Yardstick International College

School online of postgraduate studies Department

of Business Administration
THE Effect OF INFORMATION & COMMUNICATION TECHNOLOGY
ON ETHIOPIAN PRIVATE BANKS’ PERFORMANCE: THE CASE OF
TWO SELECTED ETHIOPIAN PRIVATE BANKS

By: EPHREM KEMACHEW

A Thesis Submitted to School of Online Post Graduate Study of

Yardstick International College in Partial Fulfillment of the Requirements
for the Award of a Master’s Degree in Master of Business Administration

JUNE, 2023
Addis Ababa
 Yardstick International College
School online of postgraduate studies Department
of Business Administration

THE Effect OF INFORMATION & COMMUNICATION TECHNOLOGY

ON ETHIOPIAN PRIVATE BANKS’ PERFORMANCE: THE CASE OF
TWO SELECTED ETHIOPIAN PRIVATE BANKS

By: EPHREM KEMACHEW

A Research proposal Submitted to School of Online Post Graduate Study of

Yardstick International College in Partial Fulfillment of the Requirements for
the Award of a Master’s Degree in Master of Business Administration

Advisor: Dr Berihun Muche

JUNE, 2023
Addis Ababa
 Declaration

I declare that this study is my original work towards the Executive Masters of
Business Administration and has not been submitted for any Degree or Diploma
in any University. To the best of my knowledge, all source of materials used for
the study have been duly acknowledged. I have undertaken the study
independently with the guidance and support of the research advisor.

Signature:
Ephrem Kemachew

Name of Advisor: Dr. Berihun Muche

Signature:

I
 Acknowledgement

First of all I would like to praise almighty God who gave me endurance and strength
throughout the duration of the program. Then I am deeply grateful to my virgin mother who
is always with me and To the holy angels and the holy righteous who are always with me
Then I am deeply grateful to my advisor, Dr. Berihun Muche, for his precious comments,
guidance and unreserved support in checking and giving constructive suggestions.

I am extremely indebted to my beloved mother , yemenzwork shewayrga and my father

Kemachew Tesfaye , for their encouragement, patience and understanding since the
beginning of the program and without them it would have been difficult for me to complete
the program. In addition I would like to express my deep gratitude to my brothers ,Damtew
Kemachew,Befekadu Kemachew Daniel Kemachew and,my sisters; Meseret,Makda and
Azeb Kemachew.

My thanks also belong to my friend, Aynabeba Endale , for her unreserved and devoted effort
to comment and edit my work throughout the project time. My appreciation also goes to my
friends who had taken the endeavor to voluntarily administer the questionnaires on my
behalf.

Ephrem Kemachew
March 2023

Addis Ababa

Catalog
Declaration ............................................................................................................................................... I
II
Acknowledgement ................................................................................................................................... II
List of Table .......................................................................................................................................... IV
List of Figures ....................................................................................................................................... IV
CHAPTER ONE ..................................................................................................................................... 1
Introduction............................................................................................................................................. 1
1.1Background of the Study .................................................................................................................... 1
1.2. Statement of the Problem .................................................................................................................. 4
1.3 Research Question and Research objectives ....................................................................................... 6
Research objectives ................................................................................................................................. 6
1.4 Significance of the study .................................................................................................................... 6
1.5 Scope/Delimitation of the study ......................................................................................................... 7
1.6 Limitation of the study ....................................................................................................................... 7
1.7 Definition of key terms ...................................................................................................................... 7
1.8 Organization of the paper ................................................................................................................... 8
CHAPTER TWO .................................................................................................................................... 9
Literature Review .................................................................................................................................... 9
2.Introduction .......................................................................................................................................... 9
2.1.Review of theories ............................................................................................................................. 9
2,1.1 Brief History of Banking in Ethiopia ..............................................................................................10
2.3 Review of Empirical Studies .............................................................................................................11
2.4 Research Gap....................................................................................................................................12
2.5 Conceptual Framework .....................................................................................................................13
2.5.1 Importance of ICT in Financial Service Delivery (Conceptual Framework of the Study) ................14
2.5.2 Benefit of ICT in Banking Industry ................................................................................................14
ICT ADOPTION .....................................................................................................................................19
2.6 Hypothesis ........................................................................................................................................25
2.7 Theoretical Frameworks ...................................................................................................................25
2.7.1 Resource-Based View (RBV).........................................................................................................25
2.7.2 Technology Acceptance Model (TAM) ..........................................................................................25
Chapter Three: Research Methodology ...................................................................................................28
3.1 Introduction ......................................................................................................................................28
3.2 Research Design ...............................................................................................................................28
3.3 Research Approach ...........................................................................................................................28
3.4 Sampling Design ..............................................................................................................................28
3.4.1 Population, Sampling Unit, and Sampling Frame ...........................................................................28
3.4.2 Method of Sampling ......................................................................................................................29
3.4.3 Sampling Procedure .......................................................................................................................29
3.4.4 Sample Size Determination ............................................................................................................29
3.5. Data type and sources ......................................................................................................................30
3.6. Research Instrument and Measurements ...........................................................................................30
3.7. Methods of data collection ...............................................................................................................31
3.8 Method of data analysis ....................................................................................................................31
3.9 Validity and reliability (Pretest/ Pilot Test) .......................................................................................32
3.10 Ethical Considerations ....................................................................................................................32
3.11 Summary ........................................................................................................................................32
Chapter 4................................................................................................................................................33
Budjet plan and time schedule ................................................................................................................33
References..............................................................................................................................................35
Appendix ...............................................................................................................................................36

III
 List of Table

Table 1: Delivery Platform available for Electronic Banking ……………………19

Table 2: Features of E-Banking services rendered by Ethiopian Banks ……….22

List of Figures

Figure 1 Conceptual Framework on banking performance ……………………………13

Fig 2 Conceptual Framework relating ICT to the performance of Baking Industry …... 19

IV
Abstract:
This research proposal aims to investigate the effect of Information and Communication Technology (ICT)
on the performance of Ethiopian private banks. The study will utilize a case study research design to assess
the impact of ICT on two selected Ethiopian private banks; Dashen Bank S.C. and United Bank S.C. The
objective of the research is to identify the impact of ICT adoption on the banks' operational efficiency,
customer satisfaction, and profitability. The study will use a mixed-method approach, including both
qualitative and quantitative data collection and analysis techniques. The research will involve a
comprehensive literature review on the relationship between ICT and bank performance, followed by the
selection of two private banks as case studies. Data will be collected through surveys, interviews, and
secondary sources, and analyzed using descriptive statistics, correlation analysis, and regression analysis.
The findings of the study are expected to support Ethiopian private banks in making informed decisions on
the adoption of ICT, with the aim of enhancing their overall performance.

Key words:
Information and Communication Technology (ICT), private banks, financial performance, Dashen Bank S.C,
United Bank S.C.

Acronyms:
ICT- Information and Communication Technology
S.C- Share Company.

V
 CHAPTER ONE

Introduction

Information and communication technology (ICT) has emerged as a critical element in the global financial
sector, providing essential tools for banks to streamline their operations, enhance customer service delivery,
and achieve competitive advantage. Private banks, with their focus on high net worth clients, have been at
the forefront of the ICT adoption curve, with significant investments in technology infrastructure, software
systems, and digital capabilities. This research proposal seeks to explore the impact of ICT on private banks,
examining the various ways in which technology has transformed the banking sector and identifying key
success factors for ICT-driven innovation in the private banking space

1.1Background of the Study

Ethiopia is one of the fastest-growing economies in Africa, with the banking sector being an essential
contributor to the country's economic growth. In the past few years, the country's banking sector has
undergone tremendous changes due to advancements in Information and Communication Technology (ICT).
The use of ICT has revolutionized the way banks operate, and Ethiopian private banks have not been left
behind.The use of ICT in banking has numerous benefits that have positively affected the performance of
private banks in Ethiopia. One of the significant benefits of ICT is its ability to improve the efficiency and
effectiveness of banking operations. With the use of technology, banks can automate their transactions, save
time, and reduce costs associated with the manual processing of transactions. ICT has also improved the
security of banking systems and reduced fraud, which has led to increased customer confidence in the
banking sector.

Information and communication technology (ICT) has become a ubiquitous and essential tool for businesses
around the world. The recent advancements in technology have paved the way for increased efficiency in
communication, data sharing, and decision-making.The use of ICT in banking has numerous benefits that
have positively affected the performance of private banks in Ethiopia. One of the significant benefits of ICT
is its ability to improve the efficiency and effectiveness of banking operations. With the use of technology,
banks can automate their transactions, save time, and reduce costs associated with the manual processing of

1
transactions. ICT has also improved the security of banking systems and reduced fraud, which has led to
increased customer confidence in the banking sector.

With increasing global competition and quick spreading of knowledge, the future of many businesses depend
upon their ability to innovate (Talegeta, 2012). Information technology is one of the most important tools
along with innovations in organizations and it plays a critical role in development of new products and
services. Rai, et. al. (1996) concurred that, IT provides new forms of customer services, new distribution
channels, new information based products, improved productivity, and has the capacity to influence industry
structure. According to Agrawal and Jain (2013), the major impetus for innovation has been globalization of
financial system, deregulation, and great advances in technology. Thus, in increasingly integrated financial
systems facing higher volatilities, more competition and wide varieties of risks, financial innovation has
become an essence to provide new products and strategies to better suit different circumstances of time and
market and to meet different requirements of participants in financial system.

Banks, like other business organizations, are deploying innovative products and services to ensure their
future survival and meet the changing expectation of their customers. In this intense globally competitive
market, banks should strive to satisfy the needs of their customers through providing quality customer
service and improve their customer relation management. According to Agrawal and Jain (2013), while
banks are striving to strengthen customer relationship and move towards „relationship banking,‟ customers
are increasingly moving away from the confines of traditional branch banking and seeking the convenience
of remote electronic banking. In this regard Information technology and the communication networking
system have revolutionized the working of banks and financial entities all over the world.

Indeed, there is no doubt that the majority of business organizations, particularly banks, consider computer
technology as core competency measure to gain their competitive advantage. In this regard Jalal-Karim and
Hamdan (2010) concurred that in recent years, the utilization of information technology has been increased
in service industries, particularly, the banking industry, which by using information technology related
products such as internet banking, electronic payments, security investments, information exchange, can
deliver high quality services to clients with less effort. Theoretically, alternative banking channels/e-channels
will enhance good performance of banking services and increase the level of customer satisfaction by
providing anytime, anywhere and multi way banking services including varieties of services, conveniences,

2
speed, efficiency, security and cost effectiveness (Kumbhar, 2011). Therefore every bank should accentuate
the effect of technology on their customers‟ satisfaction and employees‟ performance.

Banking in Ethiopia began in 1905 with the bank of Abyssinia, a private company controlled by the bank of
Egypt (Asefa, 2011). However introduction of information technology into the banking industry is the last
decade phenomena. Currently most of Ethiopian Banks have started providing Technology-based
services/products like ATM (payment cards), Mobile banking, Internet Banking, SMS banking and
Electronic fund transfer to their customers. Gemechu (2012), argued that technology innovation play a
crucial role in Banking industry by creating value for banks and customers, that it enables customers to
perform banking transaction without visiting a brick and mortar banking system.

The use of ICT in banking has numerous benefits that have positively affected the performance of private
banks in Ethiopia. One of the significant benefits of ICT is its ability to improve the efficiency and
effectiveness of banking operations. With the use of technology, banks can automate their transactions, save
time, and reduce costs associated with the manual processing of transactions. ICT has also improved the
security of banking systems and reduced fraud, which has led to increased customer confidence in the
banking sector.
Despite the significant benefits that ICT has brought to the banking sector, it is not clear how the use of
technology has influenced the performance of Ethiopian private banks.Ethiopian private banks need to
appreciate the role of information and communication technology on their performance and properly
ascertain the challenge thereon.This research aims to investigate the effect of ICT on Ethiopian private bank
performance. The research will focus on two selected Ethiopian private banks and will assess how the
adoption of ICT has impacted their performance.

3
1.2. Statement of the Problem

Ethiopian private banks have adopted information and communication technology to enhance their
performance. Still, their overall performance regarding the implementation of these technologies needs
focused research attention. Therefore, the research problem is to evaluate the effect of ICT on the overall
performance of Ethiopian private banks, identifying whether these technologies add significant value or not.

Information and communication technology (ICT) has in particular brought a complete paradigm shift on the
bank‟s performance and on the customer service delivery in the banking industry (Aliyu and Tasmin, 2012).
Nowadays the banking system is slowly shifting from traditional banking towards relationship banking.
Traditionally the relationship between the bank and its customers handled by face to face interaction in a
branch, whereas, in contemporary banking, customers are demanding more flexible and accessible services
everywhere and anytime. Technology has made a lot of impact on banking services owing to its role in
gathering and analyzing information. The 21st century has witnessed a lot of technological innovation in
banking sector. Some of the services that technology is providing to the financial services are:

ATMs, Mobile Banking, Branch network, Telephone Banking, Internet Banking just to mention a few
(Yeboah et. al, 2013). In general ICT allows the present day banks to meet the expectation of their more
demanding customers who are more techno-savvy compared with their counterparties of the yester years.

In today‟s fast changing world, banking environment has become highly competitive and banks are required
to respond quickly to the dynamics of fast changing customers‟ expectations. To be able to survive and
exceed in this changing market, banks are striving to improve their customer service delivery and
productivity through adaptation of electronic banking. Electronic banking is generally an extension of
traditional banking, using the internet as an electric delivery channel for banking products and services. The
banking today is redefined and re-engineered with the use of IT and banks start offering more sophisticated
services to customers with continuous product and process innovation (Tiwari and Kumar, 2012). Today‟s
dynamic and stiff market competition forced banks to spend all their resources on improvement of service
delivery and value added activities in order to survive and become productive. Yeboah et al, (2013) believes
that total automation of banking is an imperative need for all banks to attract more customers, provide
efficient and quality services, and survive in the emerging new competition, apart from the profit motive
which is the primary objective of the banks.

4
Information technology has become inevitable and is seen as the only way for banks to survive in the
increasingly competitive banking arena (Benerjea & Dawinji, 2011). Thus, it just doesn‟t make sense to put
off investment in these most basic of technology that lay the foundation for the very future of banking. It is
absolutely critical for future revenue and engagements of banks (King, 2013). In fact, many organizations
have invested their time and resources for the betterment of their services and products. Yeboah et. al, (2013)
argued that Banks, in particular have invested huge sums of money in IT, having their products and services
basically supported by it. Identifying the IT investment and its role in the banking industry is very crucial
point for the success of the modern banks and Yeboah et, al (2013) insisted that banks should properly
understand the impact of ICT on their efficient service delivery, customer satisfaction and employees‟
productivity in order to maximize the return on its investment. On the other hand, Agbolade (2011) claimed
that the most significant shortcoming in the banking industry today is a wide failure on the part of senior
management in banks to grasp the importance of technology

and incorporate it into their strategic plans accordingly. In addition to this, the management is oblivious to
the current banking situation that requires their determination to fully address all the challenges related with
ICT.

Even though many studies have been conducted on impact of ICT on banking performance, limited studies
are available in Ethiopia that investigate the impact of ICT on performance of Ethiopian Private Banks and
the challenges thereon. Hence, more studies are still required to understand the relevance of ICT in Ethiopian
Private Banks and to give a better insight for decision makers of the industry.
The banking industry in Ethiopia is facing various challenges related to inefficiencies, such as lengthy
transaction processing times, errors, and high transaction costs. ICT has the potential to address these
problems, but there is a lack of evidence on the effect of ICT on Ethiopian private bank performance. This
study aims to explore this issue.The research will explore the different ways in which ICT has been adopted
in the banking sector, the challenges encountered during the adoption process, and the benefits realized by
private banks. By understanding the effect of ICT on private bank performance, the study will provide
insights into how private banks can leverage technology to improve their operations and competitive
advantage.
Therefore, this research proposal seeks to gain a deeper understanding of the impact of ICT on private banks
and investigate the factors that drive or hinder technology adoption in the sector.

5
1.3 Research Question and Research objectives

Based on the statement of the problem and review of related literature, this study seeks answers for the
following questions:
 What is the current state of ICT adoption and usage in private banks?

How has ICT impacted the operations, products, and services of private banks?

What are the drivers and barriers to ICT adoption and usage in private banks?

What are the future prospects for ICT in the private banking sector?

How can private banks effectively integrate ICT into their operations and remain competitive in the
digital age?

Research objectives

The main objective of this research is to determine the effect of Information and Communication Technology
on Ethiopian private bank performance.Specifically, the study seeks to achieve the following objectives:

To assess the extent of ICT adoption in Ethiopian private banks.

To identify the benefits of ICT adoption on private bank performance.

To determine the challenges encountered during the adoption of ICT in Ethiopian private banks.

To evaluate the impact of ICT adoption on private bank performance in Ethiopia.

To examine the impact of ICT on the operations, products, and services of private banks

1.4 Significance of the study

The study's findings will contribute to an enhanced understanding of the impact of information and
communication technology on Ethiopian private banks' performance. The results of this study can help bank
managers to make informed decisions regarding the integration of ICT into their operations, enabling them to
improve efficiency, reduce costs, and enhance customer satisfaction. This study is important because it will
contribute to the limited research on the effect of ICT on Ethiopian private bank performance. The findings
will be useful to Ethiopian private banks that are looking to implement or improve their adoption of ICT.
Additionally, the study will provide insights for policymakers and regulators in the banking sector

6
1.5 Scope/Delimitation of the study

This study will focus on two selected Ethiopian private banks operating in Addis Ababa. The research will
analyze the effect of ICT on their performance, including their financial performance and customer
satisfaction. The study acknowledges that there are other factors that could impact banks' performance, but it
will focus solely on the contribution of ICT in the banking industry.This study is confined only to know the
impact of ICT on customers‟ satisfaction and employees‟ performance/productivity of selected Ethiopian
private banks. The study was conducted based on Dashen Bank and United Bank; for they are pioneers to
move towards adopting Information and Communication Technology and networking their branches and to
move to core banking which is the platform for all Technology-based services/products. The participants of
the study were also selected from Addis Ababa branches of the two selected banks

1.6 Limitation of the study

The study may face a few limitations that could impact the study's results. These limitations include
limitations in the availability of primary data not made public by the banks, lack of cooperation from
respondents or unsuitable sample size that does not adequately represent the private banking sector in
Ethiopia.This study may be limited by the availability of data, time constraints, and the willingness of the
two selected banks to participate in the research. Additionally, the study may not capture the experiences of
other private banks in Ethiopia.

1.7 Definition of key terms

Information and Communication Technology (ICT): The integration of telecommunications, computers, and
software to enable sharing and exchanging of information.

Performance: The ability of a business organization to achieve its objectives through efficient and effective
use of resources.

Private banks: Financial institutions that are not controlled by the government, formed to provide banking
services to individuals and non-governmental organizations.

7
1.8 Organization of the paper

This research proposal is organized in five chapters. Chapter One covers the introduction, including the
background, statement of the problem, research questions, objectives, significance of the study,
scope/delimitation of the study, limitations of the study, and definition of key terms. Chapter Two provides a
literature review on the effect of ICT on bank performance. Chapter Three discusses the research
methodology, including data collection and analysis procedures. Chapter Four presents the results of the
research. Finally, Chapter Five provides a discussion of the findings, conclusions, and recommendations for
future research.

8
 CHAPTER TWO

Literature Review

2.Introduction

This chapter aims to provide an overview of the existing literature on the effect of Information and
Communication Technology (ICT) on private bank performance, specifically in the Ethiopian context. The
chapter will also discuss the theoretical frameworks that provide a basis for analyzing the impact of ICT on
private bank performance, including the Resource-Based View (RBV) and the Technology Acceptance
Model (TAM). The review will further explore the potential factors that can affect the implementation of
ICT in private banks, such as organizational culture, regulatory compliance, and the availability of skilled
ICT personnel

2.1.Review of theories
Information and Communication Technology (ICT) is increasingly becoming an important tool for
enhancing the performance of private banks in Ethiopia. This means that the efficiency, effectiveness, and
profitability of private banks depend largely on the extent to which they adopt and utilize ICT. According to
Haddad, Khechine, and Abdouli (2017), ICT has revolutionized the way banking transactions are conducted
and has thus increased the speed and convenience of banking services. This implies that ICT has not only
enhanced customer satisfaction but has also helped private banks save costs, increase their market share and
reduce operational risks.
The use of ICT has transformed the traditional way of banking in Ethiopia. According to Gebreel and Ednie
(2018), the introduction of Electronic Banking (e-banking) has revolutionized private banks' mode of
operation by providing customers with online access to their accounts at any time and from anywhere in the
world. Furthermore, e-banking has also reduced transactional costs and has enabled banks to reach a larger
customer base, thereby increasing their profitability. In addition, e-banking has been found to be more
efficient in reducing fraud and operational errors, which translate to a positive impact on the banks' overall
performance.
According to Tesfaye et al. (2019), ICT adoption has been linked to banks' overall performance, as investors
look at how technology can offer greater efficiency in operations and market reach. Banks that have adopted

9
ICT have been found to be more profitable and have greater financial stability. This is because ICT adoption
facilitates more efficient operational processes, which in turn enable banks to make informed decisions and
meet customer demands effectively. In contrast, banks that do not adopt ICT tend to lag behind in terms o f
performance since manual processes are more cumbersome and costly.
However, despite the numerous benefits of ICT adoption, some challenges are still hindering its full
utilization in Ethiopia's private banks. According to Desalegn and Ango (2019), the lack of infrastructure and
inadequate ICT skills among staff are some of the major challenges facing ICT adoption in Ethiopian private
banks. This implies that private banks need to invest in infrastructure and staff training to enable the full
utilization of ICT and reap its benefits on overall performance.
Overall, this review reveals that ICT has a significant impact on private banks' performance in Ethiopia.
Private banks that have adopted ICT have seen an increase in efficiency, effectiveness, profitability, and
customer satisfaction. However, there is still a need for private banks to invest in infrastructure and staff
training to enable the full utilization of ICT and reap its benefits fully.
Several theories are relevant to understanding the effect of ICT on private banks' performance, including
the resource-based theory, the technology acceptance model, the contingency theory, and the institutional
theory. The resource-based theory examines an organization's resources from a strategic perspective and
emphasizes that competitive advantage stems from possessing valuable, rare, and difficult-to-replicate
resources. The technology acceptance model postulates that an individual's decision to adopt a particular
technology depends on the individual's perceived usefulness and perceived ease-of-use of the technology.
The contingency theory proposes that there is no universal best approach to management, and management
approaches should align with the organization's specific characteristics and circumstances. Lastly, the
institutional theory posits that organizations conform to external norms and regulations to legitimize their
activities and maintain their social status.

2,1.1 Brief History of Banking in Ethiopia

Modern banking in Ethiopia started in 1905 with the establishment of Abyssinian Bank which was based on
a fifty years agreement with the Anglo-Egyptian National Bank. In 1908, a new development bank and two
other foreign banks were also established. These banks were criticized for being wholly foreign owned
(Abera, 2012). In 1931 Abyssinian Bank was liquidated and replaced by the Bank of Ethiopia, which was the
bank of issue until the Italian invasion of 1936. During the Italian occupation, bank of Italy bank notes
formed the legal tender. In 1943, the State Bank of Ethiopia was established, with two departments

10
performing the separate functions of an issuing bank and a commercial bank. In 1963, these functions were
formally separated and the National Bank of Ethiopia (the central and issuing bank) and the Commercial
Bank of Ethiopia were formed (Vijay and Asefa, 2011).
According to Abera (2012), following the declaration of socialism in 1974 the nationalized banks were
reorganized and one commercial bank (CBE), a national Bank (recreated in 1976) and two specialized banks
i.e. the Agricultural and Industrial bank, renamed recently as the Development Bank of Ethiopia (DBE) and a
Housing and Saving Bank, renamed recently as Construction and Business Bank (CBB) were formed.
Following the demise of the Dergue regime in 1991, the Ethiopian People‟s Revolutionary Democratic Front
declared a liberal economy system. In line with this, Monetary and Banking proclamation of 1994
established the National Bank of Ethiopia as a judicial entity, separated from the government and outlined its
main functions. Monetary and Banking proclamation No. 83/1994 and the Licensing and Supervision of
Banking Business No. 84/1994 laid down the legal basis for investment in the banking sector (Ayele, 2012).
Currently, the Ethiopian banking industry comprises of 26 private commercial banks and two public banks.
(see Table 2.1.2.1). There are no foreign banks in the country, and the system remains isolated from the
effects of globalization. It seems that policy-makers fear that inviting foreign banks to invest will lead to loss
of control over the economy (Vijay and Asefa, 2011).

Despite a rapid increase in the number of local financial institutions since financial liberalization, the
Ethiopian banking system is still underdeveloped compared to the rest of the world and cash is still the most
dominant medium of exchange. The use of check is mostly limited to government institutions, NOGs and
some private business and share companies (Worku, 2010.

2.3 Review of Empirical Studies

Several empirical studies have been conducted globally to investigate the impact of ICT on private banks'
performance, ranging from the use of the internet to mobile banking to various ICT applications. The
findings show that ICT adoption enhances a bank's overall performance, particularly in improving
operational efficiency, cost reduction, and customer satisfaction. The studies also suggest that ICT adoption
increases a bank's profitability, reduces risk, and improves the decision-making process.

11
Numerous studies have been conducted on the effect of information and communication technology (ICT) on
bank performance in various countries. These studies have provided insights on how ICT adoption has
impacted banking operations and customer satisfaction.

In a study conducted by Hossain et al. (2020) in Bangladesh, it was found that ICT adoption has a significant
positive effect on bank performance. The study concluded that ICT adoption improved the efficiency and
effectiveness of banking processes, resulting in increased profitability and customer satisfaction.

Similarly, a study conducted by Abor and Quartey (2010) in Ghana found that ICT adoption improves
financial performance and operational efficiency of banks. The study found that banks that adopted ICT
reported higher returns on assets and equity, compared to those that did not adopt ICT.

In a study conducted in Nigeria by Adeyemi and Adeyinka (2017), it was found that ICT adoption positively
affects bank performance by improving service quality, operational efficiency, and customer satisfaction.
The study provides evidence that the use of ICT enhances banks' ability to deliver innovative and customized
services to their customers, resulting in increased profitability and market share.

2.4 Research Gap

Although several studies have been conducted on the effect of ICT on bank performance, there is a gap in
research on the Ethiopian banking sector. Most studies have focused on developed countries or emerging
economies, neglecting the unique characteristics of African countries, particularly Ethiopia.

While some empirical studies have been conducted relating to ICT adoption and its impact on Ethiopian
private banks, they are limited in scope and volume, and none of the studies have analyzed the effects of
multiple ICT applications on banks' performance. Moreover, the existing literature does not address the
underlying factors that affect the banks' implementation of ICT and the barriers and challenges they face

Furthermore, previous studies have primarily focused on the adoption of ICT and its impact on bank
performance without analyzing the specific ICT tools or systems that are most effective in improving bank
performance. Therefore, this study aims to address these research gaps by examining the impact of specific
ICT tools on the performance of selected Ethiopian private banks.

12
2.5 Conceptual Framework
The conceptual framework illustrates the relationship between ICT and private bank performance in Ethiopia.
The framework identifies four critical factors that influence private bank performance. These include ICT
infrastructure, ICT spending, human resource skills, and organizational culture. Banking Industry ICT can
contribute significantly to the overall performance of the banking industry, given its ability to enhance
efficiency, customer experience, and profitability. The figure below illustrates the conceptual framework
relating ICT to the performance of the banking industry.
The first factor is ICT infrastructure, which refers to the availability and quality of ICT tools and
infrastructure for banking processes. The second factor is ICT spending, which refers to the amount of
resources expended on ICT development and maintenance. The third factor is human resource skills, which
refers to the level of technological expertise possessed by bank employees. The fourth and final factor is
organizational culture, which refers to the values, beliefs, and norms that drive the bank's operations and
performance.

ICT infrastructure Bank performance

organizational culture

ICT spending human resource skills

Figure 1 Conceptual Framework

Figure 1 illustrates the key concepts and relationships between ICT and private bank performance in
Ethiopia. The arrows indicate causal relationships between the factors; for instance, ICT infrastructure and
ICT spending influence human resource skills, which in turn impact organizational culture, and finally bank
performance. The framework posits that investments in ICT infrastructure and ICT spending lead to
improvement in human resource skills, which drives the development of a technology-driven organizational
culture that, in turn, positively impacts private bank performance.

13
Therefore, this conceptual framework provides a framework for assessing the relationships between ICT and
private bank performance in Ethiopia. The framework highlights the critical role that ICT plays in shaping
private bank performance and provides a road map for further research, which can help private banks in
Ethiopia optimize their ICT investments, enhance their organizational culture, and drive better performance.

And also The conceptual framework of this study is based on the RBV and TCT theories, which suggest
that ICT adoption can enhance the performance of private banks in Ethiopia. Based on the review of
empirical studies, this study proposes that the following ICT related factors will positively affect the
performance of Ethiopian private banks:
1.ICT investment: The amount and type of ICT investment made by private banks may affect their
performance.
2. ICT infrastructure: The quality and accessibility of ICT infrastructure may affect the ability of banks to
use ICT effectively.
3, ICT adoption: The extent and complexity of ICT adoption may affect the operational efficiency and
customer service of private banks.
4, ICT skills and training: The level of ICT skills and training of bank employees may affect the ability of
banks to use ICT effectively .
The framework proposes that the adoption of ICT leads to the acquisition of ICT resources, which in turn
enables banks to provide innovative products and services, improve operational efficiency, enhance customer
satisfaction, and increase employees' productivity. These dimensions of bank performance, in turn, lead to
improved financial performance

2.5.1 Importance of ICT in Financial Service Delivery (Conceptual Framework of the

Study)

2.5.2 Benefit of ICT in Banking Industry

In recent years, the utilization of information technology has been magnificently increased in
service industries, particularly, the banking industry, which by using information technology
related products such as internet banking, electronic payments, security investments and
information exchange, can deliver high quality services to clients with less effort (Jalil-Kerim
and Hamdam, 2010). The famous quote of Bill Gates says that “banking is vital to a healthy
economy, but banks themselves are not” highlight the crucial nature of electronic forces that are
affecting banks more than any other financial service provider group. This transaction of
business operation by banks have created new mode of operation called E-Banking (Mai et. al.,

14
2007). Web based banking service or E-Banking, the latest generation of electronic banking
transaction has opened up new opportunity to the existing banks and financial institutions. It
permits business process re-engineering, service borderless market, to achieve zero latency
leading to improvements in customer service levels and better risk management because of real-
time settlement (Agrawall& Jain, 2013).

According to Ayanda et. al. (2011), it is imperative for bank‟s management to intensify
investment in Information Technology products to facilitate speed, convenience and accurate
services, or otherwise they may lose out customers to other competitors. Agrawal and Jain
(2013) also agreed that, intense competition among the banks has redefined the concept of the
entire banking system; the banks are looking for new ways not only to attract but also to retain
their customers and gain competitive advantage over their competitors. They continued that,
while banks are striving to strengthen customer relationship and move towards „relationship
banking‟ customers are increasingly moving away from the confines of traditional branch
banking and seeking the convenience of remote electronic banking. Information technology and
the communication networking systems have revolutionized the working of banks and financial
entities all over the world.Batra and Bhatia (2014) stated the three-directional advantages that
have been achieved by advancement of IT in banking sector:

15
For the Customer:
ICT enables customers to access banking services conveniently and efficiently, irrespective of their location.
The use of digital channels such as mobile banking, internet banking, and ATMs provides customers with an
opportunity to conduct transactions at their convenience, reducing the need for physical visits to bank
branches. Additionally, ICT improves the accuracy and speed of transactions, resulting in a more transparent
and reliable banking experience.
Self-inquiry Facilities

Remote banking

Anytime banking

Telebanking

Electronic banking

Efficient single-window service

For the Bank:

ICT enhances the efficiency of banking operations, leading to lower costs of operation, increased
profitability, and better risk management. The use of digital channels streamlines the banking
process, reducing transaction time, minimizing errors, and improving security measures.
Furthermore, digital channels provide the bank with an opportunity to reach a broader customer
base, leading to increased revenue.. The major advantages for a bank to implement IT are:
 Availability of a wide range of inquiry facilities, assisting the bank in business development
and follow-up
 Immediate replies to customer queries without reference to ledger-keeper as terminals are
provided to managers and chief managers.

Automatic and prompt carrying out of standing instructions on due date and generation of
reports.Generation of various MIS reports and periodical return on due dates.

Fast and up-to-date information transfer enabling speedier decisions, by interconnecting
computerized branches and controlling office (core banking).

16
 For the Employees:
ICT enhances the productivity of bank employees by automating most banking processes, reducing the
workload and improving accuracy. Additionally, ICT enhances communication within the organization,
improving decision-making processes and streamlining customer service delivery.

IT has increased their productivity through the following:

Accurate computing of cumbersome and time-consuming jobs such as balancing and interest
calculations on due dates.
Automatic printing of covering schedules, deposit receipts, pass book/pass sheet, freeing the staff
from performing these time-consuming jobs, and enabling them to give more attention to the needs
of the customers.
Signature retrieval facility, assisting in verification of transactions sitting at their own terminal.
Avoidance of duplication of entries due to existing of single-point data entry.

2.5.3 Relationship between ICT and Organizational Performance: Banking Industry

Most of the initiatives regarding technology are aimed at providing better and more efficient customer
service by offering multiple options to the customer. The death of distance, which is a by-product of
technology, has become a reality in the banking sector. Technology is also playing a key role in banks‟
strategies for gaining a competitive edge (R.K. Uppal, 2008). According to Alalade et. al. (2014), the
application of information and communication technology concepts, techniques, policies and implementation
strategies to banking service, has become a subject of fundamental importance and concern to all banks and
indeed a prerequisite for local and global competitiveness. ICT directly affects how managers decide, how
they plan and what products and services are offered in the banking industry.
According to R.K. Uppal (2008), the relationship between IT and banking is fundamentally symbiotic. In the
banking sector, IT can reduce costs, increase volumes, and facilitate customized products; similarly, IT
requires banking and financial services to facilitate its growth. Alalade et. al. (2014) argued that the most
significant shortcoming in the banking industry today is a wide spread failure on the part of senior member
of management in banks to grasp the importance of technology and incorporate it into their strategic plans
accordingly. He continued that banks should re-examine their service and delivery systems in order to
properly position them within the framework of the dictates of the dynamism of information and

17
communication technology. Many studies agreed that there is a positive relationship between ICT and
performance of banking in terms of quality service delivery, customer satisfaction and attraction, employees‟
productivity, cost reduction, profitability, and effective decision making.
The advancement in technology has played an important role in improving service delivery standards in the
banking industry. In its simplest form, Automated Teller machine and deposit machines now allow
consumers to carry out banking transactions beyond banking hours. With online banking, individuals can
check their account balances and make payments without having to go to the banking hall. There is also,
mobile banking which allows individuals to check their

account balance and make fund transfers using their mobile phones. This is gradually creating a cashless
society where consumers no longer have to pay for all their purchase with hard cash (Wisdom, 2012). He
finally conceded that the growth in the application and acceptance of internet-driven technology means that
delivering an enhanced service is more achievable than ever before.
Many industries embark on improving customer satisfaction by getting the latest machines to improve their
organization‟s performance. They believe that acquisition of latest technology will improve operating
practices and the quality and quantity of their goods and services (Dauda and Akingbade, 2011). Banks
provide customer - convenient and inexpensive access to the bank 24 hours a day and 7 days a week. Online
banking extends the relationship with the customers through providing financial services right into their
home and office. The bank may also enjoy the benefit in terms of increasing customer loyalty and
satisfaction (Shaikh, 2014). According to Wisdom (2012), online banking ensures customer satisfaction as it
extends financial services to customers outside the banking hall. Similarly, e-banking has provided banks
with a large customer base as it has resulted in increased customer loyalty and satisfaction.
Labor productivity is also used as an indicator of the economic performance of countries, industries and firms
(Piget and Kossai, 2013). ICT has productivity increasing effect on labor productivity and total factor
productivity of companies. The banking industry is one of the industries that enjoy the largest productivity
growth effect of ICT (Luka and Frank, 2012). According to Dauda and Akingbade (2011), there is evidence
that a significant and positive relationship between technology innovation and bank employee‟s performance.
ICT investment also facilitates revenue growth through new value propositions, new market and sales
channels, and improves management of life cycle. Higher customer satisfaction leads to higher loyalty, which
ultimately leads to higher revenue growth. ICT can help firms reduce operational costs, general and
administration costs and marketing costs. ICT allows cost reduction through better information sharing and
tighter coordination in the supply chain relationship (Piget and Kossai, 2013)

18
Based on the above and many related literature reviews, the conceptual framework of this study is rooted on
the incorporation of ICT facilitated products and services (technology-based services and products) into
banking operation and how they impacted on the overall performance of Ethiopian Private banks in terms of
customers‟ satisfaction, staff efficiency/employee performance. This conceptual relationship of ICT and
banks‟ performance refers as a base for the research question, hypothesis and motivation of the study
throughout the paper. ICT signifies the provision of banking products and services electronically in the form
of e-fund transfer technology, telephone banking technology and Internet banking technology; in other words
e- banking. E-funds transfer technology focused on ATMs, credit and debit cards and e-cheques while
telephone banking technology focused on interactive Voice response and Internet banking focused on the
Internet and its applications such as websites and e-mail (Namirembe, 2007).

Fig 2 Conceptual Framework relating ICT to the performance of Baking Industry

BANKING OPERATION
ICT ADOPTION Account Opening
Office Automation Enquiry on Account
(Core Banking, Paperless Environment) Withdrawal and deposit
Internet Banking
Fund Transfer
Mobile Banking: (SMS, Agent Banking)
Payment Cards (ATM, POS)

BANKS OVERALL PERFORMANCE

Cost Effectiveness/Profitability
Competitive Advantage
(Customer satisfaction and
attraction)
Quality Service Delivery
Staff Efficiency/Productivity

19
2.5.4 Types of Technological Facilities/Channels in Banking Industry

Technological innovations have been identified to contribute to the distribution channel of banks. The
electronic delivery channels are collectively known as Electronic Banking. Electronic Banking is really not
one technology, but an attempt to merge several different technologies. Each of these evolved in different
ways, but in recent years groups and industries have recognized the importance of working together (Oppong
et. al., 2014). According to Bultum (2014) E-banking can also be defined as a variety of platforms such as
internet banking or online banking, TV-based baking, mobile phone banking, and PC banking

Table 1: Delivery Platform available for Electronic Banking

Types of Service Description

PC Banking (Private Proprietary software, distributed by the bank, is installed by the
Dial Up) customer on their PC. Access to bank via a modem linked directly to the
bank.
Internet Banking Access their bank via Internet.
Managed network The bank makes use of an online service provided by another party.
TV Based The use of satellite or cable to deliver account information to the TV

screen of the customer (Also internet based)

Telephone Banking Customers access their bank via telephone (own personal ID and

password required)
Mobile phone banking Account with text message (SMS), Internet connection (WAP), or high

(SMS, WAP, 3rd speed 3rd generation mobile connection (also Intent based)
generation)
Source: Shaikh, (2014).

20
 Some of the products and service of electronic banking/ICT that are often used via the above
platforms are as follows

Core Banking

In core banking system, banks have a centralized database. There is only one server called HUB.
Easy accessibility of data can be possible because of centralized database, which helps
management information system (MIS) to take quick and accurate decisions (R.K. Uppal, 2008).
Automated Teller Machines (ATMs)
ATM combines a computer terminal, record-keeping system and cash vault in one unit, permitting
customers to enter the bank‟s book keeping system with a plastic card containing a personal
Identification Number (PIN) or by punching a special code number into the computer
terminal linked to the bank‟s computerized records 24 hours a day. Once access is gained, it offers
several retail banking services to customers. ATMs are able to provide a wide range of service,
such as making deposits, funds transfer between two or more accounts and bill payments (Oppong
et. al., 2014).
Point-of-Sale Transfer Terminals (POS)
The system allows consumers to pay for retail purchase with a check card, a new name for debit
card. The money for the purchase is transferred immediately from account of debit card
holder/customer to the store‟s/merchant‟s account at purchase point (Bultum, 2014).
Telephone Banking
Telebanking (Telephone Banking) can be considered as a form of remote or virtual banking,
which is essentially the delivery of branch financial services via telecommunication devices where
the bank customers can perform retail banking transactions by dialing a touch-tone telephone or
mobile communication unit, which is connected to an automated system of the bank by utilizing
automated voice response (AVR) technology (Oppong et. al., 2014).
Mobile Banking
Mobile banking is a service that enables customers to conduct some banking services such as
account inquiry and fund transfer, by using of short text message (SMS) (Bultum, 2014).

21
Personal Computer Banking
PC-Banking is a service which allows the bank‟s customers to access information about their
accounts via a proprietary network, usually with the help of proprietary software installed on their
personal computer. Once access is gained, the customer can perform a lot of retail banking
functions (Oppong et. al., 2014).
Internet banking The idea of internet banking is to give customers access to their bank accounts
via a web site and to enable them to enact certain transactions on their accounts, given compliance
with stringent security checks. It is used to provide traditional banking service over the internet
(Oppong et. al., 2014).

2.5.5 ICT and Ethiopian Private Banking Industry

Telecommunication was introduced in Ethiopia in 1894. Despite the very early introduction,
Ethiopia has one of the most underdeveloped information and communication technology
infrastructures on the continent (GISW, 2008). The sole provider of ICT service of the country,
Ethiopian Telecommunication Corporation, newly called Ethio-telecom, has received a monopoly
license from the regulator, the Ethiopian Telecommunication Agency (ETA) for efficiency and
quality service requirement and infrastructure expansion targets (Adam, 2007). According to GTP
2004 report, in 2010/2011 fiscal year the number of mobile subscription reached 17.26 million
while the number of fixed line subscription reached 0.805 million. Similarly internet subscription
including mobile internet for the same fiscal year reached 2.661 million.
The rapidly growing information and communication technology is knocking the front door of
every organization in the world, where Ethiopian banks would not be exceptional. In the face of
rapid expansion of electronic payment system throughout the developed and developing world,
Ethiopian‟s financial sector cannot remain an exception in expanding the use of the system
(Worku, 2010). Still, the adoption and implementation stage of ICT is one of the most
distinguishing development criteria of developing and developed countries.
In Ethiopia cash is still the most dominant medium of exchange, and electronic payment systems
are at an embryonic stage (Worku, 2010). Bultum (2014) concurred that the development of E-
Commerce, adoption and diffusion of E-banking system is not well developed in Ethiopia. All
banks in Ethiopia are too late to move with technological advancement and they should clearly
chart out the time schedule for their integration and technological advancement. Even though

22
currently there are three government and sixteen private banks in the Ethiopian banking industry,
the modern e-banking services like ATMs, Payment cards, Tele banking, Internet banking, Mobile
Banking and other are new to the industry.
According to Bultum (2014) Commercial Bank of Ethiopia (CBE) was the first to introduce ATMs
to deliver the service to local users. In addition to eight ATM located in Addis Ababa,

CBE has had visa membership since November 14, 2005. However, due to lack of appropriate
infrastructure it failed to reap the fruit of its membership. Worku (2010) Dashen Bank, a forerunner
in introducing E-bank in the Ethiopian private banks industry, has launched ATM service for its
customers in 2006. Harnessing its leadership with advanced banking technology, Dashen Bank
signed an agreement with iVery, a South African E-payment technology company, for the
introduction of mobile banking in April 21, 2009. The agreement signed by three private banks,
Awash International Bank, United Bank and Nib International Bank, to launch ATM and POS
terminal network together in 2009 has also been another pointing event for development of E-
banking in the industry (Bultum, 2014). It also introduced inter-connectivity between banks for the
first time.
According to NBE report as of June 2014 there were 884 ATM machines in the country, among
which only seven private banks have been able to distribute 451 ATM machines in the industry.
Features of E-banking services rendered by Ethiopian banks are presented as follows:

Table 2: Features of E-Banking services rendered by Ethiopian Banks

Electronic Banking Features of Services Rendered

Service
1. Personal Profile Administration
2. Balance Enquiry
3. View daily transaction register
4. Ability to link accounts together so that transfer can be
Internet Banking completed from one account to another
5. Customer service enquiry and resolution within seconds
6. View check issuance status through the register
7. Password change and management features

23
 8. Intrusion detection capability

1. All customers will receive an ATM Card and personal

identification number.
ATM Banking 2. The ATM allows you to receive cash at your convenience.
It also allows you to check your balance, make transfer and
deposit
cash.
1. Authentication and verification
2. Check daily, weekly or monthly balance
3. Interactively receive account balance

SMS Banking 4. Produce a mini statement on your mobile

5. Receive alerts and notification on:

Low balance
Deposit and withdrawal
Transfer of funds from your account or into your account
1. Secure delegated 24 hours service
2. Authentication and verification
Call Center Banking 3. Balance enquiry
4. View daily transaction register
5. Customer service enquiry and resolution
6. Request online statement

Source: Shaikh (2014).

24
2.6 Hypothesis
Based on the literature review and conceptual framework, the following hypotheses are proposed:
H1: The adoption of ICT has a positive impact on the operational efficiency of Ethiopian private
banks.
H2: The adoption of ICT has a positive impact on the customer satisfaction of Ethiopian private
banks.
H3: The adoption of ICT has a positive impact on the employees' productivity of Ethiopian private
banks.
H4: The operational efficiency, customer satisfaction, and employees' productivity of Ethiopian
private banks mediate the relationship between ICT adoption and financial performance.

2.7 Theoretical Frameworks

Measuring Customer Satisfaction This study employs the Technology Acceptance Model (TAM)
as the theoretical framework, which posits that an individual's actual use of a technology is mainly
determined by their attitude towards the technology. The study will measure customer satisfaction
using the Service Quality (SERVQUAL) model, which assesses customer satisfaction based on five
dimensions, including reliability, responsiveness, assurance, empathy, and tangibles.

2.7.1 Resource-Based View (RBV)

The RBV provides a framework for understanding how firms can use their internal resources to
gain a competitive advantage (Barney, 1991). According to the RBV, a firm's resources can be
tangible or intangible and can include assets, competencies, organizational processes, and
knowledge. ICT can be viewed as a resource that private banks can use to improve their
competitive advantage. ICT investments can lead to cost savings and increased efficiency, which
can result in higher profitability and better customer service (Tan & Teo, 2000).

2.7.2 Technology Acceptance Model (TAM)

The TAM is a widely used model for understanding how end-users adopt new technology (Davis,
1989). The model suggests that perceived usefulness and perceived ease of use are key

25
determinants of user acceptance of new technology. Private banks can use the TAM to understand
how their employees and customers perceive their ICT investments.

2.8 ICT and Private Bank Performance

Numerous studies have examined the impact of ICT on private bank performance. These studies
have mainly focused on the effects of various ICT applications on profitability, operational
efficiency, customer satisfaction, and risk management.
Tadesse (2017) conducted a study on the effects of ICT on the performance of Ethiopian private
banks. The study used data from five private banks and found that ICT investments had a
significant positive impact on bank profitability. The study also found that the use of Automated
Teller Machines (ATMs) positively affected bank performance.
In a study on the impact of ICT on bank performance in Nigeria, Ige and Fagbemi (2011) found
that ICT investments had a significant positive impact on bank efficiency, as measured by total
assets and deposits.
Another study by Wu and Wang (2010) examined the impact of customer relationship management
(CRM) technology on bank performance. The study found that CRM implementation led to
significant improvements in customer satisfaction and loyalty, resulting in better financial
performance for the bank.
In Ethiopia, private banks face challenges related to the limited availability of skilled ICT
personnel and regulatory compliance. According to a study by Asmare and Gebremariam (2018),
these challenges can hinder the implementation and adoption of ICT, which can negatively affect
bank performance.

2.9 Factors Affecting Implementation of ICT in Private Banks

Organizational culture can have a significant influence on the adoption of new technology in
private banks. According to a study by Al-Hawari, Kam, and Ab-Rahman (2015), a customer-
centric culture is essential for successful ICT implementation in banks. Banks that prioritize
customer needs and use ICT to improve customer service can experience higher levels of
performance.
Regulatory compliance can also affect the implementation of ICT in private banks. According to a
study by Deloitte (2018), regulatory compliance can be a barrier to ICT adoption. Banks must

26
comply with numerous regulations, which can be complex and time-consuming. Failure to comply
can result in fines and reputation damage.
Finally, the availability of skilled ICT personnel is another significant factor that can affect the
implementation of ICT in private banks. According to a study by Asmare and Gebremariam
(2018), the shortage of skilled IT professionals in Ethiopia can hinder the implementation of ICT in
private banks.
This chapter has provided an overview of the existing literature on the effect of ICT on private
bank performance, specifically in the Ethiopian context. The chapter has discussed the theoretical
frameworks that provide a basis for analyzing the impact of ICT on private bank performance,
including the RBV and the TAM. The review has further explored the potential factors that can
affect the implementation of ICT in private banks, such as organizational culture, regulatory
compliance, and the availability of skilled ICT personnel. The next chapter will provide details on
the methodology used in this study.

27
 Chapter Three: Research Methodology

3.1 Introduction
This chapter outlines the research methodology that will be used in this study aimed at
investigating the effects of information and communication technology on Ethiopian private
banks’ performance, with the case of two selected Ethiopian private banks. The chapter
begins with an overview of the research design, approach, sampling design, sample size
determination, data collection method, and data analysis method. Additionally, it provides
an overview of the limitations of this study, ethical considerations, and a summary of the
chapter.

3.2 Research Design

This study will employ a case study design. The case study design is useful in examining
specific phenomena or situations in their natural context. This strategy will allow the
researcher to understand the impacts of information and communication technology on
the performance of the selected private banks, as well as the factors that facilitate or
hinder the use of ICT

3.3 Research Approach

This study will adopt a qualitative research approach. A qualitative approach is
appropriate since the research will gather data from interviews, focus group discussions,
and document analysis, allowing for an in-depth examination of the research problem.

3.4 Sampling Design

3.4.1 Population, Sampling Unit, and Sampling Frame

The population of this study will be the private banks in Ethiopia that have implemented
online banking services. The sampling unit will be the two selected private banks, while
the sampling frame will consist of a list of all private banks in Ethiopia that offer online
banking services

28
3.4.2 Method of Sampling

This study will use purposive sampling. Purposive sampling is useful in selecting the
most relevant and informative cases for the research. The two private banks will be
selected based on their reputation in the Ethiopian banking industry and their level of
adoption and use of information and communication technology. This research will use a
purposive sampling technique to select two private banks in Ethiopia based on the
following criteria: (i) having been in operation for at least five years; (ii) having a
significant market share; (iii) being actively using ICT in their operations. The selection
of the two private banks will ensure that there is a wide range of variation in the level of
ICT usage and the extent to which it affects their performance.

3.4.3 Sampling Procedure

The researcher will first obtain a list of private banks in Ethiopia that offer online banking
services. The two banks will be selected based on their reputation in the Ethiopian
banking industry and their level of adoption and use of information and communication
technology. The researcher will first identify all private banks in Ethiopia and then
randomly select two banks that meet the eligibility criteria. An initial contact will be
made with the management of the two selected banks to explain the purpose of the
research and request their participation.and the research will involve face to face
interviews

3.4.4 Sample Size Determination

The sample size for this study is two private banks, which were purposively selected
based on the selection criteria specified above. The sample size is small because of the
nature of the study, which is a case study. The two selected private banks are expected to
provide rich and detailed data on the effects of ICT on private banks' performance in
Ethiopia. Generally Qualitative studies typically use small samples to ensure in-depth
analysis. In line with this approach, the researcher will select two private banks for this
study.

29
3.5. Data type and sources
The data used in this research will be both qualitative and quantitative. Qualitative data
will be used to capture deeper insights into how ICT affects private banks’ performance.
The quantitative data will measure the impact of ICT on the private banking industry
using various key performance indicators (KPIs).

The sources of data for this study will include:

Primary data: Data will be collected through interviews with bank management, ICT
staff, and employees working with ICT systems in the selected private banks. In
addition, a survey will be administered to both bank employees and customers to
obtain their perceptions of the impact of ICT on private banks.

Secondary data: Other sources of data will include literature on the use of ICT in
banking, the annual reports of selected private banks, and publicly available data on
private banking activities.

3.6. Research Instrument and Measurements

Research Instrument:

The research instrument for this study will include a semi-structured questionnaire, which
will be administered to employees and customers of the selected private banks. The
questionnaire will be divided into two main sections. The first section will collect
demographic information, while the second section will focus on ICT usage and the
impact of ICT on private bank performance. The questionnaire will consist of four
sections:

Section 1: Demographic Information - This section will capture basic information about
respondents such as age, gender, education, job position, and years of experience.

Section 2: ICT Adoption - This section will measure the extent of ICT adoption by
private banks in Ethiopia. The questions in this section will focus on the types of ICT that
are currently used by the banks, the degree of integration of ICT into the banks'
operations, and the level of investment in ICT.

30
 Section 3: Bank Performance - This section will measure the performance of private
banks in Ethiopia. The questions in this section will focus on financial performance
indicators such as return on assets, return on equity, asset quality, liquidity, and
efficiency.

Section 4: Impact of ICT on Private Bank Performance - This section will examine
the impact of ICT on private bank performance in Ethiopia. The questions in this
section will focus on the relationship between ICT adoption and financial
performance indicators.

The measurements used in this study will be based on the Key Performance Indicators
(KPIs) used in the banking industry. The KPIs used in this study will include
profitability, efficiency, customer satisfaction, and innovation

3.7. Methods of data collection

Data will be collected using various methods, including:

1, Semi-structured interviews: The interviews will be conducted with management

and employees of the selected private banks. The interviews will be used to collect
qualitative data on how ICT affects the selected private banks’ performance.

2, Questionnaires: The questionnaires will be used to collect quantitative data from

employees and customers of the selected private banks. The data collected will be
used to measure the impact of ICT on private bank performance.

3, Secondary data: Data will be collected from various sources, including annual
reports and publicly available data.

3.8 Method of data analysis

The data collected from the questionnaires and interviews will be analyzed using
Statistical Package for Social Sciences (SPSS) statistical software. Descriptive
statistics will be used to summarize the data collected, and inferential statistics will be
used to test the hypotheses developed in this study. The qualitative data collected
from the interviews will be analyzed using content analysis. Content analysis will be
used to identify common themes and patterns in the data collected

31
3.9 Validity and reliability (Pretest/ Pilot Test)
Before the actual data collection a pretest or pilot test will be conducted to test the
research instrument and procedure to ensure their effectiveness and accuracy.
To ensure the validity and reliability of the research instrument, a pretest or pilot test will
be conducted with a small sample of employees and customers. The feedback obtained
from the pretest will be used to refine the questionnaire to ensure that it is valid and
reliable.

3.10 Ethical Considerations

The study will adhere to ethical principles and guidelines throughout the research
process. The privacy and confidentiality of the participants will be respected, and the data
collected will be used solely for research purposes. Participants will be required to sign
consent forms before their data is collected.the study will comply with ethical guidelines
set by the university's research board The study will also seek approval from the ethical
review committee of the respective universities.

3.11 Summary

This chapter outlined the research methodology that will be used in this study, including
the research design, approach, sampling design, sample size determination, data
collection, and data analysis methods. Additionally, Validity and reliability and ethical
considerations were discussed.

32
 Chapter 4

Budjet plan and time schedule

Time schedule
I believe the duration of the study will cover about seven months ranging from
January 2015(E.C) to August 2015(E.C) we break down the time by scheduling
the beginning of the research to the end of research.

No Activities Duration of time

Jan Febr Ma A May Jun July Augest

uar uary rch pr e
y il
1 Thesis Title
Submission 
2 Thesis Title
Approval & 

3 Proposal 
Writing 
4 Data 
Collection
Period
5 Analyzing   
data
6 Finalizing and  
writing paper
7 First Draft 
Submission
8 Presentation 

9 Submission 
of Final Draft

33
Budget plan
As I calculated for the overall financial cost of research is described in the
following table.
No Item Unit Quantity Unit price Total price

1 Research 1 1500 1500

Assistants r

3 Travel and 5 50 250

Accommodation
4 Data Collection Per page 260 2 520
(Printing,
Stationary, etc.)y
6 Data Analysis 10000
Software
7 Internet Per minute 6000 0.15 900

8 Miscellaneous 500

Total cost 13670

 Note: All activities will be completed within the

budgeted cost, and deadlines may be adjusted as needed
with advisor approval.

34
References

Aitken, J., & Learmonth, M. (2013). The effects of information and

communication technology on the performance of UK banks: A review.
Journal of financial services research, 44(1), 81-99.

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of

management, 17(1), 99-120.

Bryman, A., & Bell, E. (2015). Business research methods. Oxford University Press,
USA.

Dziri, A. (2018). The impact of information technology on banks' performance in

Tunisia. Information & Management, 55(1), 64-74.

Gefen, D., & Straub, D. (2004). Consumer trust in B2C e-Commerce and the
importance of social presence: experiments in e-Products and e-Services.
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Hernández, J. M., Martínez, J. I., & Psomas, E. L. (2014). Information

technology and business performance: The role of intermediate
inputs. International Journal of Production Economics, 156, 284-297.

International Finance Corporation. (2015). Ethiopia: Private sector snapshot.

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+Snapshot+-+Ethiopia+August+2015.pdf?MOD=AJPERES

Moore, G. (2015). Crossing the chasm: Marketing and selling high-tech products to
mainstream customers. Harper Collins.

Nyangena, W., & Mowo, G. (2017). The impact of information and

communication technology on performance of banks in Kenya. International
Journal of Economics, Commerce and Management, 5(3), 110-123.

Pilinkiene, V., & Gaspareniene, L. (2015). The impact of information technology

on the organizational performance: Case of Lithuanian SMEs. Procedia-Social
and Behavioral Sciences, 213, 1007-1012.
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country-partnership-framework-cpf-2018-2021
Tewdros Sisay Asefa, 2011, E-Business: Application of Software and technology
in selected Ethiopian Banks: Issues and Challenges, International Journal of
Computer Science Issues, Vol. 8, Issue6 No. 1.

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Empirical Study on Ethiopia Private Commercial Banks, Msc Thesis,
AAu

35
Appendix
Dear Respondents,
This questionnaire is designed to gather information about the Effect of Information and
Communication Technology on customers‟ satisfaction and the challenges thereon in Ethiopian
private banks. All responses will be used to conduct a study for the partial fulfillment of
Executive Masters Thesis in Business Administration. I would like to assure you that you will be
guaranteed anonymity as I do not ask your name here and your responses will not be used for
any other purposes other than the intended purpose. Besides, this survey should only take about
10 minutes of your time. I am grateful for your cooperation in advance!
N.B Please put a “√” mark to all your responses in the circle provided beside each statement.
If you do not use, at least, any one of Technology-based services/products of the bank, please
do not fill out the questionnaire.
I. Demographic information
1. Age (years old)

□ 18 or below □ 19~28 □ 29~38 □ 39 or above

2. Marital Status

□ Single □ Married □ Divorce □ Separated □ Widowed

3. Education background

□ High school diploma or below □ Junior college diploma □ Undergraduate degree

(Bachelor‟s degree) □ Graduate degree (Master‟s degree) or above

4. Gender

□ Male □ Female
5. Occupation

□ Business (enterprise) managerial and technical personnel

□ Government officer □ Professional (science and education, cultural, health)

36
□ Student □ Self-employed □ Unemployed □ Others

6. Which of the Technology-based services/products of the bank do you use?

□ ATM □ Mobile Banking □ Internet Banking □ SMS Alert □

Phone Banking □ Electronic Fund Transfer

7. Length of Technology-based services/products use:

□ Less than 1 year □ 1-2 years □ 2 years and above

II. This part of questionnaire covers about customer satisfaction in relation with Technology-
based services/products provided by this bank. Technology-based banking services/products
include: connectivity of branches over the internet, ATM, POS, Mobile banking, Internet
Banking, SMS banking and electronic fund transfer. Please indicate how much you agree or
disagree with each of the following statements by circling the number that best represents your
opinion. 1 indicates strongly disagree (SDA), 2 indicates disagree (DA), 3 indicates neutral (N),
4 indicates agree (A) and 5 indicates strongly agree (SA).

37
S.No. Research Question SDA DA N A SA

A. Factors Affecting Customer satisfaction

1. This bank provides most of Technology-based services/products 1 2 3 4 5
and the services are almost always available.

2. The Technology-based services/products provided by this bank 1 2 3 4 5

work accurately and are error-free and reliable.

3. The Technology-based services/products allow me to complete

transactions quickly and save me a lot of time, especially when I am 1 2 3 4 5
pressed for time.

4. I feel the Technology-based services/products provided by this 1 2 3 4 5

bank are safe and the risk associated with them is low.

5. The Technology-based services/products provide precise and

sufficient information I need (account statement and balance 1 2 3 4 5
enquiry).

6. The Technology-based services/products provided by this bank 1 2 3 4 5

are easy to use and user-friendly.

7. The Technology-based services/products minimize 1 2 3 4 5

inconvenience by providing anywhere and anytime banking
(banking at home/office at 24/7).

8. The charges associated with Technology-based services/products 1 2 3 4 5

are reasonably fair and minimize the transaction cost of banking.

9. When I contact this bank’s customer service via e-mail, phone, 1 2 3 4 5

interactive website and fax, my requests are always anticipated
properly and always answered promptly.

10. This bank resolves my complaints quickly and offers a fair 1 2 3 4 5

compensation for its mistakes.

38
B. Overall Customer satisfaction

1. Overall, I am satisfied with the bank Technology-based services. 1 2 3 4 5

2. I say positive things about the bank to other people. 1 2 3 4 5

3. I will encourage friends and relatives to use the service offered

1 2 3 4 5
by the bank.

III. This part of the questionnaire covers about challenges which discourage customers to use
Technology-based services/products of the bank frequently or at all. Please indicate how much the
following challenges affect the customers’ decision to use Technology-based services/products
by circling the number that best represents your opinion. 1 indicates Not at all affecting (NA), 2
indicates somewhat affecting (A), 3 indicates Strongly Affecting (SA).

S.No. Challenges NA A SA

1. Lack of confidence with the security on Technology-based 1 2 3

services/products.

2. Customers do not trust the Technology-based 1 2 3

services/products provided by the bank

3. Using the Technology-based services/products of the bank is

1 2 3
expensive.

4. Customers are not familiar with the Technology-based 1 2 3

services/products of the bank.

5. Lack of sufficient technical and managerial support of the bank. 1 2 3

39
6. The bank is not fast to respond/rectify when transactional
errors occur (like: when ATM jammed payment cards or 1 2 3
customers’ accounts deducted without being paid the full or part
of the amount).

7. Lack of available Information and Communication technology 1 2 3

infrastructure (access to internet, mobile phone and computers).

8. Mobile and Internet are not connected well every time due to 1 2 3
network problem.

9. The system doesn’t work efficiently every time we need it, as 1 2 3

the bank promised.

10. Customers may prefer branch service to Technology-based 1 2 3

services/products.

Thank you.

40
 QUESTIONNAIRE
Dear Respondents,
This questionnaire is designed to gather information about the effect of Information and
Communication Technology on employees‟ performance. All responses will be used to conduct
a study for the partial fulfillment of Executive Masters Thesis in Business Administration. I
would like to assure you that you will be guaranteed anonymity as I do not ask your name here
and your responses will not be used for any other purposes other than the intended purpose.
Besides, this survey should only take about 10 minutes of your time. I am grateful for your
cooperation in advance!
N.B Please put a “√” mark to all your responses in the circle provided beside each statement .
I. Demographic information
1. Gender

□ Male □ Female
2. Age (years old)

□ 18 or below □ 19~28 □ 29~38 □ 39 or above

3. Marital Status

□ Single □ Married  Divorce □ Separated □ Widowed

4. Education background

□ High school diploma or below □ Junior college diploma □ Undergraduate degree

(Bachelor‟s degree) □ Graduate degree (Master‟s degree) or above

5. Position

□ Non-Managerial Post □ Managerial Post

6. Work Experience

□ Less than 3 year □ 3-5 years □ 5 years and above

II. This part of questionnaire covers about employees’ performance/staff productivity in

relation to adoption of Information and Communication Technology in bank’s day-to-day

41
operation. Please indicate how much you agree or disagree with each of the
following statements by circling the number that best represents your opinion. 1
indicates strongly disagree (SDA), 2 indicates disagree (DA), 3 indicates neutral
(N), 4 indicates agree (A) and 5 indicates strongly agree (SA).

S.No. Research Question SDA DA N A SA

1. Information and Communication Technology helps employees 1 2 3 4 5

to achieve a larger number of tasks.
2. Information and Communication Technology helps to lesson 1 2 3 4 5
workload of employees.
3. Information and Communication Technology helps employees
1 2 3 4 5
to deliver output timely.

4 Information and Communication Technology helps employees

1 2 3 4 5
to reduce errors.

5. Information and Communication Technology helps employees 1 2 3 4 5

to perform their work within the required specifications.

6. Information and Communication Technology helps employees 1 2 3 4 5

to improve work continuously.
7. Information and Communication Technology helps employees 1 2 3 4 5
to deliver consistent output even in high work pressure.
8. Information and Communication Technology helps employees
1 2 3 4 5
to improve their effort to learn more and apply new knowledge.

9. Information and Communication Technology helps to achieve 1 2 3 4 5

greater flexibility in work.
Overall Employees Performance
1. Overall, Information and Communication Technology enhance
1 2 3 4 5
performance of bank employees.
2. Information and Communication Technology has made work
1 2 3 4 5
easier and interesting.
3. Information and Communication Technology improve
effectiveness of communication flow (via internet or intranet) 1 2 3 4 5
and decision making process.
Thank you

42