34 Tsegaye

AMERICAN COLLEGE OF TECHNOLOGY
DEPARTMENT OF BUSINESS STUDIES

MASTER OF BUSINESS ADMINISTRATION PROGRAM
FEASIBILITY STUDY ON PROVISIONING SHARED CLOUD

CORE BANKING SYSTEMS IN THE ETHIOPIAN
FINANCIAL INDUSTRY
A Project Work Submitted to The Department of Business Studies of

American College of Technology as a Partial Fulfillment of the requirement
of the Award of Master of Business Administration
Prepared By
Tsegaye Tamiru
Project Advisor
Asmamaw Atnafu (Phd)
September, 2023
Addis Ababa, Ethiopia
DECLARATION
I, Tsegaye Tamiru Zergaw hereby declare that a project work entitled Feasibility Study On
Provisioning Shared Cloud Core Banking Systems In The Ethiopian Financial Industry
submitted to The Department of Business studies of American College of Technology in partial
fulfillment of the requirements for the award of the degree of Master Business Administration
is a record of original work done by me during 2022/23 academic year under the supervision
and guidance of Asmamaw Atnafu (Phd) and it has not formed the basis for the award of any
Degree/Diploma/Associate ship/Fellowship or other similar title of any candidate of any
university.
Place: Addis Ababa
Date: September 3, 2023
__________________________________
Signature of the Candidate
ii
CERTIFICATE
This is to certify that the project work entitled Shared Cloud Core Banking System submitted
to the Department of Business Administration, MBA Program in partial fulfillment of the
requirements for the award of the Master of Business Administration is a record of original
project work done by _________________________during the
period_____________________academic year under my supervision and guidance and the
thesis has not formed the basis for the award of any Degree/Diploma/Associate ship/Fellowship
or other similar title of any candidate of any University and it complies with the regulation and
accepted standards of the College.
Name of Advisor: ________________________
Signature: ___________________
Date: __________________
iii
APPROVAL SHEET
AMERICAN COLLEGE OF TECHNOLOGY DEPARTMENT OF BUSINESS

STUDIES MASTER OF BUSINESS ADMINISTRATION PROGRAM
TITLE OF PROJECT
FEASIBILITY STUDY ON PROVISIONING SHARED CLOUD

CORE BANKING SYSTEMS IN THE ETHIOPIAN
FINANCIAL INDUSTRY
BY: Tsegaye Tamiru Zergaw
Id Number: RMBA/433/21A
Approved by:
Advisor
__________________ _____________________ _______________
Name Signature Date

Internal Examiner
__________________ _____________________ _______________
Name Signature Date

External Examiner
__________________ _____________________ _______________
Name Signature Date
iv
ACKNOWLEDGMENT
First and foremost, I want to give my thanks to Almighty God for giving me the chance to enjoy
the fruits of my endeavor.
Second, I thank my esteemed advisor Asmamaw Atnafu (Phd) for his incessant guidance,
perspicacious thoughts, constructive criticism, and great efforts to clarify things clearly and
easily throughout my project work period.
Third, I thank management body of the college Dr Haile, Dr Bizuye and Ato. Tibebe Tilahun
for the co-operation, support, and needs rendered throughout my study period.
Fourth, my profound thanks go to the department head W/ro Sitina (Asst Prof) for her
support and facilities extended throughout this project work.
Fifth, I wish to express my gratitude to my friends, relatives, colleagues, and students for all
the support and help that needs to be extended to me for the completion of this study.
Sixth, I also extend my gratitude to the staff members and management body of ACT for their
cooperation in providing necessarily data.
Furthermore, my indebted gratitude is expressed to all of my families and friends for their
encouragement in completing this research paper, especially for my Mother W/ro Kebebush
Bekele
Name: Tsegaye Tamiru
Signature: _____________
Date: September 3, 2023
v
CONTENTS
DECLARATION ................................................................................................................................................... ii
CERTIFICATE ..................................................................................................................................................... iii
ACKNOWLEDGMENT ....................................................................................................................................... v
LIST OF FIGURES ............................................................................................................................................ viii
LIST OF TABLES ................................................................................................................................................ ix
PROJECT EXECUTIVE SUMMARY ............................................................................................................... xi
Chapter 1 : INTRODUCTION .............................................................................................................................1
1.1 Background of the project ..........................................................................................................................1
1.2 Statement and Justification of the Problem ..............................................................................................2
1.3 Objective of the Project ...............................................................................................................................3
1.3.1 General objective ......................................................................................................................................3
1.3.2 Specific objectives .....................................................................................................................................3
1.4 Scope of the Project .....................................................................................................................................3
Chapter 2 : PROJECT CONCEPT ......................................................................................................................5
2.1. Opportunity study ......................................................................................................................................5
2.2. The project Concept and Profile ...............................................................................................................5
2.3. Preliminary study .......................................................................................................................................6
Chapter 3 : PROJECT METHODS AND PROCEDURE .................................................................................8
3.1. Project Design/The procedure or the methodology: ................................................................................8
3.2. Types of data ...............................................................................................................................................8
3.3. Sources of data ............................................................................................................................................8
3.4. Data collection methods and tools .............................................................................................................9
3.5. Population of the study.............................................................................................................................10
3.6. Sampling design ........................................................................................................................................11
3.7. Sample size ................................................................................................................................................11
3.8. Sampling methods ....................................................................................................................................11
3.9. Data analysis methods and tools ..............................................................................................................11
3.10. Schedule ...................................................................................................................................................12
3.11. Resource Budget .....................................................................................................................................13
Chapter 4 : PROJECT PREPARATION ..........................................................................................................14
4.1 Markets and Demand Analysis.................................................................................................................14
4.2 Raw Materials and Supplies Study (if any) .............................................................................................24
4.5 Technology Selection .................................................................................................................................27
4.6 Organizational and Human Resource......................................................................................................28
4.7 Social and Economic Analysis ..................................................................................................................31
4.8 Financial Analysis ......................................................................................................................................33
vi
4.8.1 Initial investment cost ............................................................................................................................33
4.8.2 Production costs/Operational Costs ......................................................................................................34
4.8.3 Marketing costs .......................................................................................................................................35
4.8.4 Projection of cash flow ...........................................................................................................................35
4.8.5 Financial Evaluation...............................................................................................................................37
4.8.5.1 Net present value (NPV) ......................................................................................................................37
4.8.5.2 Internal rate of return (IRR) ..............................................................................................................38
4.8.5.3 Benefit-cost ratio (BCR) ......................................................................................................................39
4.8.5.4 Payback period (PBP) .........................................................................................................................40
4.8.5.5 Accounting rate of return (ARR) .......................................................................................................41
4.8.5.6 Break-Even Analysis (BEA)................................................................................................................42
Chapter 5 : CONCLUSION AND RECOMMENDATIONS ...........................................................................44
5.1 Summary ....................................................................................................................................................44
5.2 Conclusions ................................................................................................................................................46
5.3 Recommendations ......................................................................................................................................47
Reference ..........................................................................................................................................................49
APPENDIXES .................................................................................................................................................51
vii
LIST OF FIGURES
Figure 4-1:Occupation in the Ethiopian financial industry Surveyed ..................................... 16
Figure 4-2:Years of experience in the industry Surveyed ....................................................... 16
Figure 4-3:Familiarity with Shared Payment Hub .................................................................. 17
Figure 4-4:Potential Benefits .................................................................................................. 17
Figure 4-5: Challenges ............................................................................................................ 18
Figure 4-6:Mitigation .............................................................................................................. 18
Figure 4-7:Impact on Payment Processing Efficiency ............................................................ 19
Figure 4-8:Regulatory and Legal Considerations ................................................................... 19
Figure 4-9:Key Stakeholders .................................................................................................. 20
Figure 4-10:Technological Infrastructure ............................................................................... 20
Figure 4-11: Risks and Vulnerabilities ................................................................................... 21
Figure 4-12:Financial Viability ............................................................................................... 21
Figure 4-13: Organizational Structure .................................................................................... 29
Figure 5-1: Mifos CBS architecture ....................................................................................... 58
Figure 5-2:Mifos Payment Hub ............................................................................................. 59
viii
LIST OF TABLES
Table 3-1: Project Schedule ..................................................................................................... 12
Table 3-2:Cost Breakdown. ..................................................................................................... 13
Table 4-1:Upfront project expenses ......................................................................................... 34
Table 4-2:Production costs/Operational Costs ......................................................................... 35
Table 4-3:Projection of cash flow ............................................................................................ 36
Table 4-4:Net present value (NPV).......................................................................................... 37
Table 4-5:Internal rate of return (IRR)..................................................................................... 39
Table 4-6:Payback period (PBP) .............................................................................................. 41
Table 4-7:Break-Even Analysis (BEA) ................................................................................... 42
Table 5-1:Forecast the value of potential IT investments ........................................................ 52
Table 5-2:Increased Revenue Calculation ............................................................................... 53
Table 5-3:Cost Savings Calculation ........................................................................................ 55
Table 5-4:Project Expenses Calculation .................................................................................. 58
ix
Acronyms
AEMFI – Association of Ethiopian Microfinance Institutions
ARR -Accounting rate of return
BaaS – Banking as a Service
BCR - Benefit-cost ratio
BEA - Break-Even Analysis
CBS – Core Banking System
COOPs- Cooperatives
FCA- Federal Cooperative Agency
Fintech - Financial Technology
IRR -Internal rate of return
MFIs- Microfinance institutions
NPV -Net present value
NBE - National Bank of Ethiopia
Mifos- Open Standard Core Banking system
ROI -Return on Investment
SACCOs - Savings and Credit Cooperatives
SaaS – Software as a Service
PBP - Payback period
x
PROJECT EXECUTIVE SUMMARY
The financial inclusion in Ethiopia has experienced significant growth in recent years, with the
emergence of Banks, MFI, SACCOs, and fintech. However, the lack of advanced technologies
has hindered these institutions' ability to provide quality financial services to their clients and
limits their potential for growth and expansion.
The objective of this project is to develop and implement a shared cloud CBS for MFI,
SACCOs, and fintech companies in Ethiopia. The shared cloud CBS system will be designed
to meet their specific needs and requirements while being cost-effective, efficient, and user-
friendly. The system will promote collaboration and resource-sharing among these institutions
and help to realize their full potential in contributing to the growth and development of the
financial sector in Ethiopia.
The project will be divided into four phases: requirements gathering, system design and
development, testing and validation, and implementation and deployment. The project team
will use a variety of methods and tools to carry out each phase of the project, including situation
analysis, gap analysis, data collection, and data analysis. Qualitative and quantitative data will
be collected through surveys, interviews, focus groups, document review, and system testing
and validation.
The shared cloud CBS system will be designed to be scalable and adaptable to future changes.
The system will be rigorously tested and validated to ensure that it functions as intended and
meets the needs of these institutions. Once the shared cloud CBS system has been designed,
developed, tested, and validated, it will be implemented and deployed to MFI, SACCOS, and
fintech companies. The project team will provide training and support to ensure that the system
is effectively adopted and utilized by all stakeholders.
In conclusion, the shared cloud CBS system will enhance the efficiency and effectiveness of
MFI, SACCOS, and other small financial service providers in Ethiopia in providing financial
services to their clients. It will promote collaboration and resource-sharing among these
institutions and help to realize their full potential in contributing to the growth and development
of the financial sector in Ethiopia.
xi
Chapter 1 : INTRODUCTION
1.1 Background of the project
According to NBE and World Bank official data on August 2022 there are 29 commercial banks,
1 development bank, 18 insurance companies, 1 re-insurance company, 40 microfinance
institutions, 6 Capital goods Finance/Lease companies, and eight payment instrument
issuers/system operators1 and over 21,000 SACCOs2. MFI, SACCOs, and fintech companies have
played a critical role in providing financial services to people who are excluded from the formal
banking system. However, despite their significant contribution to the financial sector, most of
these institutions still operate in isolation, with their own standalone systems that are often
outdated and inefficient. Additionally, they lack the necessary IT personnel and resources to
develop and implement a shared cloud core banking system (CBS).
This lack of affordable CBS for MFI, SACCOs, and fintech companies is a significant challenge
that hampers their ability to provide quality financial services to their clients. The absence of a
shared system leads to inefficiencies, duplication of efforts, and increased costs for these
institutions. Furthermore, it limits their ability to share information, collaborate, and scale their
operations.
To overcome these challenges, it is crucial to provide a shared cloud CBS that can be used by all
these financial service providers. This system will enable them to share information, collaborate,
and scale their operations effectively. By doing so, they can reduce inefficiencies, lower costs, and
provide better financial services to their clients.
Moreover, a shared cloud CBS will help these institutions to streamline their operations by
eliminating duplicate efforts, improving data accuracy, and reducing the time required to process
financial transactions. This, in turn, will enhance their ability to provide quality financial services
to their clients, thereby contributing to the growth of the financial sector in Ethiopia.
______________________
1 https://nbe.gov.et/banks-in-ethiopia-continue-to-grow-despite-challenges/2 https://collaboration.worldbank.org/content/sites/collaboration-
for-development/en/groups/cooperative-financial-institutions/blogs.entry.html/2022/07/27/strengthening_theethiopiansaccosectorworking-
UbHK.html
In conclusion, the lack of a shared cloud CBS for MFI, SACCOs, and fintech companies is a
significant challenge that hampers their ability to provide quality financial services to their clients.
Provisioning a shared cloud CBS is crucial to overcome this challenge, helps financial inclusions
and improve the efficiency of these financial service providers. By doing so, they can provide
better financial services to their clients, reduce costs, and contribute to the growth of the financial
sector in Ethiopia.
1.2 Statement and Justification of the Problem
The problem addressed in this feasibility study is the affordability and limited access to Core
Banking Systems (CBS) for Microfinance Institutions (MFIs), Savings and Credit Cooperative
Organizations (SACCOS), and small financial service providers in Ethiopia. These institutions
face significant challenges in adopting and implementing CBS due to various factors.
Many of these institutions lack the necessary IT personnel with expertise in CBS implementation
and management. They often operate with limited resources and prioritize their budget towards
core operational activities, leaving little room for investments in IT infrastructure and personnel
training. As a result, they struggle to leverage modern banking technologies, including CBS, which
can significantly enhance their operational efficiency and customer service.
The cost of implementing and maintaining CBS is a major barrier for these institutions. Traditional
CBS solutions often require substantial upfront investments in hardware, software licenses, and
infrastructure setup. Additionally, ongoing maintenance, updates, and technical support further
contribute to the financial burden. For MFIs, SACCOS, and small financial service providers with
limited budgets, these costs can be prohibitive and hinder their ability to modernize their
operations.
Furthermore, the lack of CBS adoption in these institutions hampers their ability to compete in the
ever-evolving financial landscape. Without a robust banking system in place, these institutions
face challenges in providing efficient and convenient financial services to their clients. This can
result in slower transaction processing, limited product offerings, and reduced customer
Feasibility Study on Provisioning Shared Cloud Core Banking Systems in Ethiopian Financial Industry
satisfaction. In a highly competitive market, where customers increasingly demand digital and
efficient banking services, the absence of CBS puts these institutions at a disadvantage.
1.3 Objective of the Project
1.3.1 General objective
The general objective of this project is To assess the feasibility of provisioning shared cloud-based
CBS for MFIs, SACCOS, and small financial service providers in Ethiopia a that will enhance
their efficiency and effectiveness in providing financial services to their clients.
1.3.2 Specific objectives
1. To identify the specific needs and requirements of MFIs, SACCOS, and small financial
service providers regarding CBS implementation.
2. To evaluate the potential benefits, challenges, and risks associated with shared cloud-
based CBS.
3. To analyze the financial viability and cost-effectiveness of implementing shared cloud-
based CBS.
4. To propose a comprehensive implementation plan and guidelines for adopting shared
cloud-based CBS in the Ethiopian financial industry.
1.4 Scope of the Project
The scope of this feasibility study is to assess the viability of provisioning shared cloud-based Core
Banking Systems (CBS) specifically tailored for Microfinance Institutions (MFIs), Savings and
Credit Cooperative Organizations (SACCOS), and small financial service providers in Ethiopia.
The study will focus on addressing the challenges faced by these institutions in adopting CBS,
including limited IT personnel and budget constraints.
3
The project will encompass various aspects related to the implementation of shared cloud-based
CBS, including the identification of specific needs and requirements of MFIs, SACCOS, and small
financial service providers in Ethiopia. This will involve understanding their operational processes,
transaction volumes, customer base, and financial service offerings.
Furthermore, the study will evaluate the potential benefits, challenges, and risks associated with
shared cloud-based CBS. It will examine how adopting such a system can enhance operational
efficiency, improve customer experience, and enable better financial service delivery for these
institutions. It will also analyze the potential risks and security concerns associated with cloud-
based solutions.
The financial viability and cost-effectiveness of implementing shared cloud-based CBS will be
thoroughly assessed. This will involve analyzing the initial investment costs, maintenance and
support expenses, and the potential return on investment for MFIs, SACCOS, and small financial
service providers. The study will also consider the affordability and sustainability of the proposed
solution for these institutions.
4
Chapter 2 : PROJECT CONCEPT
2.1. Opportunity study
The opportunity study in this feasibility project aims to explore and analyze the current market
conditions, technological advancements, and regulatory environment in the Ethiopian financial
industry. It will identify the opportunities and potential benefits of adopting shared cloud-based
CBS specifically tailored for MFIs, Savings and SACCOS, and small financial service providers.
The study will assess the market demand for CBS among these institutions, considering factors
such as transaction volumes, customer base, and service offerings. It will investigate the current
challenges faced by MFIs, SACCOS, and small financial service providers in delivering efficient
and reliable financial services. By understanding the market dynamics, the study will identify the
gaps and opportunities that can be addressed through the implementation of shared cloud-based
CBS.
2.2. The project Concept and Profile
The project concept and profile will provide a detailed overview of the feasibility study, including
its objectives, target beneficiaries, and expected outcomes. This section will outline the project's
vision and how it aligns with the needs of MFIs, SACCOS, and small financial service providers
in Ethiopia.
The project aims to assess the feasibility of provisioning shared cloud-based CBS as a cost-
effective and sustainable solution for these institutions. It recognizes the challenges they face due
to limited IT personnel, inadequate budgets, and the absence of modern banking technologies. By
adopting shared cloud-based CBS, these institutions can overcome these barriers and enhance their
operational efficiency, customer service, and competitiveness.
The project will involve collaboration with relevant stakeholders, including MFIs, SACCOS, small
financial service providers, industry experts, and cloud service providers. By engaging with these
stakeholders, the project will gather insights, perspectives, and expertise to ensure a
comprehensive and practical approach.
5
The project concept will emphasize the importance of shared cloud-based CBS in improving
financial service delivery and operational efficiency for MFIs, SACCOS, and small financial
service providers. It will highlight the potential benefits, such as streamlined transaction
processing, improved data security, better risk management, and enhanced customer experience.
The project will also consider the scalability and flexibility that cloud-based solutions offer,
enabling institutions to adapt to changing market demands and regulatory requirements.
The project profile will outline the scope, objectives, and expected outcomes of the feasibility
study. It will define the criteria for success and the criteria for assessing the feasibility of shared
cloud-based CBS for MFIs, SACCOS, and small financial service providers. The project profile
will also identify the key deliverables, including the feasibility study report, implementation plan,
and guidelines for adopting shared cloud-based CBS.
2.3. Preliminary study
The preliminary study oversees the availability of different cloud providers, including telecloud
and other cloud providers, as well as the presence of 40 microfinance institutions, 6 Capital goods
Finance/Lease companies, and eight payment instrument issuers/system operators1 in Ethiopia.
Additionally, there are over 21,000 Savings and Credit Cooperative Organizations (SACCOs) in
the country, and various reports indicate that their main issue is the unavailability and affordability
of Core Banking Systems (CBS).
The study also assess the availability and suitability of different cloud providers, including
telecloud and other options, for the implementation of CBS in the Ethiopian financial industry.
This will involve evaluating the services, infrastructure, and support offered by these providers to
determine their compatibility with the needs of microfinance institutions, Capital goods
Finance/Lease companies, payment instrument issuers/system operators, and SACCOs.
Furthermore, the preliminary study gathers information on the specific needs and challenges faced
by these financial institutions. It will analyze the required services, functionality, scalability, and
security requirements of microfinance institutions, Capital goods Finance/Lease companies,
6
payment instrument issuers/system operators, and SACCOs. By understanding their unique

circumstances, the study will be able to propose tailored solutions and recommendations to address
the unavailability and affordability issues related to CBS.
The study also assess the financial capabilities and resource constraints of these institutions. Then
analyzes the affordability of CBS for microfinance institutions, Capital goods Finance/Lease
companies, payment instrument issuers/system operators, and SACCOs, considering their budgets
and financial sustainability. This analysis will help identify cost-effective solutions that meet their
specific needs and enable them to overcome the challenges associated with CBS implementation.
By conducting this preliminary study, the project gains insights into the availability of different
cloud providers, such as telecloud, and their suitability for the Ethiopian financial industry. It will
also assess the specific needs and challenges of microfinance institutions, Capital goods
Finance/Lease companies, payment instrument issuers/system operators, and SACCOs.
Additionally, the study considers the affordability of CBS and propose cost-effective solutions to
address the unavailability and affordability issues faced by these institutions.
While the preliminary study will not delve into the detailed business model analysis, it will
consider the financial implications of CBS implementation. It will assess the potential costs
involved in adopting CBS, including initial investment costs and ongoing maintenance expenses.
Additionally, the study will consider the potential benefits and value that cloud-based solutions
can bring to the financial institutions and Product-as-a-Service (PaaS) is the business model as in
general.
7
Chapter 3 : PROJECT METHODS AND PROCEDURE
3.1. Project Design/The procedure or the methodology:
The feasibility study will employ a combination of qualitative and quantitative research methods
to gather comprehensive and reliable data. This mixed-methods approach will ensure a holistic
understanding of the problem and enable the project to propose practical and evidence-based
solutions.
The qualitative research methods will involve conducting interviews, focus group discussions, and
case studies with key stakeholders, including representatives from microfinance institutions,
PII/PSP, SACCOs, and cloud service providers. These qualitative methods will help gather
insights into the specific needs, challenges, and perspectives of these stakeholders. The data
collected through qualitative research will be analyzed thematically to identify common themes,
patterns, and recommendations.
The quantitative research methods will include surveys and data analysis to collect and analyze
numerical data. Surveys will be conducted among a representative sample of MFIs, PII/PSP,
SACCOs to gather quantitative data on their current IT infrastructure, budgetary constraints, and
preferences for CBS implementation. The data collected through surveys will be analyzed using
statistical methods to derive meaningful insights and trends.
3.2. Types of data
The types of data that will be collected include qualitative and quantitative data. Qualitative data
will be collected through surveys, interviews, and focus groups with key stakeholders, while
quantitative data will be collected through system testing and validation.
3.3. Sources of data
The sources of data for this project will include a variety of stakeholders, institutions, and existing
systems.
8
MFI, SACCOS, and other small financial service providers in Ethiopia will be the primary source
of data. These institutions will provide valuable insights into their specific needs and requirements
for a shared cloud CBS system. The project team will conduct surveys, interviews, and focus
groups with representatives from these institutions to gather their feedback and input.
Government agencies and regulatory bodies will also be an important source of data. These
stakeholders will provide insights into the regulatory framework and policies that govern the
financial sector in Ethiopia. The project team will consult with these stakeholders to ensure that
the shared cloud CBS system complies with relevant regulations and policies.
Industry experts will be consulted to provide insights into best practices and emerging trends in
the financial sector. These experts will provide valuable insights into the latest technologies and
innovations that can be incorporated into the shared cloud CBS system. The project team will
conduct interviews and consult with these experts to gather their feedback and input.
Existing systems and best practices in other countries will be reviewed to identify key features and
functionalities that are necessary for a shared cloud CBS system for MFI, SACCOS, and other
small financial service providers in Ethiopia. The project team will conduct a thorough review of
existing systems and best practices in other countries to gather insights into the latest technologies
and innovations that can be incorporated into the shared cloud CBS system (BaaS).
In general, the sources of data for this project will include a variety of stakeholders, institutions,
and existing systems. The project team will use a combination of surveys, interviews, focus groups,
and consultations to gather data from these sources and ensure that the shared cloud CBS system
meets the specific needs and requirements of MFI, SACCOS, and other small financial service
providers in Ethiopia.
3.4. Data collection methods and tools
Variety of data collection methods and tools will be used to gather qualitative and quantitative data
for the shared cloud CBS system. These methods and tools include surveys, interviews, focus
groups, document review, and system testing and validation.
9
Surveys will be used to collect quantitative data from a large number of stakeholders in a relatively
short amount of time. Online surveys will be distributed to MFI, SACCOS, and other small
financial service providers in Ethiopia, as well as other relevant stakeholders, including
government agencies, regulatory bodies, and industry experts. These surveys will be designed to
gather feedback on various aspects of the shared cloud CBS system, including its features,
functionalities, and usability.
Interviews will be used to gather qualitative data from key stakeholders, including representatives
from MFI, SACCOS, and other small financial service providers in Ethiopia, government
agencies, regulatory bodies, and industry experts. Face-to-face or remote interviews will be
conducted to gather more detailed feedback and insights into the specific needs and requirements
of these stakeholders.
Focus groups will be used to gather qualitative data from a group of stakeholders who share
common characteristics or interests. These groups will be conducted with representatives from
MFI, SACCOS, and other small financial service providers in Ethiopia, government agencies,
regulatory bodies, and industry experts. The focus groups will be designed to encourage discussion
and debate among participants, allowing the project team to gather a more comprehensive
understanding of the stakeholders' needs and requirements.
Document review will be used to gather data from existing reports, studies, and other relevant
documents related to the financial sector in Ethiopia. The project team will review these documents
to gain insights into the regulatory framework, policies, and best practices in the financial sector.
System testing and validation will be used to gather quantitative data on the shared cloud CBS
system's performance and functionality. The project team will use software tools to test the
system's features and functionalities to ensure that they meet the needs and requirements of MFI,
SACCOS, and other small financial service providers in Ethiopia.
3.5. Population of the study
The population of the study will include MFI, SACCOS, and fintech companies in Ethiopia, as
well as other relevant stakeholders, including government agencies like FCA, associations like
AEMFI, regulatory bodies like NBE, and industry experts.
10
MFI, SACCOS, and other small financial service providers in Ethiopia are the primary
stakeholders for this project. These institutions provide financial services to a large number of
people in Ethiopia, particularly those who are underserved or excluded from traditional banking
services. The shared cloud CBS system will be designed to meet their specific needs and
requirements, with the goal of enhancing the efficiency and effectiveness of their operations.
3.6. Sampling design
The project will use purposive sampling design to select participants for the surveys, interviews,
and focus groups. The project team will select participants based on their relevance and importance
to the project objectives, ensuring that the data collected is comprehensive and accurate. A
combination of online and offline methods is used to conduct the interviews and focus groups,
ensuring that the participants can provide valuable insights into the specific needs and
requirements of the stakeholders and the shared cloud CBS system.
3.7. Sample size
The project team will use a purposive sampling design to select participants for the surveys,
interviews, and focus groups. Participants will be selected based on their relevance and importance
to the project objectives.
3.8. Sampling methods
The project will use non-probability sampling methods such as purposive sampling as purposive
sampling is often used when the research project requires specific expertise, knowledge, or
experiences that are possessed by a particular group of individuals. It allows the researcher to focus
on a specific population or subgroup that is most relevant to the project objectives, saving time
and resources compared to sampling the entire population.
3.9. Data analysis methods and tools
The data analysis methods and tools will include qualitative analysis of survey and interview data,
system testing and validation, and statistical analysis of quantitative data. Qualitative data analysis
will involve thematically coding and categorizing the data collected through interviews, focus
11
group discussions, and case studies. This process will identify common themes, patterns, and
recommendations that emerge from the qualitative data. It will enable the project to gain a deeper
understanding of the challenges, needs, and perspectives of the stakeholders and inform the
proposed solutions and recommendations.
3.10. Schedule
The schedule for the project outlines the timeline and sequence of activities that need to be
completed in order to achieve the project objectives. It includes key milestones, deliverables, and
dependencies between tasks. The schedule helps to ensure that the project is completed within the
desired timeframe and allows for effective project management and resource allocation.
Task Name Duration

MIS Implementation 20 days
Project Management and
3 days
Monitoring
Planning 3 days
Business Process Management 10 days
Data Migration 15 days
Conduct Awareness Program 3 days
Create Awareness Program 3 days
Software Development 10 days
Conduct train-the-trainers program 10 days
Perform System Tests 25 days
Conduct system test cycle 1 10 days
Conduct system test cycle 2 5 days
Conduct integration testing 5 days
Conduct performance testing 5 days
Conduct Pilot 20 days
Plan Post Implementation Support 4 days
Create System Documentation 6 days
Create System Manual 3 days
Create/Update Operations Manual
3 days
and Accounting Procedures
Prepare for Users Training 5 days
Rollout 8 days
Create rollout plan 4 days
Prepare for rollout 4 days
Complete project -
Table 3-1: Project Schedule
12
3.11. Resource Budget
The resource budget outlines the allocation of resources required to complete the project
successfully. This includes human resources, equipment, materials, and any other resources
necessary for the project's execution. The resource budget is an essential component of project
planning as it ensures that the necessary resources are available at the right time and in the right
quantities
Project Expenses Upfront

Cloud Hosting -
Hardware 1,130,000
Software 350,000
Connectivity Costs 300,000
Data Migration 230,769
Customizations/Enhancements 10,000,000
Training 1,192,308
Marketing Expenses 240,000
Office Rent & Related 1,200,000
Other Upfront Cost 100,000
SUM 14,743,077
Table 3-2:Cost Breakdown.
13
Chapter 4 : PROJECT PREPARATION
4.1 Markets and Demand Analysis
Based on the interview and discussion conducted with different SACCOs (5), MFI (4) and Fintech
(6) the output is summarized as follows:
The implementation of a shared CBS in general a payment hub in Ethiopia has the potential to
bring several benefits. These include cost reduction in payment processing, enhanced efficiency
in payment transactions, increased interoperability between financial institutions, and enhanced
security and fraud prevention. Additionally, implementing a shared payment hub can improve the
customer experience and save time.
However, there are also various challenges that need to be addressed in implementing a shared
payment hub in the Ethiopian financial industry. These challenges include the lack of a regulatory
framework and data privacy concerns. To mitigate these challenges, it is necessary to strengthen
regulations and implement robust data protection measures.
The efficiency of payment processing in Ethiopia can be significantly impacted by a shared

payment hub. It can lead to a significant improvement in payment processing, including response
time and overall efficiency.
There are several key stakeholders that should be involved in the implementation of a shared
payment hub in Ethiopia. These stakeholders include the government/regulators, commercial
banks, payment service providers, and telecommunication companies. Each stakeholder has a
specific role to play, with the government/regulators responsible for regulation, commercial banks
for business, payment service providers for channels, and telecommunication companies for
communications.
To support a shared payment hub in Ethiopia, certain technological infrastructure is required. This
includes real-time payment systems, secure data networks, standardized APIs, and robust
cybersecurity measures. It is important to address any existing infrastructure gaps to ensure the
smooth functioning of the shared payment hub.
14
Implementing a shared payment hub in Ethiopia also poses potential risks and vulnerabilities.
These include cybersecurity threats, system failures, and a lack of trust among stakeholders. These
risks can be mitigated by implementing security patches, avoiding and minimizing system failures,
and providing 24-hour robust and functioning systems.
Assessing the financial viability of implementing a shared payment hub in Ethiopia requires
considering various factors. These factors include the value it adds for customers and financial
institutions, the readiness of government/regulators and financial institutions, and the transparency
of the implementation process.
There are successful examples of shared payment hubs in other countries that can serve as a
reference for Ethiopia. For example, M-Pesa in Kenya is a successful shared payment hub that has
improved financial inclusion and efficiency in payment processing.
Based on knowledge and experience, recommendations for the successful implementation of a

shared payment hub in Ethiopia include strengthening the regulatory framework, promoting
collaboration among stakeholders, investing in technology infrastructure, and conducting thorough
risk assessments. It is important to prioritize strategies and actions that focus on regulatory
framework refinement, collaboration, and technological aspects.
Further discussions or research related to the feasibility study of a shared payment hub in Ethiopia
may be of interest to some participants.
Note: The responses have been summarized and consolidated to provide an overview of the key
points mentioned as follows:
15
Figure 4-1:Occupation in the Ethiopian financial industry Surveyed
Figure 4-2:Years of experience in the industry Surveyed
16
Figure 4-3:Familiarity with Shared Payment Hub
Figure 4-4:Potential Benefits
17
Figure 4-5: Challenges
Figure 4-6:Mitigation
18
Figure 4-7:Impact on Payment Processing Efficiency
Figure 4-8:Regulatory and Legal Considerations
19
Figure 4-9:Key Stakeholders
Figure 4-10:Technological Infrastructure
20
Figure 4-11: Risks and Vulnerabilities
Figure 4-12:Financial Viability
21
Based on the responses from the participants, we can analyze the feasibility of implementing a
shared payment hub in Ethiopia. Here are some key findings:
1. Familiarity with the concept: The majority of participants (90%) are familiar with the
concept of a shared payment hub, indicating a basic understanding of its benefits and
challenges.
2. Potential benefits: The most commonly mentioned potential benefits of implementing a

shared payment hub in Ethiopia include cost reduction in payment processing (100% of
participants), enhanced efficiency in payment transactions (100%), increased
interoperability between financial institutions (80%), enhanced security and fraud
prevention (80%), improved customer experience (60%), and time-saving (20%).
3. Challenges: The main challenges foreseen in implementing a shared payment hub in the
Ethiopian financial industry include the lack of a regulatory framework (73.3% of
participants), data privacy concerns (70%), resistance from financial institutions (60%),
and technological limitations (63.3%).
4. Mitigation strategies: To mitigate these challenges, participants suggested strengthening

regulations (80%), implementing robust data protection measures (76.7%), providing
incentives to financial institutions (50%), investing in technology infrastructure (73.3%),
and promoting collaboration among stakeholders (50%).
5. Impact on payment processing efficiency: Participants believe that a shared payment hub
would have a significant (80%) to moderate (16,7%) positive impact on the efficiency of
payment processing in Ethiopia. Specific improvements expected include faster response
time (30%) and enhanced interaction between financial institutions (20%).
6. Regulatory and legal considerations: While the majority of participants (80%) believe that
there are regulatory and legal considerations that need to be addressed before implementing
a shared payment hub, specific considerations were not mentioned.
22
7. Key stakeholders: Participants identified government/regulators (93.3%), commercial
banks (93.3%), payment service providers (70%), and telecommunication companies
(96.7%) as the key stakeholders that should be involved in the implementation of a shared
payment hub. Each stakeholder has a specific role to play, such as government/regulators
for regulation, banks for business, payment service providers for channels, and
telecommunication companies for communications.
8. Technological infrastructure: Participants mentioned that a shared payment hub in Ethiopia

would require real-time payment systems (93.3%), secure data networks (86.7%),
standardized APIs (83.3%), and robust cybersecurity measures (83.3%). However, existing
infrastructure gaps that need to be addressed were not specified.
9. Risks and vulnerabilities: The main risks and vulnerabilities identified in implementing a
shared payment hub include cybersecurity threats (83.3% of participants), system failures
(76.7%), data breaches (73.3%), and lack of trust among stakeholders (66.7%). Mitigation
strategies include implementing security patches (80%) and ensuring 24/7 robust and
functioning systems (20%).
10. Financial viability: Participants were unsure (10%) or moderately (23.3%) assessed the
financial viability of implementing a shared payment hub in Ethiopia. Factors that should
be considered in this assessment include the value it adds for customers and financial
institutions (66.7%) and the readiness of government/regulators and financial institutions
(20%).
11. Successful examples in other countries: Participants mentioned M-pesa in Kenya and UPI
in India as successful examples of shared payment hubs that could serve as references for
Ethiopia. However, the relevance and specific details of these examples were not provided.
12. Recommendations for successful implementation: Participants recommended

strengthening the regulatory framework (80%), promoting collaboration among
stakeholders (70%), investing in technology infrastructure (60%), conducting thorough
23
risk assessments (50%), and focusing on transparency and public interest (40%).
Prioritizing these strategies and actions was not specified.
13. Interest in further discussions or research: Participants showed interest in participating in

further discussions or research related to the feasibility study of a shared payment hub in
Ethiopia, with 93.3% indicating their willingness.
Overall, the analysis of the participants' responses suggests that implementing a shared payment
hub in Ethiopia could bring significant benefits, but there are challenges that need to be addressed,
such as the lack of a regulatory framework and data privacy concerns. Mitigation strategies should
focus on strengthening regulations, investing in technology infrastructure, and promoting
collaboration among stakeholders. Further research and discussions are needed to ensure the
successful implementation of a shared payment hub in Ethiopia.
4.2 Raw Materials and Supplies Study (if any)
As the project focuses on configuring and implementing a shared cloud CBS system, there is no
specific raw materials and supplies study required. However, as a technological requirement, such
as hardware and software that needed to build and maintain the shared cloud CBS system is
assessed. Based on my assessment cloud providers such as AWS, IBM and Azure clouds have all
the required resources and services. And Telecloud is the only option as the regulatory forces to
use only local cloud service provides, trust and better it has better capacity among other local cloud
service providers.
In the context of utilizing Telecloud as a cloud host for a shared CBS, the raw materials and
supplies required mainly consist of hardware components, software licenses, and networking
infrastructure. These raw materials and supplies are necessary for the efficient operation of the
shared CBS services.
Hardware components include servers, storage devices, networking equipment, and other
computing resources. It is important to assess the existing hardware infrastructure of Telecloud
and ensure its capacity to handle the workload of the shared CBS services. Collaboration with
24
EthioTelecom and establishing maintenance agreements can help ensure the availability and
reliability of hardware components.
Software licenses are another critical component for the operation of the shared CBS services.
These licenses include the CBS software, security software, database management systems, and
other necessary applications. It is important to assess the existing software licenses of Telecloud
and ensure their compatibility with the requirements of the shared CBS services.
Networking infrastructure, including routers, switches, and firewalls, is essential for providing
secure and reliable connectivity for the shared CBS services. It is necessary to assess the existing
networking infrastructure of Telecloud and ensure its capacity to handle the communication needs
of the participating banks.
Basic resource requirements are as follows:
✓ Compute Services
Elastic Cloud Server, Bare Metal Server, Image Management Service, Auto Scaling and ECS-
Snapshot
✓ Storage Services
Elastic Volume Service, Object Storage Service
✓ Network Services
Virtual Private Cloud, L2 Bridge Service, Security Group, Direct Connect, VPC Endpoint, NAT
Gateway, Network ACL, Elastic IP(EIP), Cloud Connect, Elastic Load Balancer, and Virtual
Private Network
✓ Security Services
Web Application Firewall, Edge Firewall Service, and Vulnerability Scan Service
✓ Backup Services
Cloud Server Backup Service and Volume Backup Service
✓ Container Services
Cloud Container Engine
✓ Database Services
Mysql, Oracle and others
25
4.3 Location and Site Assessment
On the assessment of location and site requirements for the implementation of the shared cloud
CBS system, factors such as transaction volumes, scalability, and future growth projections is
considered. Additionally, access to reliable internet connectivity, data security, and infrastructure
availability is also considered. Furthermore, the feasibility of hosting the shared cloud CBS system
on a local or external server, by considering factors such as cost, data privacy, and regulatory
compliance is decided to use TeleCloud. The office of support is in Addis Ababa to full fill the
listed factors.
4.4 Production Program and Plant Capacity
In the context of utilizing Telecloud as a cloud host for a shared CBS, the production program
refers to the deployment and management of the shared CBS services to the participating banks.
It involves the configuration of the hardware and software components, onboarding of banks, and
ongoing maintenance and support.
The plant capacity, in this case, refers to the capacity of the Telecloud infrastructure to handle the
workload and the number of participating banks. The capacity should be determined based on the
projected demand or number of FI for shared CBS services in Ethiopia and the scalability
requirements of Telecloud.
To determine the production program and plant capacity, it is necessary to consider a section of
this document related to analysis of the market demand and growth projections. This analysis also
considers factors such as the number of potential participating banks or FI, the volume of
transactions to be processed, and the expected growth rate of the FI sector.
Additionally, the production program also considers the deployment timeline and the phased
approach to ensure smooth onboarding of participating banks. This may involve conducting pilot
projects with a limited number of banks before full-scale deployment.
26
Furthermore, the plant capacity considers scalability to accommodate future growth. The capacity
planning involves assessing the scalability options, such as optimizing resource allocation and
expanding the existing infrastructure of Telecloud, to meet the increasing demand for shared CBS
services.
The production program also includes the establishment of standard operating procedures (SOPs)
for the deployment, management, and maintenance of the shared CBS services. These SOPs
outlines the processes and protocols for provisioning resources, managing user accounts, ensuring
data security, and handling system updates and upgrades.
Regular performance monitoring and capacity management will be implemented to ensure optimal
utilization of resources and to identify any bottlenecks or areas for improvement. This will help in
maintaining high service levels and meeting the expectations of the participating banks in addition
to business continuity and success criteria of the service.
4.5 Technology Selection
In the context of utilizing Telecloud as a cloud host for a shared CBS, the technology selection is
focused on ensuring the compatibility and reliability of the existing hardware, software, and
networking technologies for the shared CBS services.
Basic Technology requirements are as follows:
✓ Compute Services
Elastic Cloud Server, Bare Metal Server, Image Management Service, Auto Scaling and ECS-
Snapshot
✓ Storage Services
Elastic Volume Service, Object Storage Service
✓ Network Services
Virtual Private Cloud, L2 Bridge Service, Security Group, Direct Connect, VPC Endpoint, NAT
Gateway, Network ACL, Elastic IP(EIP), Cloud Connect, Elastic Load Balancer, and Virtual
Private Network
27
✓ Security Services
Web Application Firewall, Edge Firewall Service, and Vulnerability Scan Service
✓ Backup Services
Cloud Server Backup Service and Volume Backup Service
✓ Container Services
Cloud Container Engine
✓ Database Services
Mysql, Oracle and others
Please refer the annex part for architecture of the a shared CBS and payment hub.
4.6 Organizational and Human Resource
When we come to organizational and human resources, the implementation of a shared cloud CBS
in Ethiopia would require careful planning and allocation of resources. Key considerations include:
Organizational Structure: A dedicated team or department would need to be established to
oversee the implementation and management of the shared payment hub. This team would be
responsible for coordinating with stakeholders, ensuring compliance with regulations, and
handling any technical or operational issues that may arise.
Basically, the organizational structure for implementing and provisioning a shared cloud CBS
(Core Banking System) service should contain the following departments:
Chief Executive Officer (CEO), Human Resources (HR) Department, Finance Department,
Marketing Department, Operations Department, IT Department, Legal and Compliance
Department, Customer Service Department. But to focus on the IT Department the following
structure and responsibilities are required:
28
General Manager
Vendor
Support and
Security and Management/Stak
Technical Team Maintenance
Compliance Team eholder
Team
Engagement
CBS
Implementation Audit and Training and
Communication
and Change Assurance Customer Service
Controll
Figure 4-13: Organizational Structure
1. General Manager: The manager oversees the entire implementation process, ensuring
that the project is delivered on time, within budget, and according to the defined scope.
He/ She coordinate with different stakeholders, manage resources, and monitor progress.
2. Technical Team: The technical team consists of professionals with expertise in cloud
computing, CBS systems, and infrastructure. They are responsible for designing,
configuring, and managing the cloud infrastructure, including servers, databases,
networking, and security.
3. CBS Implementation Team: This team is responsible for implementing the CBS system
on the cloud platform. They work closely with the technical team to ensure that the CBS
software is properly installed, configured, and integrated with other systems or modules.
4. Data Migration Team: The data migration team is responsible for transferring existing
data from legacy systems to the cloud-based CBS. They ensure data integrity, perform
data cleansing and validation, and manage the migration process to minimize disruptions.
5. Security and Compliance Team: This team is responsible for ensuring the security and
compliance of the cloud CBS service. They establish security protocols, implement
access controls, conduct regular security audits, and ensure compliance with industry
regulations and standards.
29
6. Support and Maintenance Team: This team provides ongoing support and maintenance
for the cloud CBS service. They address user inquiries, troubleshoot issues, perform
system upgrades, and ensure the continuous availability and performance of the service.
7. Quality Assurance Team: The quality assurance team is responsible for testing and
validating the functionality, performance, and reliability of the cloud CBS service. They
conduct various testing activities, including functional testing, integration testing, and
performance testing, to ensure a high-quality service.
8. Training and Documentation Team: This team is responsible for developing training
materials and conducting training sessions for users and administrators of the cloud CBS
service. They also create documentation, user manuals, and FAQs to support users in
utilizing the service effectively.
9. Vendor Management: In some cases, there may be involvement from external vendors
or service providers. The vendor management team is responsible for managing vendor
relationships, contracts, and service level agreements (SLAs).
10. Stakeholder Engagement: This team is responsible for engaging and communicating
with key stakeholders, including management, users, regulatory bodies, and other
relevant parties. They provide updates, gather feedback, and ensure alignment with
stakeholder expectations.
Skilled Workforce: The success of a shared cloud CBS relies on having a skilled and
knowledgeable workforce. Training programs may need to be implemented to enhance the
capabilities of existing staff or to recruit new talent with expertise in payment systems, data
security, and financial technology.
Collaboration and Communication: Effective collaboration and communication among

stakeholders are essential for the smooth functioning of a shared cloud CBS. Clear channels of
communication should be established, and regular meetings or forums should be organized to
foster collaboration and address any concerns or issues that may arise.
30
4.7 Social and Economic Analysis
A social and economic analysis is necessary to assess the potential impact of a shared cloud CBS
on the Ethiopian society and economy. Key areas of analysis include:
1. Financial Inclusion: The implementation of a shared cloud CBS service can significantly
contribute to financial inclusion by providing access to modern banking services for
previously unbanked or underbanked individuals. This can empower individuals and
businesses to participate more fully in the economy, improve their financial management
capabilities, and access credit and other financial services.
2. Cost Reduction and Efficiency: The adoption of a shared cloud CBS service can lead to
cost reduction and improved efficiency for financial institutions. By leveraging cloud
technology, institutions can eliminate the need for expensive on-premises infrastructure,
reduce maintenance costs, and optimize resource allocation. This cost savings can be
passed on to customers, making financial services more affordable and accessible.
3. Job Creation and Skills Development: The implementation of a shared cloud CBS
service can create job opportunities in the technology sector, including software
development, cloud infrastructure management, data analytics, and cybersecurity. This can
stimulate economic growth and provide avenues for skills development and career
advancement.
4. Enhanced Security and Fraud Prevention: A shared cloud CBS service can offer
advanced security measures and fraud prevention mechanisms, safeguarding customer data
and transactions. This can build trust among users and contribute to the overall stability of
the financial system. Additionally, the cloud infrastructure can provide robust data backup
and disaster recovery capabilities, ensuring business continuity in the face of unforeseen
events.
5. Digital Transformation and Innovation: The adoption of a shared cloud CBS service
promotes digital transformation within the financial industry. It encourages financial
institutions to innovate and offer new products and services that meet the evolving needs
31
of customers. This can drive economic growth, attract investments, and foster a culture of
technological advancement.
6. Environmental Sustainability: By leveraging cloud technology, financial institutions can

reduce their carbon footprint by minimizing the need for on-premises infrastructure, which
requires significant energy consumption and physical space. The shared cloud CBS service
promotes environmental sustainability by optimizing resource utilization and reducing
electronic waste.
7. Regulatory Compliance and Risk Management: A shared cloud CBS service can assist
financial institutions in meeting regulatory requirements and managing risks effectively.
The centralized nature of the service allows for efficient monitoring, reporting, and
compliance with regulatory frameworks. This helps mitigate operational risks and ensures
adherence to industry standards.
8. Collaboration and Interoperability: The adoption of a shared cloud CBS service

encourages collaboration and interoperability between financial institutions. It enables
seamless integration of systems, data sharing, and interoperable payment services. This
fosters a more connected and efficient financial ecosystem, benefiting businesses,
individuals, and the overall economy.
9. Economic Resilience and Business Continuity: The cloud-based infrastructure of a

shared CBS service provides enhanced resilience and business continuity capabilities.
Financial institutions can better withstand disruptions such as natural disasters, system
failures, or cyberattacks. This resilience contributes to the stability and continuity of
financial services, safeguarding the economy.
10. Access to Advanced Analytics and Insights: The shared cloud CBS service enables
financial institutions to leverage advanced analytics and data-driven insights to make
informed business decisions. This can lead to improved risk management, personalized
customer experiences, and targeted product offerings. The availability of such insights can
drive efficiency, customer satisfaction, and revenue growth.
By conducting a comprehensive social and economic analysis and reviewing related standard
reports of Gartner, Digital Frontiers, and other G-20 socio-economic case studies reports, it
32
becomes evident that the implementation of a shared cloud CBS service has the potential to bring
about significant positive impacts on financial inclusion, cost reduction, job creation, security,
innovation, environmental sustainability, regulatory compliance, collaboration, and economic
resilience. These benefits contribute to the overall development and growth of the financial
industry and the economy as a whole.
4.8 Financial Analysis
In order to assess the financial viability of implementing a shared cloud CBS in Ethiopia, several
financial analysis measures need to be considered. Since this project is a shared cloud CBS , mifos
Framework for Forecasting Return on Investment template (©Grameen® Foundation, USA. All
rights reserved) is used. Please refer on the annex part for all assumptions and calculations.
4.8.1 Initial investment cost
On estimating the initial investment required for setting up the shared cloud CBS, including
infrastructure, technology, licensing, and other related costs is as follows:
1. Hosting: There is no specific cost mentioned for hosting in this upfront.

2. Hardware: The expenses for hardware amount to 1,130,000. This includes the cost of
purchasing and setting up necessary hardware equipment for the project.
3. Software: The expenses for software amount to 350,000. This includes the cost of
purchasing or licensing required software for the project.
4. Connectivity Costs: The expenses for connectivity amount to 300,000. This includes the
cost of establishing and maintaining the necessary network connections for the project.
5. Data Migration: The expenses for data migration amount to 230,769. This includes the
cost of transferring and converting existing data to the new project system.
6. Customizations/Enhancements: The expenses for customizations and enhancements
amount to 10,000,000. This includes the cost of tailoring the project system to meet
specific requirements and adding additional features or functionalities.
33
7. Training: The expenses for training amount to 1,192,308. This includes the cost of
providing training to project team members or end-users to effectively utilize the project
system.
8. Marketing Expenses: The expenses for marketing amount to 240,000. This includes the
cost of promoting the project or its related services to potential customers or stakeholders.
9. Office Rent & Related: The expenses for office rent and related costs amount to
1,200,000. This includes the cost of leasing office space and any associated expenses
such as utilities, maintenance, etc.
10. Other Upfront Cost: The expenses for other upfront costs amount to 100,000. This
includes any additional expenses not specified in the given categories but incurred during
the initial phase of the project.
Overall, the total upfront project expenses for upfront sum up to 14,743,077. These expenses
cover various aspects and summarized as follows:
Project Expenses Upfront

Cloud Hosting -
Hardware 1,130,000
Software 350,000
Connectivity Costs 300,000
Data Migration 230,769
Customizations/Enhancements 10,000,000
Training 1,192,308
Marketing Expenses 240,000
Office Rent & Related 1,200,000
Other Upfront Cost 100,000
SUM 14,743,077
Table 4-1:Upfront project expenses
4.8.2 Production costs/Operational Costs
Production costs or operational costs include ongoing expenses such as salaries, utilities,
maintenance, and system upgrades. These costs need to be carefully monitored and managed to
ensure the financial sustainability of the shared cloud CBS or payment hub. The costs are
summarized as follows.
34
Project Expenses Year 1 Year 2 Year 3 Year 4 Year 5
Upfront
Hosting
- 1,500,000 2,178,000 2,635,380 3,188,810 3,858,460
Hardware
1,130,000 - - - - -
Software
350,000 - - - - -
Connectivity Costs
300,000 200,000 200,000 200,000 200,000 200,000
Data Migration
230,769 - - - - -
Customizations/Enhance
ments 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Training
1,192,308 1,192,308 1,192,308 1,192,308 1,192,308 1,192,308
Marketing Expenses
240,000 240,000 240,000 240,000 240,000 240,000
Office Rent & Related
1,200,000 1,350,000 1,500,000 1,650,000 1,800,000 1,950,000
Other Upfront Cost
100,000 - - - - -
14,743,077 14,482,308 15,310,308 15,917,688 16,621,117 17,440,768
Table 4-2:Production costs/Operational Costs
4.8.3 Marketing costs
The marketing costs required to promote and create awareness about the shared cloud CBS or
payment hub among users, merchants, and financial institutions or stakeholders. The expenses
for marketing amount to 240,000.
4.8.4 Projection of cash flow
Cash flow projections provide insights into the expected inflows and outflows of cash over a
specific period. This includes initial cash flow, net cash flow, and terminal cash flow. Accurate
projections help determine the financial health of the shared cloud CBS or Payment Hub and
support decision-making.
35
Project Revenues / Savings Year 1 Year 2 Year 3 Year 4 Year 5
Increased Revenue
Increase in Income due to DevOps
Efficiency 718,740 956,643 1,273,292 1,694,751 2,255,714
New products (faster TTM - incremental
income) 171,316 228,022 303,497 403,954 537,663
Cost Savings
Decreased Time for Project Closing
75,000 75,000 75,000 75,000 75,000
Cost Savings in Site Deployment and
Maintenance 67,337,278 67,337,278 67,337,278 67,337,278 67,337,278
Reduction in MIS Support and License
Costs 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Faster CBS Deployment
1,564,615 1,055,492 1,277,146 1,545,346 1,869,869
70,866,950 70,652,435 71,266,212 72,056,330 73,075,524
Project Expenses Upfront Year 1 Year 2 Year 3 Year 4 Year 5

Hosting
- 1,500,000 2,178,000 2,635,380 3,188,810 3,858,460
Hardware
1,130,000 - - - - -
Software
350,000 - - - - -
Connectivity Costs
300,000 200,000 200,000 200,000 200,000 200,000
Data Migration
230,769 - - - - -
Customizations/Enhan
cements 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Training
1,192,308 1,192,308 1,192,308 1,192,308 1,192,308 1,192,308
Marketing Expenses
240,000 240,000 240,000 240,000 240,000 240,000
Office Rent & Related
1,200,000 1,350,000 1,500,000 1,650,000 1,800,000 1,950,000
Other Upfront Cost
100,000 - - - - -
14,743,077 14,482,308 15,310,308 15,917,688 16,621,117 17,440,768

Year 1 2 3 4 5
Net Cash Flows before
TAX (14,743,077) 56,384,642 55,342,127 55,348,525 55,435,213 55,634,757
Income Taxes
Payable 16,915,393 16,602,638 16,604,557 16,630,564 16,690,427
Net Cash Flows
(14,743,077) 39,469,249 38,739,489 38,743,967 38,804,649 38,944,330
Table 4-3:Projection of cash flow
36
4.8.5 Financial Evaluation
In this section the evaluate the financial performance of the shared cloud CBS or payment hub by
considering the following metrics will be evaluated:
4.8.5.1 Net present value (NPV)
NPV measures the profitability of an investment by calculating the present value of expected cash
flows. A positive NPV indicates that the investment is financially viable. The NPV is the difference
between the present value of the cash inflows and the present value of the cash outflows of a
project. It is calculated using the following formula:
NPV = Σ(CFt / (1 + r)^t)
where:
• CFt is the cash flow in year t

• r is the discount rate
• t is the number of years
In this case, the discount rate is 18%. The present value of the cash flows is calculated by
discounting the future cash flows back to the present using the discount rate. The net present value
of the project is calculated as follows:
In your case, the discount rate is 18%, the upfront cost is 14,743,077, and the net cash flows are
as follows:
Year 1 2 3 4 5
Cash Flows Before
TAX (14,743,077) 56,384,642 55,342,127 55,348,525 55,435,213 55,634,757
Income Taxes Payable
16,915,393 16,602,638 16,604,557 16,630,564 16,690,427
Net Cash Flows
(14,743,077) 39,469,249 38,739,489 38,743,967 38,804,649 38,944,330
NPV of Cash Flows
(14,743,077) 33,448,516.39 27,822,098 23,580,775 20,015,006 17,022,925
Table 4-4:Net present value (NPV)
37
The NPV of the project is calculated as follows:
NPV = -14,743,077 + 39,469,249/(1+0.18)^1 + 38,739,489/(1+0.18)^2 + 38,743,967/(1+0.18)^3

+ 38,804,649/(1+0.18)^4 + 38,944,330/(1+0.18)^5
NPV = 107146243.39
Therefore, the NPV of the shared cloud CBS project is 107146243.39. This means that the project
is expected to generate a positive return of 107146243.39 after considering the time value of money
and the risk of the project.
4.8.5.2 Internal rate of return (IRR)
To calculate the Internal Rate of Return (IRR) for the shared cloud CBS project, we need to find
the discount rate at which the Net Present Value (NPV) becomes zero. The IRR represents the
annualized rate of return that the investment is expected to generate.
In this case, the given NPV is 107,146,243.39 ETB. By finding the discount rate that results in an
NPV of zero, we can determine the IRR.
Given the NPV = 107,146,243.39, we can calculate the IRR as follows:
IRR = Discount rate at which NPV = 0
Year SUM
1 2 3 4 5
Net Cash Flows
(14,743,077) 51,083,74 54,198,37 59,319,74 66,191,0 75,395,57 306,188,448
0 6 6 10 6
NPV of Cash
Flows-IRR (14,743,077) 15,256,28 5,236,031 1,848,301 662,455 241,626 8,501,626
200% 9.56
NPV of Cash
Flows-IRR (14,743,077) 12,307,54 3,233,207 875,564 241,486 67,948 1,982,677
300% 9.50
NPV of Cash
Flows- IRR (14,743,077) 11,238,22 2,621,190 630,689 154,714 38,743 (59,515)
355% 6.18
NPV of Cash
Flows-IRR (14,743,077) 11,263,08 2,634,729 635,805 156,422 39,284 (13,748)
354% 8.93
Internal rate of
return (IRR) (14,743,077) 11,272,56 2,639,896 637,761 157,077 39,492 3,709
353% 1.27
38
NPV of Cash
Flows When (14,743,077) 11,307,20 2,658,831 644,946 159,487 40,259
IRR 351% 0.88 67,647
NPV of Cash
Flows When (14,743,077) 11,270,54 2,638,795 637,344 156,937 39,448 (9)
IRR 351% 4.32
Table 4-5:Internal rate of return (IRR)
Calculating the IRR can be done using the trial-and-error method, or by utilizing financial software
or calculators. The trial-and-error method involves testing different discount rates until the NPV
is closest to zero.
Using financial software or calculators can provide a more accurate and efficient calculation of the
IRR. These tools utilize algorithms to find the exact discount rate that results in an NPV of zero.
Unfortunately, without more specific information or the use of financial software, it is not possible
to determine the exact IRR for the shared cloud CBS project.
Using a trial-and-error method or a financial calculator, we find that the IRR for the given NPV is
approximately 353.117%.
Therefore, the Internal Rate of Return (IRR) for the project, based on the given NPV data, is
approximately 353.117%. This means that it is a very nice investment decisions based on the
concept of IRR and the assumed / required/discount rate of 18 % considered.
4.8.5.3 Benefit-cost ratio (BCR)
The Benefit-Cost Ratio (BCR) is a financial metric that compares the present value of benefits to
the present value of costs. It provides an indication of the economic viability of an investment by
assessing whether the benefits outweigh the costs.
To calculate the BCR for the shared cloud CBS project, we need to determine the present value of
benefits and the present value of costs. The present value takes into account the time value of
money, discounting future cash flows to their present value.
39
In this case, the present value of benefits is given as 107,146,243.39 ETB, and the present value
of costs is the initial investment of 14,743,077 ETB.
BCR = PV of benefits / PV of costs

BCR = 107,146,243.39 / 14,743,077
BCR = 7.27
The resulting BCR value of 7.27 indicates that the present value of the benefits is 7.27 times greater
than the present value of the costs. This suggests that the project generates significant positive net
benefits compared to the costs.
Interpreting the BCR value, it is generally considered favorable if the BCR is greater than 1. In
this case, with a BCR of 7.27, it indicates that the project is economically viable and has the
potential to generate substantial returns.
However, it's important to consider other factors such as the project's time horizon, risk factors,
and other financial indicators before making a final assessment of the project's viability. While the
BCR provides a useful measure of the economic feasibility of the investment, it should be analyzed
in conjunction with other financial metrics to gain a comprehensive understanding of the project's
financial viability.
4.8.5.4 Payback period (PBP)
PBP calculates the time required for the investment to generate cash flows sufficient to recover
the initial investment. A shorter payback period indicates a quicker return on investment. PBP is
the time it takes for the project to recover the initial investment.
To calculate the payback period for the shared cloud CBS project, we divide the initial investment
by the net cash flow in Year 1. The net cash flow represents the cash inflows generated by the
project after deducting any cash outflows.
In this case, the initial investment is 14,743,077 ETB, and the net cash flow in Year 1 is
33,448,516.39 ETB. Therefore, the payback period is calculated as follows:
PBP = (Initial Investment / Net Cash Flow in Year 1)
=14,743,077/33,448,516.39= 5.28 Months
40
NPV of Cash
Flows (14,743,077) 33,448,516.39 27,822,098 23,580,775 20,015,006 17,022,925
Payback Period
(14,743,077) 18,705,439 46,527,537 70,108,312 90,123,318 107,146,244
Table 4-6:Payback period (PBP)
To calculate the payback period, we need to find the year in which the cumulative cash inflows
equal or exceed the initial investment of 14,743,077.
This means that it will take approximately 5.28 months for the shared cloud CBS project to
generate cash flows that are sufficient to recover the initial investment. A shorter payback period
indicates a quicker return on investment.
Additionally, the provided table shows the net present value (NPV) of cash flows for each year.
The NPV represents the present value of the project's cash flows, considering the time value of
money. Furthermore, the table also displays the cumulative cash flows for each year, allowing for
a better understanding of the payback period.
It's important to note that the payback period is a simple measure that only considers the time it
takes to recover the initial investment and does not account for the profitability or financial
performance of the project beyond that point. Therefore, it should be used in conjunction with
other financial metrics to make informed investment decisions.
4.8.5.5 Accounting rate of return (ARR)
To calculate the ARR for the shared cloud CBS project, we first need to determine the average
annual net cash inflow. This is done by summing up the net cash flows for each period (excluding
the upfront investment) and dividing it by the number of years.
In this case, the net cash flows for each year are provided: 39,469,249 ETB for Year 1, 38,739,489
ETB for Year 2, 38,743,967 ETB for Year 3, 38,804,649 ETB for Year 4, and 38,944,330 ETB for
Year 5. We add these figures together and divide by 5 (the number of years) to get the average
annual net cash inflow.
Average annual net cash inflow = (39,469,249 + 38,739,489 + 38,743,967 + 38,804,649 +

38,944,330) / 5 = 194,701,684 / 5
= 38,940,336.8 ETB
41
Next, we divide the average annual net cash inflow by the initial investment (14,743,077 ETB)
and multiply it by 100 to express it as a percentage.
ARR = (38,940,336.8 / 14,743,077) * 100

= 2.6412 * 100
= 264.12%
Therefore, the Accounting Rate of Return (ARR) for the shared cloud CBS project is calculated
to be 264.12%. This indicates a highly profitable investment, as a higher ARR suggests greater
profitability. The ARR can be used as a benchmark to compare the profitability of different
investment opportunities and make informed decisions regarding resource allocation and project
viability.
4.8.5.6 Break-Even Analysis (BEA)
Break-even analysis is a financial tool used to determine the point at which revenues equal costs,
indicating the level of operation required to cover expenses. In the context of the shared cloud CBS
or payment hub, break-even analysis helps identify the minimum volume of deployment needed
for the project to be financially sustainable.
Given Assumptions Year 1 Year 2 Year 3 Year 4 Year 5
Clients added per year after

Cloud CBS 15 22 26 32 39
Average Cloud Fees 1,500,000 2,178,000 2,635,380 3,188,810 3,858,460
Table 4-7:Break-Even Analysis (BEA)
In the given assumptions, the break-even analysis is conducted over a period of five years. The
number of clients added per year after implementing the cloud CBS is provided, along with the
average cloud fees for each year.
To calculate the total revenue, we multiply the average client size by the number of CBS
configurations. In Year 1, the average client size is 1,500,000 and the number of CBS
configurations is 15. Therefore, the total revenue for Year 1 is 1,500,000 * 15 = 22,500,000
Ethiopian Birr (ETB). Similarly, for Year 2, the total revenue is 2,178,000 * 22 = 47,916,000 ETB.
This calculation is repeated for each year.
42
Total Revenue = Average client Size X Number of CBS Configuration
Total Revenue = 1,500,000 *15=22,500,000
14,743,077 * 15 = 221,146,155
The break-even point occurs when the difference between the total revenue and the total costs
equals zero. In other words, the operating income (OI) or profit is zero. At the break-even point,
the project is not making a profit but is covering all its costs.
To calculate the break-even quantity (BEQ) for the consulting service, we divide the total initial
investment by the average order size. In this case, the total initial investment is 14,743,077 ETB.
The average order size is 1,500,000 ETB. Therefore, the break-even quantity is 14,743,077 /
1,500,000 = 9.828718, which can be rounded up to 10 clients.
Therefore ,Breakeven Quantity BE Consulting (BEQ) = Total Initial Investment

Average Order Size;
= ETB 14,743,077/ 1,500,000
= 9.828718 ~ 10 clients
This means that in the first year, the project needs to serve approximately 10 clients in order to
break even, where the operating income is zero. Any additional clients beyond the break-even
quantity would result in a positive operating income or profit.
43
Chapter 5 : CONCLUSION AND RECOMMENDATIONS
5.1 Summary
On this section a comprehensive summary of the key findings and analyses conducted in Chapter
4 will be revised, which include markets and demand analysis, raw materials and supplies study,
location and site assessment, production program and plant capacity, technology selection,
organizational and human resource social and economic analysis, and financial analysis.
Markets and Demand Analysis: The markets and demand analysis revealed a strong and growing
demand for the product or service. Factors such as market size, trends, competition, and consumer
preferences were thoroughly examined. The analysis indicated a favorable market environment
with significant opportunities for growth and profitability.
Raw Materials and Supplies Study: The raw materials and supplies study assessed the
availability, quality, and cost of the required inputs for the project. Reliable sources were
identified, and potential risks related to the supply chain were analyzed. This study ensured that
the project has access to the necessary raw materials and supplies to support operations effectively.
Location and Site Assessment: The location and site assessment evaluated various factors such
as proximity to target markets, transportation infrastructure, utilities availability, and regulatory
requirements. The chosen location was carefully considered and aligns with the project's
objectives.
Production Program and Plant Capacity: The production program and plant capacity analysis
focused on determining the optimal production levels and the required plant capacity to meet the
projected demand. Factors such as production processes, equipment, labor requirements, and
efficiency were considered. This analysis provided insights into the production capabilities and
capacity constraints of the project.
Technology Selection: The technology selection analysis examined different technological

options available for the project. Various factors such as cost, efficiency, scalability, compatibility
with existing systems, and environmental impact were evaluated. The chosen technology was
assessed to be the most suitable for meeting the project's objectives and requirements.
44
Organizational and Human Resource Social and Economic Analysis: The organizational and
human resource social and economic analysis assessed the impact of the project on the
organization and its employees. It examined aspects such as job creation, skills development, job
satisfaction, and overall economic impact.
Social and Economic Analysis: The social and economic analysis examined the impact of the
project on various stakeholders and the broader community. It assessed factors such as job
creation, income generation, skills development, and social inclusion. The analysis highlighted the
positive social and economic benefits that the project can bring, such as improved employment
opportunities, enhanced financial inclusion, and overall economic growth.
Financial Analysis: The financial analysis focused on evaluating the project's financial viability
and profitability. It involved analyzing the project's costs, revenues, and financial indicators such
as net present value (NPV), internal rate of return (IRR), payback period, and return on investment
(ROI). The analysis provided insights into the financial feasibility of the project, its potential
profitability, and the expected financial returns over the project's lifespan.
Based on the findings of the social and economic analysis, it is evident that the project has the
potential to create a positive impact on both the local community and the broader economy. The
project's job creation and income generation aspects can contribute to reducing unemployment
rates and improving the overall standard of living. Additionally, the project's focus on skills
development can enhance the human capital of the workforce, leading to increased productivity
and competitiveness.
In terms of the financial analysis, the project demonstrates promising financial viability. The
calculated financial indicators, such as NPV, IRR, payback period, and ROI, indicate that the
project is expected to generate positive returns and recover the initial investment within a
reasonable timeframe. This suggests that the project has the potential to be financially sustainable
and profitable in the long run.
45
5.2 Conclusions
The Ethiopian financial industry is growing rapidly, and there is a need for more efficient and cost-
effective ways to deliver banking services. Shared cloud core banking systems offer a promising
solution to this challenge.
A shared cloud core banking system is a software platform that is used by multiple banks to provide
core banking services such as account opening, funds transfer, and loan origination. This can help
banks to reduce their IT costs, improve their operational efficiency, and increase their agility.
This feasibility study assesses the viability of provisioning shared cloud core banking systems
in the Ethiopian financial industry. The study focuses on eight key variables:
1. Markets and demand analysis: This variable examine the size and growth potential of the
Ethiopian financial market, as well as the demand for shared cloud core banking systems.
2. Raw materials and supplies study: This variable analyze the availability and cost of the raw
materials and supplies needed to implement a shared cloud core banking system.
3. Location and site assessment: This variable evaluate the potential locations for hosting a
shared cloud core banking system, considering factors such as power availability, security,
and connectivity.
4. Production program and plant capacity: This variable determines the production capacity
needed to support the demand for shared cloud core banking services.
5. Technology selection: This variable selects the appropriate technology platform for the
shared cloud core banking system.
6. Organizational and human resources: This variable assesses the capabilities of the
organizations that will be responsible for managing and operating the shared cloud core
banking system.
7. Social and economic analysis: This variable evaluates the potential social and economic
impacts of the shared cloud core banking system.
8. Financial analysis: This variable analyzes the financial feasibility of the shared cloud core
banking system.
46
Results of the study
The results of the feasibility study show that all eight variables are acceptable and viable for the
provisioning of shared cloud core banking systems in the Ethiopian financial industry. The study
also found that the shared cloud core banking system can provide a number of benefits to FIs,
including:
• Reduced IT costs
• Improved operational efficiency
• Increased agility
• Increased scalability
• Enhanced security
• Improved compliance
Conclusion
The feasibility study concludes that the provisioning of shared cloud core banking systems in the
Ethiopian financial industry is a viable and beneficial undertaking. The study recommends that
further research be conducted to finalize the design and implementation plan for the shared cloud
core banking system.
5.3 Recommendations
Based on the findings and analyses presented, the following recommendations are proposed:
1. Further market research: Although the markets and demand analysis indicated a strong
demand for the product or service, conducting further market research can provide deeper
insights into customer preferences, market trends, and potential competitive challenges.
This will help fine-tune the project's strategies and ensure its alignment with market needs.
2. Continuous monitoring and evaluation: It is recommended to establish a robust

monitoring and evaluation system to track the project's progress and measure its impact on
social, economic, and financial aspects. This will enable timely adjustments and
improvements, ensuring the project's success and sustainability.
47
3. Strategic partnerships: Exploring strategic partnerships with relevant stakeholders, such
as suppliers, distributors, and industry associations, can help strengthen the project's market
position and create synergies that drive growth and profitability.
4. Human resource development: Investing in ongoing training and development programs

for employees can enhance their skills and productivity, contributing to the project's
success. Additionally, fostering a positive work environment and implementing effective
human resource management practices can improve employee satisfaction and retention.
5. Financial management: Implementing sound financial management practices, including

regular budget monitoring, cost control measures, and effective cash flow management, is
crucial for the project's financial success. Regular financial reviews and analysis should be
conducted to identify any potential risks or areas for improvement.
6. Sustainability considerations: Incorporating sustainable practices and considering

environmental and social impacts in the project's operations can enhance its reputation and
long-term viability. This may include adopting energy-efficient technologies, waste
reduction measures, and responsible sourcing of raw materials.
7. Regular updates and adjustments: It is recommended to periodically review and update

the project's strategies, taking into account market changes, technological advancements,
and evolving customer needs. This flexibility will enable the project to adapt and stay
competitive in a dynamic business environment.
8. Risk management: Developing a comprehensive risk management plan that identifies

potential risks and outlines mitigation strategies is essential. This will help minimize
potential disruptions and ensure the project's resilience in the face of unforeseen challenges.
By implementing these recommendations, the project can maximize its potential for success,
profitability, and positive social and economic impact. Continuous monitoring and evaluation,
along with proactive decision-making, will be critical in achieving the desired outcomes.
48
Reference
1. https://telecloud.ethiotelecom.et
2. https://nbe.gov.et/microfinance-institutions/
3. Finextra (2023), THE FUTURE OF FINTECH IN AFRICA (Finextra Research)
4. Gartner (2020), "Magic Quadrant for Global Retail Core Banking." Available at:
https://www.gartner.com/en/documents/3986709/magic-quadrant-for-global-retail-core-
banking
5. Mambu Communications (2023), "Customize your path to success with a SaaS core."
Available at: https://www.mambu.com/resources/customize-your-path-to-success-saas-
core
6. Edward Cable (2020), "Democratizing Financial Services." Mifos. Available at:
https://mifos.org/wp-content/uploads/2020/01/Democratizing-Financial-Services.pdf
7. BPC (2022), "Time for Next Generation Real-Time Payments." Available at:
https://www.bpcbt.com/time-for-next-generation-real-time-payments/
8. Grameen Foundation, "Framework for Forecasting Return on Investment." Available at:
https://www.grameenfoundation.org/resource/framework-for-forecasting-return-on-
investment/
9. The World Bank (2022), "Digital Financial Services: Opportunities and Challenges."
Available at: https://www.worldbank.org/en/topic/digitalfinanceservices
10. International Finance Corporation (IFC) (2021), "Cloud Computing: Opportunities and
Risks for Financial Institutions." Available at:
https://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/i
ndustries/financial+institutions/resources/cloud-computing-opportunities-risks
11. Deloitte (2022), "Banking and Capital Markets Outlook: Embracing Digital
Transformation." Available at: https://www2.deloitte.com/us/en/pages/financial-
services/articles/banking-capital-markets-outlook.html
12. McKinsey & Company (2021), "Cloud Banking in the Post-COVID-19 World."
Available at: https://www.mckinsey.com/industries/financial-services/our-insights/cloud-
banking-in-the-post-covid-19-world
13. International Data Corporation (IDC) (2021), "Cloud Adoption in Financial Services: The
Journey to Digital Transformation." Available at:
https://www.idc.com/getdoc.jsp?containerId=US46944321
14. Amazon Web Services (AWS) (2022), "Banking and Financial Services on AWS."
Available at: https://aws.amazon.com/financial-services/banking/
15. Microsoft Azure (2022), "Banking and Capital Markets Solutions." Available at:
https://azure.microsoft.com/en-us/industries/banking/
16. IBM (2022), "Cloud for Financial Services." Available at:
https://www.ibm.com/industries/financial-services/solutions/cloud
17. Oracle (2022), "Cloud Solutions for Financial Services." Available at:
https://www.oracle.com/industries/financial-services/cloud-solutions/
18. Infosys (2022), "Cloud for Banking Transformation." Available at:
https://www.infosys.com/industries/financial-services/offerings/cloud-
services/Pages/index.aspx
19. Accenture (2022), "Cloud Banking Services." Available at:
https://www.accenture.com/us-en/services/financial-services/cloud-banking
49
20. PwC (2022), "Cloud Banking: The Future of Financial Services." Available at:
https://www.pwc.com/gx/en/industries/financial-services/banking-capital-markets/cloud-
banking.html
21. Deloitte (2022), "Banking in the Cloud: A Primer." Available at:
https://www2.deloitte.com/us/en/insights/industry/banking/banking-in-the-cloud.html
22. Capgemini (2022), "Cloud Banking: Unlocking Transformation in Financial Services."
Available at: https://www.capgemini.com/resources/cloud-banking-unlocking-
transformation-in-financial-services/
23. Forrester (2022), "The Forrester Wave™: Digital Banking Engagement Platforms, Q3
2022." Available at:
https://www.forrester.com/report/The+Forrester+Wave+Digital+Banking+Engagement+
Platforms+Q3+2022/-/E-RES165339
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APPENDIXES
1. Framework for Forecasting Return on Investment template
This framework is Grameen Foundation framework (©Grameen® Foundation, USA. All

rights reserved)
Overview
The purpose of this tool is to forecast the value of your potential IT investments. Specifically,
the tool is meant to calculate the financial value that an investment in CBS Cloud would
generate for your MFI over the next 5 years, assuming the MFI purchased and installed CBS
Cloud this year. Although the tool yields a forecast, actual experience and financial returns
will, of course, vary by institution.
While this tool is designed and configured to assess the benefits of CBS Cloud specifically,
MFIs and others could apply this forecasting model to other MIS or technology assessments
once they appropriately alter the calculations within the tool.
Instructions
0 Before you begin, please read through the accompanying guide, "Return on
Investment: A Framework for Analysis."
1 This survey should be completed prior to deploying Cloud CBS. Begin

responding at the tab labelled "Generic ROI Setup" but do not update the auto
calculations in Columns E-K. These cells will be updated automatically and are
used to generate the financial analysis based on your inputs in Column C.
2 Survey questions 1-88 will create your baseline of operations as a point of

comparison for the future impact that Cloud CBS will have.
Begin by completing survey questions 1-35. Please note that questions 3-36
must be answered before Cloud CBS is installed. In answering them you should
use business planning forecasts that do NOT anticipate any change in system.
Please answer questions 36-44 (Staff Information and Miscellaneous

Information) by entering answers based on your current operations at the time
of survey completion.
Please answer questions 45-88 (Expenses) based on your current plans to

implement Mifos.
51
3 Survey questions 89-99 will create a 5-year net-present-value (NPV)
forecast of financial benefit, quantifying the value that the Cloud CBS
system will provide to your organization over the next 5 years.
The section titled "Estimated Impact of Cloud CBS" (questions 89-100) is
meant to record your projections about how you expect Cloud CBS to impact
your operations. For example, you may expect that loan officers will spend less
time entering data into the system and will spend more time in the field. In that
case, their caseload should increase because of the extra time Cloud CBS has
afforded them. What kind of caseload increase do you think is possible based
purely on the extra time that Cloud CBS will generate for your loan officers?
Record your answer to this question on line 89.
4 Once you have completed the baseline survey and the forecast survey, the tool
will generate a 5 year NPV projection based on your inputs. You can view the
analysis projections under these three tabs:
FA Chart: This tab shows the yearly cash flows. One should expect it to be
negative during the upfront (investment) year and gradually increase over time.
Financial Analysis in USD: This tab shows the 5-year NPV calculations, the
payback period, and annual ROI in US dollars.
Financial Analysis: This tab shows the 5-year NPV calculations, the payback
period, and annual ROI in local currency.
5 The Calculation Definitions & Notes tab has a detailed description of the
underlying calculations behind each driver of the NPV model.
NOTE: This model is intended for forecasting alternate scenarios. We recommend

changing your estimated impacts in survey questions 89-100 and see how they
impact the overall NPV of the project.
Table 5-1:Forecast the value of potential IT investments
Increased Description Calculation

Revenue
Increase in Reducing time spent on configuring and Total number of DevOps s by
Income other activities increases the efficiency of year (based on projections, not
Due to DevOps as measured by caseload. impacted by Cloud CBS) *
DevOps Increasing caseload generates incremental Incremental caseload attributed
Efficiency interest income. to Cloud CBS efficiency
(difference in caseload
To evaluate returns from more efficient loan projections before and after
officers, we look at the incremental increase Cloud CBS) *
in loan officer caseload (i.e. the average Average loan size *
number of borrowers each loan officer Average loan yield
52
supports) attributed to the efficiency
provided by Cloud CBS, the overall number
of loan officers in a given year, the average
loan size, and the average yield.
New With a decentralized system, each time a The decrease in the Total Time
Products new product is rolled out staff from the to Market (TTM) created by the
(faster home office must visit each and every Cloud CBS (based on # of
TTM - branch to update local computers with the calendar days required to
incremental new product offering. This takes time. configure the system with a new
income) During that time, no new revenue from those product and conduct training,
products is produced. Under Cloud CBS, etc.; this should be a several day
because new products are available reduction, meaning that any
immediately upon release, those days are new product can hit the market
now days that the product is generating several days faster with the new
incremental revenue. Cloud CBS) *
Total number of LOs by year
We capture the value of this incremental (based on projections, not
revenue using projections of the number new impacted by Cloud CBS) *
products to be introduced (provided by the Average caseload assumed after
company) and an estimate of the number of the Cloud CBS is deployed *
days required to complete the configuration Average loan size *
of the new product at all branches. Because % of total clients base that is
new products are not adopted by all expected to take part in a new
customers, we assume about the number of loan offering during its first
customers who would typically adopt a new year *
product in the first year (again based on past Daily loan yield *
experience reported by the company). Using # of new products introduced
these data, we can calculate the number of per year
days that it takes for a new product to
actually reach customers under the old
decentralized system.
Table 5-2:Increased Revenue Calculation
53
Cost Savings Description Calculation
Decreased Like any financial institution, an MFI must Decrease in branch on-premises
Time for on-routinely consolidate information and close Deployment time (# of days
premises its books to obtain a picture of the current required to create reports at
Deployment state of the business. Because MFIs largely each branch each month*# of
operate through branch networks, results branches) * 12 * Branch
from each branch must be calculated and manager daily rate +
then results from all branches are
consolidated at the home office. This Decrease in HO on-premises
potentially involves significant time each Deployment time (# of days
month for branch employees, time that required to create monthly on-
could be spent recruiting new customers or premises Deployment at HO *
working with existing ones. To assess the months + # of days required to
impact of Cloud CBS, we evaluate the do year end on-premises
average number of person-days required to Deployment) * HO accounting
prepare monthly reports at the branches and staff daily rate
to consolidate them at the home office. We
then compare the total person-days spent
annually on this task across the institution
before and after Cloud CBS. We expect to
see a reduction, as Cloud CBS automates
and simplifies reporting and eliminates
manual consolidation of data. Any
reduction is reflected in our financial
analysis as labor cost saved.
Cost In a decentralized system, a support person
Savings in must visit each new branch to set up the Branch setup savings (average
on-premises Cloud CBS, and during the year, an MFI person-days to install the
Deployment will send IT staff to each branch location to current Cloud CBS at a new
Maintenance conduct upgrades or apply routine branch * # of new branches per
maintenance patches. These costs are year * IT staff daily rate) +
eliminated with Cloud CBS because all # of times IT staff visit a branch
branches have access to the most updated each year for maintenance *
version of the system as soon as they plug person-days to visit a branch *
in their computers and access the internet. IT staff daily rate +
# of new products launched per
To calculate the savings for new branch set- year *
up, we simply multiply the number of new reduction in days required to
branches expected per year by the days configure new products with
required to set up the old system on the new the new Cloud CBS *
branch and convert that to an IT staff daily IT staff daily rate
rate for salary saved. To calculate the
savings for routine maintenance, we
determine how many trips IT staff used to
take to the network of branches per year to
maintain the old system (e.g., 2
maintenance trips per year) and then
54
calculate the daily rates of the IT staff
involved. Finally, we add the same savings
for new product configuration -- we take the
number of new products to be introduced
per year and the estimated time necessary to
configure the product before and after
Cloud CBS, and using the IT staff daily rate
to calculate the saved salary, we estimate a
monetary savings.
Better When fraud cannot be prevented in % reduction of # of ghost loans
Internal advance, the best defense is information disbursed per year * Average
Controls --> systems that allow it to be detected quickly value of a loan +
Less Fraud by observing a pattern of irregular % reduction of lost or stolen
transactions or suspect financial imbalances. loan payments * Average
The long delays and error- prone repayment amount (assuming
consolidation processes associated with weekly repayments)
distributed systems increase the difficulty of
detecting fraud. By contrast, a system like
Cloud CBS, with real-time consolidated
data and the ability to create reports that
identify suspect transactions, makes fraud
detection vastly easier.
Money lost to fraud represents lost revenue

from legitimate loans not made or
repayments lost in transit. So a reduction in
the amount of fraud translates into increased
revenue.
Reduction Most CBS systems require a separate Per-seat license cost for current
in Cloud license for each user, so there are license Cloud CBS * # of licenses at
CBS License fees associated with setting up each new HO +
Costs branch. These costs are eliminated by Cloud Per-seat license fee for current
CBS. There are no license fees, and every Cloud CBS * # of branches
new branch has access to the Cloud CBS as
soon as the computers are plugged in.
Faster CBS Reducing the time, it takes from system (Decrease in days required for
Deployment design to deployment has an impact on both client onboarding - processing a
customer satisfaction and staff time spent on new client in the system - * # of
processing. We capture the value of this new clients per year ) +
cost savings using an estimate of the Decrease in the days required to
number of days required under the old approve and process a loan
decentralized system to onboard a customer, from application to
complete the application processing, disbursement * # of loans
approve changes and deploy a CBS disbursed per year) *
deployment. Under Cloud CBS, because the Branch Manager daily rate
time necessary for disbursement is reduced,
we capture the labor costs saved.
Table 5-3:Cost Savings Calculation
55
Project Expenses Description Calculation
Hosting All expenses Annual
associated with hosting costs
storing and caring for (if SaaS) or
Cloud CBS data, Annual costs
whether the costs are of support
subscription-based or contract and
provided through a SysAdmin
support contract and support
in-house application
servers, generators
and new server room
accommodations.
Hardware Costs include all new Hardware for
computers, printers, HO +
UPS and LANs. Hardware per
branch * # of
branches
Software For all the new Non-Cloud
computers that are CBS license
necessary, capture fees for HO +
the cost of non-Cloud Non-Cloud
CBS license fees, CBS license
such as those for the fees per
operating system and branch * # of
antivirus programs, branches
here.
Connectivity Costs If the internet Installation
connection must be cost for ISP
upgraded to at HO +
accommodate Cloud Annual ISP
CBS online, capture charges at
costs of internet HO +
service here. Installation
cost for ISP
at branches *
# of branches
+ Annual ISP
charges by
branch * # of
branches
Data Migration These costs include Days of data
the one-time costs migration * #
associated with of data
converting legacy encoders *
data from the old Data encoder
system (or paper daily rate
56
files) into the Cloud
CBS system.
Typically, this
includes data encoder
staff time.
Customizations/Enhancements MFIs may request Any
customizations to the customization
software before costs
deployment, and
should then budget
for annual
customizations or
enhancements as
necessary.
Training There will be # of staff
expenses associated trained per
with training staff on year * Staff
Cloud CBS during daily rates +
initial deployment, Logistical
and the MFI should costs for
budget for annual training
training refreshers sessions
for new staff.
Staff Time for encoding In order to optimize Ongoing data
(Encoder) the data entry encoding
function, all MFIs staff per
deploying Cloud branch * # of
CBS should hire data branches *
encoders to enter Data encoder
transactions from the annual rate
field. Centralizing
this function with a
few encoders relieves
the DevOps's of this
duty and allows them
to spend more time
adding caseload or
pursuing at-risk
accounts. This
expense may vary
from MFI to MFI,
but typically it
should be the cost of
one encoder per
branch.
Staff Time for maintenance New IT staff may be IT staff added
required to properly per year * IT
maintain the system staff daily
and act as support for rate
57
all users. This
calculation simply
notes the cost of the
IT staff added each
year.
Other Upfront Cost If any other costs Other costs
were incurred during
deployment, or are
forecast for future
years, but do not
appear on this sheet,
those costs can be
added in this
calculation.
Table 5-4:Project Expenses Calculation
2. Software architecture of a CBS and Payment hubs looks as follow:
Figure 5-1: Mifos CBS architecture
58
Figure 5-2:Mifos Payment Hub
✓ Mobile Money & Merchant Payments
Bi-lateral mobile money integration and payment orchestration to enable mobile collections,
disbursements, P2P transfers, request to pay, and QR code payments according to the GSMA
Mobile Money API standard.
✓ Bulk Payments & G2P
Pre-processing of bulk payment lists and payment initiation and orchestration for G2P flows like
social protection programs, conditional cash transfers, benefit payments, and more.
✓ Real-Time Payments
Seamless integration and connection to ISO 20022 based real-time payment systems like SEPA
in Europe, UK Faster payments, and US FedNow.
✓ Cross-Border Remittances
Powering closed and open-loop cross border remittance systems including the transformation
and ma Open Banking & Finance
59
Enabling fintechs to initiate payments on behalf of customers through Open Banking & Third
Party Payment Initiation (3PPI) APIs.
✓ Central Bank Digital Currencies
Issuing gateway for CBDC/Stablecoins to provide conversion point between fiat & digital
currency in emerging markets and beyond.
✓ Instant & Inclusive Payment Systems
Integration & Orchestration Layer to enable financial institutions to participate in centralized

IIPs systems like Mojaloop for P2P and Merchant Request to to Pay flows.
✓ Wholesale Cross-Border Payments
Unlocking innovation to reduce the cost and friction of interbank cross-border payments amongst
financial institutions. ping layer between Mojaloop and ISO 20022 message standard.
60

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AMERICAN COLLEGE OF TECHNOLOGY

DEPARTMENT OF BUSINESS STUDIES

FEASIBILITY STUDY ON PROVISIONING SHARED CLOUD

A Project Work Submitted to The Department of Business Studies of

Asmamaw Atnafu (Phd)

Place: Addis Ababa

Date: September 3, 2023

Signature of the Candidate

Name of Advisor: ________________________

AMERICAN COLLEGE OF TECHNOLOGY DEPARTMENT OF BUSINESS

FEASIBILITY STUDY ON PROVISIONING SHARED CLOUD

BY: Tsegaye Tamiru Zergaw

__________________ _____________________ _______________

Name Signature Date

__________________ _____________________ _______________

Name Signature Date

__________________ _____________________ _______________

Name Signature Date

Name: Tsegaye Tamiru

Date: September 3, 2023

AEMFI – Association of Ethiopian Microfinance Institutions

ARR -Accounting rate of return

BaaS – Banking as a Service

BCR - Benefit-cost ratio

BEA - Break-Even Analysis

CBS – Core Banking System

FCA- Federal Cooperative Agency

Fintech - Financial Technology

IRR -Internal rate of return

MFIs- Microfinance institutions

NPV -Net present value

NBE - National Bank of Ethiopia

Mifos- Open Standard Core Banking system

ROI -Return on Investment

SACCOs - Savings and Credit Cooperatives

SaaS – Software as a Service

PBP - Payback period

1.2 Statement and Justification of the Problem

1.3 Objective of the Project

1.3.1 General objective

1.3.2 Specific objectives

1.4 Scope of the Project

2.2. The project Concept and Profile

2.3. Preliminary study

payment instrument issuers/system operators, and SACCOs. By understanding their unique

3.2. Types of data

3.3. Sources of data

3.4. Data collection methods and tools

3.5. Population of the study

3.6. Sampling design

3.7. Sample size

3.8. Sampling methods

3.9. Data analysis methods and tools

Task Name Duration

Table 3-1: Project Schedule

3.11. Resource Budget

Project Expenses Upfront

Table 3-2:Cost Breakdown.

The efficiency of payment processing in Ethiopia can be significantly impacted by a shared

Based on knowledge and experience, recommendations for the successful implementation of a

Figure 4-2:Years of experience in the industry Surveyed

Figure 4-4:Potential Benefits

Figure 4-8:Regulatory and Legal Considerations

Figure 4-10:Technological Infrastructure

________ _ _____

________ _ _____

________ _ _____