple accounts at the click of a button. Better cash management: E-banking facilities speed
up cash cycle and increases efficiency of business processes as large variety of cash management
instruments is available on internet sites. For example, it is possible to manage company’s short term cash
via internet banks (investments in over-night, short- and long term deposits, in commercial papers, in bonds
and equities, in money market funds). Private customers seek slightly different kind of benefits from E-
banking. The main benefits from E-banking for private customers are as per Bank Away (2001) are as
follows:-Reduced costs: This is in terms of the cost of availing and using the various banking products and
services. Convenience: All the banking transactions can be performed from the comfort of the home or
office or from the place a customer wants to. Speed: The response of the medium is very fast; therefore
customers can actually wait till the last minute before concluding a fund transfer.
General consumers have been significantly affected in a positive manner by E-banking. Many of the
ordinary tasks have now been fully automated resulting in greater ease and comfort.

 Banks are available 24 hours a day, seven days a week and they are only a mouse click
away.
 Customer’s account is extremely accesses able with an online account.
 Customer can withdraw can at any time through ATMs that are now widely available
throughout the country and have mini banks statements, balance inquiry at these ATM.
 Through Internet Banking customer can operate his account while sitting in his office or
home. There is no need to go to the bank in person for such matter.
 E banking has also greatly helped in payment of utility bill. Now there is no need to stand
in long queues outside banks for his purpose.

2.4.2. Benefits of E-Banking for Bank industry

Banking industry has also received numerous benefits due to growth of E- Banking infrastructure. The
growth of E-banking has greatly helped the banks in controlling their overheads and operating cost. Many
repetitive and tedious tasks have now been fully automated resulting in greater efficiency, better time usage
and enhanced control.

The rise of E-banking has made banks more competitive. It has also led to expansion of the banking
industry; opening of new avenues for banking operations. Electronic banking has greatly helped the

13
banking industry to reduce paper work, thus helping them to move the paper less environment. Electronic
banking has also helped bank in proper documentation of their records and transactions. The reach and
delivery capabilities of computer networks, such as the Internet, are far better than any branch network.

 The cost of operation per unit of services is lower for banks.

 Offers convenience to customers since they are not required to go to the bank’s facilities.
 There is a very low incidence of errors.
 The customer can obtain funds at any time from ATMs.
 Credit cards and debit cards allow customers to get discounts at points of sale.
 The customer can easily transfer the funds from one place to another place electronically.

2.4.3. Benefits to General Economy:

Electronic Banking as already stated has greatly serviced both the general public and the banking industry.
This has resulted in creation of a better enabling environment that supports growth, productivity and
prosperity. Besides many tangible benefit in form of reduction if cost, reduced delivery time, increased
efficiency, reduced wastage, e-banking electronically controlled and thoroughly monitored environment
discourage many illegal and illegitimate practices associated with banking industry like money laundering,
frauds and embezzlements. Further E-banking has helped banks in better monitoring of their customer
base. As e banking provide opportunity to banking sector to enlarge their customer base, a consequence to
increase the of volume of credit creation which results in better economic condition, Besides all this E-
banking has also helped in documentation of the economic activity of the masses.

E-banking provides so many benefits not only to the bank itself, but also to the society as a whole. E-
banking made finance economically possible:

(i) Lower operational costs of banks

(ii) Automated process
(iii) Accelerated credit decisions
(iv) Lowered minimum loan size to be profitable.
(v) Increased transparency.
(vi) Make some corporate services economically feasible for society
(vii) Make anytime access to accounts and loan information possible.

2.5. Disadvantages of E-Banking

14
Although e-banking system provides a numerous advantages to the customers but still prospecting e-
banking users should identify its few disadvantages as well. Even after investing heavily in e-banking
awareness campaign and offering so many benefits through e-banking system, still it lacks in gaining trust
factor among its customers.

The disadvantages of e-banking system are as follows:

A. Impersonal: Absence of face to face interaction makes it very impersonal. Thus, customers
who are more comfortable in dealing with people in physical bank setting that provide
those personalized services rather than mechanical interaction; e-banking is not a good
option for them.
B. Lack of trust: Still many customers do not trust online mode of service especially for money
related transactions. Users who are not seasoned in e-banking feel very uncomfortable as
they have doubt regarding the correctness of the transaction done by them online. As they
require some kind of proof of transaction as receipt, to verify their transactions.
C. Difficult for first timers: For the beginners, it appears as a complex mode of service as
customer find it complicated to navigate through bank’s website. While opening an
account online, bank’s website requires a number of information and that seems time
taking and inconvenient process to the first time users.
D. Security fraud: People generally hesitate to have an online bank account due to the
security risk involved in it. Although, it is not a big issue for banks providing e-banking
services, as they prioritize security. To avoid security risk, banks use the most advanced
security system in protecting their websites.
Moreover the E-Banking Has the following obstacles

 If the bank’s server is down, customer can’t use it.

 To use internet banking, customer is compelled to have computer with internet access.
 There is always the possibility of a cracker gaining access to customer’s account.
 Many banks don’t show customer how to use online banking very well and those are
usually the ones with the non- intuitive interface & cluttered design, which makes it pretty
easy for customer to screw up something.
 Banks bears heavy costs to install high firewall.

15
  It leads to missing of personal services.
 E-banking promotes lack of socializing or social contacts

2.6Challenges of E-banking
According to Harrison (2012), it is hypothesized that many of the factors affecting the successful adoption
of new technologies such as e-commerce and E-banking are generic in nature and that the successful
adoption of internet technologies in part depends on how these are used in conjunction with the other
technologies and management practices that form a technology cluster. However, the most critical
challenges can be ascribed to the very limited information and communication infrastructure available in
most developing countries. Reasons vary widely among sectors and countries and are most commonly
related to lack of applicability to the business, preferences for established business models, (OECD, 2004).
Common challenges includes; enabling factors (availability of ICT skills, qualified personnel, network
infrastructure); cost factors (ICT equipment and networks, software and re-organization); security and trust
factors (security and reliability of ecommerce systems, uncertainty of payment methods, legal frameworks
and intellectual property right); and challenges in areas of management skills, technological capability,
productivity and competiveness. Lack of reliable trust and redress systems and cross country legal and
regulatory differences was also impede e-commerce adoption (OECD, 2004). It is however important to
note that challenge to e-commerce adoption work differently according to organizational type and culture.
Areas of training and people development need to be addressed Harrison (2012).

The study that was conducted by Isaac (2005) indicated that the challenges for the adoption of E-banking
in Africa are security, human face i.e. customers still value personalized and responsive services from their
bankers, poor and/or lack of technological infrastructure especially in the rural areas, lack of proper
legislation governing e-transactions and preference to paper money, as opposed to “virtual” cash in
transactions etc. Ziad et al., (2009) also analyzed E-commerce challenges in terms of three categories:
economic, socio-political and cognitive. The economic obstacles include several factors that affect the
diffusion of e-commerce such as slow internet diffusion, unavailability of credit cards, unavailability of a
physical delivery system, and low bandwidth availability. The socio-political challenges take account of
government regulations like privacy and security, lacks of business laws for e-commerce, lacks of legal.
Finally, the cognitive hindrances contain a number of factors which lead to a negative cognitive assessment
of E-commerce of individuals and organizations like inadequate awareness, knowledge, skills, and

16
confidence; a lack of awareness and understanding of potential opportunities; lack of confidence in service
providers and the postal network and computer illiteracy.

Japhet and Usman (2010) identified the following specific challenges hindering the adoption of e-commerce
in developing countries. Lack of convenient payment means, poor distribution system, imperfect legal
system, and lack of large scale telecommunication transmission capability (broadband), Internet security
are problems face these countries. Another most pressing limitations are access to technology (computers,
connectivity, and gateway to Internet), limited bandwidth, which reduces the capacity to handle audio and
graphic data; poor telecommunications infrastructures and unreliable electricity supply.

The cost of the Internet access makes it inaccessible to most users in developing countries. The cost of
accessing the infrastructures also influences the growth of ecommerce. The priority for most developing
countries is to put in place the necessary infrastructure and a competitive environment and regulatory
frame work that support affordable Internet access.

The monthly connection cost of the Internet far exceeds the monthly income of a significant portion of the
population. Confidence and trust is also an essential requirement for secure electronic trading. The
geographical separation of buyers and sellers, often coupled with a lack of real-time visual or oral
interaction, creates a barrier to ecommerce adoption in developing countries. Language is another
important hindrance to ecommerce adoption. Most people in developing countries are illiterates and
uneducated. Moreover, English is a primary language used in many Western countries where new
technologies originate. It is the predominant language for development of IT and ecommerce and it is the
main language used on the Web. Finally, the study identified various socioeconomic characteristics as
barriers hindering ecommerce adoption in developing countries.

The most common are unfavorable economic condition, the poor state of educational system, Lack of ICT
skills and business skills, un reliable and non-secure payment infrastructures, the inefficient logistics and
distribution system and the lack of good transport Exploratory study conducted by Alhaji Ibrahim H. (2009)
the following are among the critical challenges for the adoption of E-banking in Nigeria:-Lack of
Technological Infrastructure – the implementation of e-payment is been impeded by unavailability of ICT
infrastructure. Most rural areas where majority of small and medium scale industries are concentrated have

17
 no access to internet facilities ICT Equipment Costs – where available, the cost of ICT is a critical factor
relative to per capital income. This makes the cost of entry higher compared to developed countries.

Regulatory and Legal Issues –inexistence of proper legal and regulatory frame work. Non-readiness of
banks and other stake holders (acceptability) – even though some have shown impressive willingness,
some banks are still not fully ready to for this new payment regime. Resistance to changes in technology
among customers and staff due to Lack of awareness on the benefits of new technologies,
 Fear of risk among banks
 Lack of trained personnel in key organizations and
 Tendency to be content with the existing structures

People are resistant to new payment mechanisms; Security – where disclosure of private information,
counterfeiting and illegal alteration of payment data may be rampant. Frequent connectivity failure in
telephone lines. Frequent power interruption. In addition, a research conducted by Eze and Nwankwo
(2012) stated that the following as major challenges for adoption and development of E-banking
technology.

2.6.1. Legal and Regulatory framework

The absence of a proper legal and regulatory framework for internet constitutes one of the major
challenges of E-banking. The existing banking laws do not address the issue of E-banking as a new
banking system.
2.6.2. Consumer Protection
Another major challenge of the development of E-banking is the issues of adequate protection for
consumers of banking products from the various risks to which they are exposed to. The risks include
financial loss, malfunctioning of terminals or cards as well as the possibility of unauthorized disclosure of
information without the consent of the consumer. The challenges here range from customer details being
stolen from the vendor files to the selling up of a fraudulent website by fake customer to deceive other
innocent customers.
2.6.3. Loss of Audit Trail
Another challenge of E-banking is the loss of audit trail as business processes continue to change with
internal banking, personal computer and telephone banking. Audit trail basically allows for the tracing of

18
transactions through banking environment facilitates the work of supervisors in ascertaining there liability or
otherwise of the information contained in the master file.
2.6.4. Security of Financial Transactions
There are numerous threats to the security of internet banking. One of such threats is the fear of insecurity
and trust associated with on-line banking which can only be tackled by a good online developer that can put
in place the required firewalls whereby only the authentic users can gain access. Security breaches in E-
banking are most frequently discussed in terms of the dangers that hackers may intercept messages,
misuse the information on modify the content of the message.
2.6.5. Money Laundering and other Financial Crimes
Another major challenge is that under E-banking the financial system is prone to criminal abuse such as
money laundering and other financial crimes. Money laundering and other financial crimes are easily
facilitated through E-banking. This has given a lot of work to monetary authorities which have continued to
work to see that the activities of the money launderers and fraudsters are brought under control.
2.6.6. Systems and Infrastructure Failure
Systems and infrastructural failure have also a lot of effect on E-banking. Failure results to loss of data.
System failure can because of software failure either at the entity or at an organization used for outsourced
functions. Infrastructure failures are mainly caused by power failure. System and infrastructure are really
given a lot of setback to development of E-banking.

2.6.7. The Potential Risks of E-banking

Electronic delivery and payments systems involve a wide range of potential risks. The use of an electronic
channel to deliver products and services introduces unique risks due to the increased speed at which
systems operate and the broad access in terms of geography, user group, applications database and
peripheral systems. The potential risks bring by the e –banking has a lot of implications for the safety and
soundness of the nation’s banking system.

2.6.8. International developments

E-banking exposes the banks to certain peculiar risks. Supervision of banking activities has to be
conducted at a global level if it has to be done effectively. This is essential because e-banking is by nature
non- territorial customers can very easily access the site and not only elicit the required information but can
also purchase the products of their choice. The regulators have to understand and efficiently deal with the

19
regulatory problems of global e-banking. Cross border supervision mechanisms have been established
agreements over home or host responsibilities (within the members), bilateral agreements for sharing of
information and setting benchmarks which all domestic as well as bankers abroad are expected to fulfill.
The ultimate purpose is that a common mechanism of supervision, strong enough is to be developed which
matches the physical banking environment.

2.6.8. Security Risks

Another major problem which is attracting attention in recent years is the security of information collected
by banks. With the advent of e-banking the risk of leaking information has increased considerably. In the
past the banks functioned in an environment which was secluded where there were no security issues but
with interconnected banking operations the banks are exposed to security risks as they function in an open
environment. They have to consciously monitor these risks constantly and manage them whenever
necessary.

There are majorly three kinds of security breaches,

I. those breaches which have a prior criminal motive (eg. fraud, having access to financial
information which can be used for commercial purposes),
II. breaches undertaken by casual hackers (these breaches may lead to a website not
working properly, giving false information or not providing any service at all, may even
ultimately lead to a crash of website) and
III. There may be some defect in the design of the website which may lead to leak of
information). All these type of breaches lead to serious financial, legal or reputational
repercussions.
Many banks are finding that these systems are hacked several times a day but the losses are minor in the
nature. However the banks should develop some kind of Burglar Alarm to trace the number of and the
frequency of these unsuccessful attempts to hack the security of inform.

Those computer systems that contain details of high valued payments or which contains highly sensitive
confidential information must be properly guarded. An adequate security system must protect such

20
information. Generally, therefore the greater is the risk of loss the greater the possibility that such a loss
may occur. Although the banks are trying to secure overall systems but more attention needs to be paid to
the separation of internal systems and poor internal security. One possibility which may lead to hacking of
website is gaining entry through a less guarded less valued website and then it gaining entry into a high
value system through banks’ internal network. It is being contemplated that banks erect firewalls (i.e.
software that prevents an unauthorized person from gaining entry into the system) among their different
systems. This would ensure minimization of damage even if an external breach does occur. The greatest
risk to security however is from internal sources that are the employees of the organization and the
contractors.

Even though there are security risks involved in e-banking, it could also eliminate some of the mistakes of
manual processing of information (customers are directly contacted through the bank’s system rather than
customers contacting the bank first and then bank eliciting information from them). With the development of
e-banking practices and management of security risks, large gains could be achieved.

The banks should proactively concentrate on addressing the risks involved effectively. They must devise a
strategic approach toward safety of data establishing correct working procedures and security controls into
systems and networks. A focused approach on information security needs to be developed which should
include testing of systems’ security controls (i.e. penetration testing), monitoring of new competitors and
keeping an eye on the weak spots, reviewing market developments and recruiting adequate staff with
expertise to manage information security and its security control system. The above mentioned concerns
would be taken up by line managers when they supervise banking operations, they should used
reassurances as these accounts.

A research conducted by Vaithianathan, S. (2010) stated that lack of technology infrastructure, lack of
awareness, lack of skilled human resources, and the lack of government initiatives, including various
economic and social factors are cited as hurdles that prevent pervasive e-commerce adoption in Indian.

2.7. Challenges of E- Banking in Ethiopia

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Major Challenges of E-banking in Ethiopia is in its emerging stage of development it has no legal protection
face challenge to enter the financial services markets quickly and efficiently. However it needs to be
recognized that perception norms and an improvement in functioning of e-banking services. Most
challenges of E- banking in Ethiopia was;

2.7.1. Acceptance of Customer

Proper understanding of the customer is the major phase of the E-banking. It is known that technology
literacy in Ethiopia is until now very low and is problems in fast acceptance of internet. Attitude of the
customer needs to be changed by giving awareness about technical terms in internet banking. However, it
supports in the fast changing technical scenario, lack of appropriate technology. Hence there is always lack
of skilled personal and fear of technology.

2.7.2. Costly Technology

E-banking at initial level require huge charge for acquiring personal computer and other equipment’s;
oneself to do online banking is still not with reach of the middle class & upper middle class customers. The
cost of maintenance of all equipments like, modem, routers, bridges and network management systems is
very high. The cost of sophisticated hardware and software and skill level of people needed. In Internet
banking there is need of skilled employees or knowledgeable professionals to route the banking
transactions via internet. Banks can employee software application developers, database administrators
and training to existing bank staff on the changing systems and procedures who can handle Internet
banking applications under proper supervision.

2.7.3. Issues in Security and Legal Issues

Providing appropriate security of using encryption techniques, implementation of firewalls and virus
protection software are difficult. In today’s banking world, legal frame work for recognizing the validity of
banking transactions. Information technology act or RBI suggested that criterion of Digital Signature
Certification Board for authentication of electric records and communication with digital signatures.

22
 2.7.4. Other business related restrictions
Not all transactions can be carried electronically; many deposits and some withdrawals require the use of
physical services. Some banks have automated to their customers (front end) but still largely depend upon
manual process (back end).It result, most of clientele or customers were restricted by lack and awareness
and due to technical problems.

Generally low level of infrastructural development, lack of suitable legal and regulatory framework, high
rates of illiteracy, frequent power interruption and security issues are the main challenges for developing e-
banking in Ethiopia. All banks in Ethiopia are too late to move with technological advancement.

2.8. Adoption of E-banking Technology

An exploratory research conducted by Mahdi Salehi (2004) in Iran indicated that the adoption status of E-
banking is the transition of pre-development to development phase and the main drivers for adopting E-
banking are downsizing, gaining competitive advantage, increasing market share and improving bank’s
image. In addition to the above factors, the case study that was conducted in china by Sherah Kurnia, Fei
Peng, Yi RuoLiu (2005) suggested that the government support is also a strong driver for E-banking
adoption. The government support is manifested in two ways. Firstly, the Government is establishing an
electronic commerce (EC)-friendly environment in the country. The government in recent years to revamp
the national ICT and logistic infrastructures has committed heavy investments. New EC laws and
regulations have also been passed and adjusted to provide legal protections for EC activities in general.
Secondly, the government also directly offers financial incentives to promote E-banking adoption.

The study that was conducted by Isaac (2005) indicated that the drive forces for the adoption of E-banking
in Africa are rapidly changing customers’ needs and preferences, government support, competitive forces
and product differentiation strategies and pressure to reduce transactional and operation costs. In the study
on online banking drivers Aladwani (2001) has found, that providing faster, easier and more reliable
services to customers were amongst the top drivers of E-banking development.

23
 2.9. Adoption of E-banking Technology in Ethiopia

2.9.1 History of Banking in Ethiopia

A reference to the Ethiopian history reveals that the first bank history was start before the agreement that
was reached in 1905 between Emperor Minilik II and Mr.Ma Gillivray, representative of the British owned
National Bank of Egypt. After the agreement, the first bank called Bank of Abysinia was start operation on
Feb.16, 1906 by the Emperor. The Bank was totally managed by the Egyptian National Bank. In 1931 Bank
of Abyssinia was legally replaced by Bank of Ethiopia shortly after Emperor Haile Selassie came to power.
Then the Ethiopian Monetary and Banking law that came into force in 1963 separated the function of
commercial and central banking creating National Bank of Ethiopia and commercial Bank of Ethiopia.
Moreover it allowed foreign banks to operate in Ethiopia limiting their maximum ownership to be 49 percent
while the remaining balance should be owned by Ethiopians. Following the demise of the Dergue regime in
1991 that ruled the country for 17 years under the rule of command economy, the EPRDF declared a liberal
economy system. In line with this, Monetary and Banking proclamation of 1994 established the national
bank of Ethiopia as a judicial entity, separated from the government and outlined its main function.
Following the change in the political environment in 1991, the proclamation for the licensing and
supervision of insurance business heralded the beginning of a new era. Immediately after the enactment of
the proclamation private insurance companies began to flourish. Currently there are 16 private banks and 3
government-owned banks (as of April, 2020.)

2.8.2. E- Banking in Ethiopia

According to Mattewos (2016) the banking business has continued realizing the advantages of the cutting-
edge information and communication technology. It has become essential to effectively implement the
appropriate technology to have faster decision support and effective data integration in the financial
intermediary process and also to look for other avenues to augment income.

Concerning the sectoral outlook, there are emerging initiatives to invest in electronic multi-service channels
and also a tendency to optimally utilize the available resources in a consortium, which partly supports the
effective implementation of the envisaged national payment system. Additionally, the ongoing efforts of
emplacing the electronic laws focusing on the retail banking business are expected to have a positive effect
on the growth of the payment card business. These are other opportunities for banks to expand their
activities and ultimately realize a second-generation reform in the Ethiopian financial sector (Dashen,
2009/10)

24
With a growing number of import-export businesses, and increased international trades and international
relations, the current banking system is short of providing efficient and dependable services and therefore
all banks operating in Ethiopia should recognize the need for introducing electronic banking system to
satisfy their customers and meet the requirements of rapidly expanding domestic and international trades,
and increasing international banking services (Worku, 2010).

In developing countries like Ethiopian, there is little evidence concerning E-banking. As far as E-banking
concerned, a lot of researches on internet banking, mobile banking and modern service delivery channels
have been done in different countries in the world. As per the knowledge of the researcher only a very
limited number of researches have been done on E-banking in Ethiopian Banking like that of (Ayana,
2012), (Gardachew,2010) and (Wondwossen and Tsegai, 2005). Therefore, more studies are still required
to assess challenges and opportunity of E-banking in the country to identify areas in which the country lags
behind their E-banking adoption and diffusion.

The first Bank that introduce E-Banking was the largest state-owned bank, Commercial Bank of Ethiopia,
by introduced ATM service for local users in 2001 with its fleet of eight ATMs located in Addis Ababa.
Moreover, CBE has had Visa membership since November 14, 2005. However, due to lack of appropriate
infrastructure it failed to reap the fruit of its membership. After CBE introduce the product, Dashen Bank
was being prepare in introducing ATM based payment system and acquired Visa membership, which
worked aggressively to maintain its lead in electronic payment systems.

Oromia ibank, a forerunner in introducing e-banking in Ethiopia, has installed ATMs at convenient locations
for its own cardholders. The Oromia bank ATM is available 24 hours a day, seven days a week and 365
days a year providing service to Oromia bank Debit Cardholders and International Visa Cardholders
coming to the country. At the end of June 2013, Oromia bank has installed 181 ATMs and more than 700
Point of Sales (POS) terminals in its area branches, university compounds, shopping malls, supermarkets,
restaurants and hotels.
Furthering its competitive edge in state-of-the-art information technology, OB is significantly investing on its
IT infrastructures and systems. Accordingly, OB has been working hard to finalize the different projects
commissioned to modernize or upgrade different IT systems in use by its core operations and back office
functions and also introduced new systems that ensure efficiency of its operations and competitiveness of

25
its services. Our fully-equipped state-of-the art data centre has also gone operational while we are finalizing
network and disaster recovery center upgrading.

Since recently, OB has been leveraging on technological developments to drive product and service
innovation, improve operational efficiency and foster business growth. The Bank has been reinforcing its
investments in Electronic banking channels to further increase the number and options of its services
outlets such as Card Banking, mobile banking, agency banking and internet banking. The Bank adopted
new core-banking system which is now fully operational. OIB is qualitatively and quantitatively improving its
Electronic banking services. As at December 26, 2021, OB has deployed 181 ATM machines and there are
121,831 Oro -card users while the number of Oro-cash (mobile banking) users reached 90,162. The Bank
also recruited 147 Oro-Agents across the country.

2.9 E-Banking product provide by OIB

Oromia International Bank provide different E- Banking product for customer through computerized
systems intended to speed operation, reduce costs, and allows banks clients to request information and
carry out most retail banking services Via computer, television, mobile phone or via other electronic means.
Services provided by Oromia International Bank under E- Banking Department are; ATM (Oro Card),
mobile Banking (Oro Cash, *840#), Agent Banking (Oro Agent) and internet Banking (Oro click).

26
 CHAPTER THREE
3. Research Methodology
This chapter will present the methodological framework applied to solve the research problem and to
answer the research questions. The chapter starts with the chosen research design, research approach
and study area. Afterwards, the sample selection and the data collection methods will be presented.

3.1. Description of the study area

The area chosen for this study is Addis Ababa because head office of Oromia Bank present in Addis Ababa
that represent the whole branches in the country and the central bank of the Country are located there and
also E-banking experts of Oromia bank are located at head offices which found in the capital city of the
country. Climatic condition of Addis Ababa city are characterized by dry winters, and this is the dry season
during this season the daily maximum temperatures are usually not more than 23 °C (73 °F), and the night-
time minimum temperatures can drop to freezing. The short rainy season is from February to May.

Addis Ababa is the capital city of Ethiopia. It is also the largest city in the country by population, with a total
population of 3,384,569 according to the 2007 census. However, it is believed that this number was in
accurate when recorded and underestimated the city’s population. The city has through recent years seen
a strong annual growth rate, and population counts as of 2020 are growing closer to 5 million.

3.2 Research Design

A research design is the arrangement of conditions for collection, measuring and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In fact, the

27
research design is the conceptual structure within which research is conducted; it constitutes the blueprint
for the collection, measurement and analysis of data (Kothari, 2004).

According to Robson (2002), the three purposes of conducting research are generally the following:
explorative, descriptive and explanative. Explorative research is characterized as the seeking of new
insights, the looking around, and the asking of questions or the bringing of some phenomenon into new
light. Explanative research aims at gaining an explanation of a specific situation or problem, generally in the
form of causal relationships. Finally, Descriptive research is a type of research that is mainly concerned
with describing the nature or condition and the degree in detail of the present situation. Creswell (2003)
stated that the descriptive method of research is used to gather information about the present or existing
condition. This study will 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 adoption and development of E-banking in Ethiopia. Therefore,
Descriptive research is being used to achieve the research objectives

3.3 sampling
Taking the whole branches of the Bank is a complicated work. Thus, the target population for this study will be the
customers of OB and the managers. The researcher will use simple random probability sampling methods to select
branches. The researcher will be using both probability and non-probability sampling method. From
probability sampling stratified sampling technique will be selected as well as from non-probability sampling
judgmental sampling technique will be selected to representative samples from e-banking users. Sampling
will be held in the ten OIB Branches found in Addis Ababa branches, all will be e-banking customers in the
study area. The reason for using proportional stratified sampling technique will be there are different
number of sample units in terms of customer`s-base/number at the different independent OB branches and
the reason for using judgmental sampling is to get information from concerned person.

3.4 Sampling design and size

The research will be takes place with defining target population for sampling of e-banking customers of
Oromia ibank branches in Addis Ababa Town. Respondents will be select from a total of ten branches.
Sample size will be determined based on the number of e- banking customers present in each branch
maintained and staff of the Bank who has better knowledge on E-banking. It is a common practice in
research to use sample in order to generalize about the targeted populations. The study considered a gross

28
total of 23,868 target population, from which 393 will be taken as a sample for the study by using the
formula (Yamane formula of 1967). In this regard, taking the available resources, time, budget, data, and
geographic distances into account, a sample size of 393 will be feasible from the 23,868 customers of e-
banking users in Oromia bank in ten branches in Addis Ababa town and managers of the Branch’s. Thus,
the researcher will apply the formula as used by Yamane (1967) assuming the level of precision or
sampling error (e) to be 5%, and, desired a confidence level of 95%, while expecting a margin of error to be
5%. Based on these the total sample size was 393 customers and applied proportionate sampling to decide
the sample size for tenbranches of OB.

N
n= (e) 2 and level of significance 95% and error 5%
1+ N
Where n=sample size
N=population
e=level of error

III.5. Sources of Data and Method of Data Collection

To accomplish the study the researcher will collect data from both primary and secondary sources. Primary
data will be collected from the staffs of the Oromia l bank and customer of the bank based on a structurally
designed questionnaire that are closed ended and open-ended questions, which gives the respondents an
opportunity for adequate expression of their view on the questions .In addition, semi-structured interview
with the higher official of Oromia bank E-banking manager’s will be conducted and observation by
researcher to identify what is really happening. In order to get sufficient and reliable data that represents
the whole branch of the selected Oromia banks including head office staff. Secondary data: different
documents, records and reports of the Bank, Regulatory organ reports, from web site, books, annual
reports and magazines, articles and different journals will be analyzed.

3.5.1 Questionnaires
According to Yin (2003), structured questioners are important method for collecting primary data and that it
further allows the researcher to be well focused on the specific research topic. The questionnaire will be
used because the researcher considered it to be more convenient as respondents could answer at their
convenience. The questionnaire will be developed by the researcher based on the research questions and
the literature. The researcher will be use open and closed-ended type of questionnaires, which gives the

29
respondents an opportunity for adequate expression of their view on the questions. The questionnaire will
be beginning with an introductory statement, which specified the purpose of the research as purely
academic. To determine the probable usefulness of the questionnaire and whether further revision is
needed prior to conducting the survey. The researcher will be circulating the questionnaire to two
postgraduate students and six professional staffs of sampled private commercial directly engaged in E-
banking technology.

The subjects will be asked if they have any problems understanding the questionnaire or have specific
comments regarding the questionnaire. The format for responding is through both open-ended and close-
ended questions. The subjects are encouraged to be very free with their responses, make suggestions for
improvement and outline any difficulties they found.

In addition, the pilot study will be conducted to ensure the validity, sequence and relevance of the
questionnaire to this study as despite in the above; ten purposely sampled branches of OB will be included
in the survey. The target respondents will be professional experts who are in charge of the E-banking
technology in sampled ten branches of OB. The respondents are considered as they are deemed to be
knowledgeable in due course of implementing and running E-banking system in their line of work and could
provide important perspectives on its adoption as they are involved in implementation of the project.

3.5.2 Interviews:
In addition to questionnaires, semi structured interviews will conducted with E-banking managers of each
sampled Oromia bank who have sufficient information regarding the research problem and with the relevant
bodies of the National Bank of Ethiopia (Banking Supervision directorate)The major purpose of this
interview was to corroborate certain facts that the investigator already thinks have been established.
A semi-structured interview will be conduct by meeting the interviewer and does not strictly follow a
formalized list of questions. They will ask more open-ended questions, allowing for a discussion with the
interviewee rather than a straightforward question and answer format. Therefore, Thus, semi structured
interviews will be conducted so as to substantiated and improve the results of questionnaires.

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3.5.3 Secondary data Sources:
The secondary sources of data constituted data gathered from records and reports of the industry, World
Wide Web (www) of the respective Oromia bank, literature on E-banking, books and journals, and
unpublished theses. The most important use of this secondary data source will be to corroborate and
augment evidence from other sources (Yin, 1989; pp. 86). Thus, the document examination helps to
substantiate the patterns that evolved from the data collected via questionnaires and interview, so that the
validity of the findings could be enhanced through secondary sources.

3.6. Method of Data Analysis

In order to meet the stated research objectives, the collected data will be analyzed based on the nature of
the objective. During data analysis period, both descriptive and inferential statistics were used as per the
desired objectives of the study. For descriptive statistics, the Statistical Package for Social Sciences
(SPSS, Ver. 20) will be used. Frequency distribution for each variable will be first determined, and result
values expressed in percent. Aggregated variables per unit of inquiries will be presented through summary
tables. Throughout the analyzing process, percentages, ratios and other statistical methods are will be
employed. Moreover, tables and graphs are used to present the findings of the study.
On the other hand, inferential statistics (i.e. mean comparison test and paired sample t-test) will be used in
order to explain the relationship between e-banking services and profitability of Oromia bank before and
after implementation of e-banking Proportion of each branch. Questionnaires will be assigned by respective
code numbers. Respondents filled and completed their response for each provided questions. After it, the
researcher checked and corrected whether or not questionnaires will be properly fill. Then, questionnaires
will be filter and organized for further data processing.

4. BUDGET OF THE PROJECT

No Items Unit Quantity Unit price Total price Remark

1 Stationary

Paper packet 4 100 400

Pen pcs 10 5 50

Pencils pcs 2 3 6

31
 Eraser pcs 2 2 4

2 Printing pcs 200 4 800

3 Photocopy pcs 120 1 120

4 Coffee tea cup 50 6 300

5 Transport cost trans 500

6 Premium and other Br 100 5 500

Bounded paper Number 1 20 20

7 Contingent (10%) 245

Total 539 151 2945.00

5. WORK PLAN
Phase Main Activity 2023DURATION OF ACTIVITIES
Mar. April May June

I 1 Review of literature
2 Starting to work proposal
3 Introductory part and Literature review
4 Identify source of literature
5 Methodology
6 Primary data collection
6.1 Preparation of questionnaire
6.2 Distribution of questionnaire
6.3 Collection of questionnaire
7 Analysis data collected through
questionnaires and other data
collection methods
8 Explain finding
11 Conclude and recommend
12 Thesis submission

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