.

ST. MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

FACTORS AFFECTING ADOPTION OF INTEREST FREE

BANKING AT UNITED BANK S.C

BY

BISIRAT BEKELE

JUNE, 2018
ADDIS ABABA, ETHIOPIA

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FACTORS AFFECTING ADOPTION OF INTEREST FREE

BANKING AT UNITED BANK S.C

BY

BISIRAT BEKELE

A THESIS SUBMITTED TO ST. MARY UNIVERSITY, SCHOOL OF

GRADUATE STUDIES IN PARTIAL FULFILMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTERS OF
BUSINESS ADMINISTRATION

JUNE, 2018
ADDIS ABABA, ETHIOPIA

1
 ST MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES FACULTY OF BUSINESS

FACTORS AFFECTING ADOPTION OF INTEREST FREE

BANKING AT UNITED BANK S.C

BY

BISIRAT BEKELE

APPROVED BY BOARD OF EXAMINERS

_______________________ ________________________

Dean, Graduate Studies Signature

________________________ _________________________

Advisor Signature
_______________________ __________________________

External Examiner Signature

________________________ ___________________________

Internal Examiner Signature

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 DEDICATION

This thesis is dedicated to my family and friends for their encouragement and
continuous support throughout MBA program and especially during this research
study.

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 DECLARATION

I declare that the submitted thesis on the title, “Factors Affecting Adoption of Interest Free
Banking at United Bank S.C”, is my original work and that all sources that have been referred to
and quoted have been dully indicated and acknowledged with complete references.

Bisirat Bekele _____________________

Name Signature
St. Mary’s University , Addis Ababa June, 2018

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 ENDORSEMENT

This is to certify that Bisirat Bekele Dubale has carried out his research work on
the topic entitled " Factors affecting adoption of interest free banking at united
bank S.C” under my supervision. This work is original in nature and it is sufficient
for submission for the partial fulfilment for the award of masters of business
administration degree.

Mohammed Mohammednur (Asst.Professor) ____________________

Advisor Signature

St. Mary’s University , Addis Ababa June, 2018

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 TABLE OF CONTENTS

Table of Contents ............................................................................................................................. i

Acknowledgments............................................................................................................................v

List of Acronyms/Abbreviations.................................................................................................... vi

List of Tables ................................................................................................................................ vii

List of Figures .............................................................................................................................. viii

Abstract .......................................................................................................................................... ix

CHAPTER ONE: INTRODUCTION ....................................................................................... 1

1.1. Background of the Study ..........................................................................................................1

1.1.1. Establishment of United Bank S.C. .............................................................................. 4

1.2. Statement of the Problem .........................................................................................................5

1.3. Research Questions ..................................................................................................................7

1.4. Objectives of the study..............................................................................................................7

1.4.1. General Objective .......................................................................................................... 7

1.4.2. Specific Objectives ........................................................................................................ 7

1.5. Limitations of the study ............................................................................................................8

1.6. Significance of the study...........................................................................................................8

1.7. Scope of the study .....................................................................................................................8

1.8. Definition of Basic Terms .........................................................................................................8

1.9. Organization of the study ..........................................................................................................9

CHAPTER TWO: REVIEW OF RELATED LITERATURE ....................................................10

2.1. Theoretical Background ..........................................................................................................10

2.1.1 Basic Concepts and definition of Interest free banking ................................................ 10

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 2.1.2 Principles of IFB ........................................................................................................... 10

2.1.3 Major Interest Free Banking Products .......................................................................... 11

2.1.4 Islamic Banking Deposit Products ............................................................................... 12

2.2 Restricted Investment Deposit (Restricted Mudaraba) ............................................................12

2.2.1 Wadiah (Safekeeping) Deposit ..................................................................................... 12

2.2.2 Demand Deposit (Amana Current Accounts) ............................................................... 13

2.2.3 Islamic Banking Financing Products ............................................................................ 13

2.2.4 Mudaraba (Silent Partnership) ..................................................................................... 13

2.2.5 Murabaha (Cost-Plus Sales Contract)........................................................................... 14

2.2.6 Ijara (Lease) ................................................................................................................. 14

2.2.7 Musharaka (Equity Partnership) ................................................................................... 14

2.2.8 Salam (Forward Trade Contract) .................................................................................. 15

2.2.9 Istisna (contract of manufacture) .................................................................................. 15

2.3. Religion and adoption of Islamic banking ..............................................................................15

2.3.1. Factors affecting Adoption of IFB............................................................................... 16

2.3.1.1 Shariah Compliance ........................................................................................... 16

2.3.1.2. Awareness of the service and Adoption of IFB ............................................... 17
2.3.1.3. Perceived Relative Advantage .......................................................................... 17
2.3.1.4 Accessibility of IFB services in all branches .........................................................18

2.4. The Need for Islamic Banking in Ethiopia .............................................................................18

2.5. Empirical Review...................................................................................................................20

2.6. Conceptual Frame work ..........................................................................................................22

CHAPTER THREE: METHODOLOGY OF THE STUDY ......................................................25

3.1 Research Design.......................................................................................................................25

3.2 Research Approach ..................................................................................................................25

3.3 Population of study ..................................................................................................................25

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3.4 Sample Size Determination......................................................................................................26

3.5 Sampling Techniques ...............................................................................................................28

3.6 Sources of Data ........................................................................................................................28

3.7 Method of Data Collection.......................................................................................................29

3.8 Procedure of Data Collection ...................................................................................................29

3.9 Data Analysis Techniques........................................................................................................29

3.10 Reliability and Validity ..........................................................................................................30

3.10.1 Reliability ................................................................................................................... 30

3.10.2 Validity ....................................................................................................................... 30

3.11 Ethical Considerations ...........................................................................................................30

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION .........................................31

4.1 Descriptive Response Rate .....................................................................................................31

4.2 Demography of Respondents ...................................................................................................33

4.2.1 Gender and Age of Respondents .................................................................................. 33

4.2.2 Employment Type and Income Level of Respondents ................................................. 33

4.3. Descriptive Statistics Analysis of Factors Affecting Adoption of Interest Free Banking ......34

4.3.1. Sharia Compliance ....................................................................................................... 34

4.3.2. Customers Awareness Regarding Products and Service ............................................. 36

4.3.3. Advertisement about products and services ................................................................ 38

4.3.4. Perceived relative advantage of the service ................................................................. 39

4.3.5. Accessibility of the IFB services in all branches of the bank ...................................... 41

4.4. Descriptive Summary of Each variable influences .................................................................42

4.5 Correlation Analysis ..............................................................................................................43

4.6 Regression Analysis .................................................................................................................45

4.7 Common Assumption Test ......................................................................................................45

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 4.7.1 Multicolinearity Test .................................................................................................... 45

4.7.2 Linearity Test ................................................................................................................ 47

4.7.3 Normality Test .............................................................................................................. 48

4.7.4 Autocorrelation/Durbin Watson Test ........................................................................... 48

4.8. ANOVA Model Fit ..............................................................................................................49

4.9. Model Summary....................................................................................................................50

4.10 Beta Coefficients ...................................................................................................................51

4.11 Hypothesis Test Result .........................................................................................................53

CHAPTER FIVE: FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ...................55

5.1 Summary of Major Findings ....................................................................................................55

5.2 Conclusions ..............................................................................................................................57

5.3 Recommendations ....................................................................................................................58

REFERENCES

APPENDICES

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 ACKNOWLEDGMENTS

First of all I thank God for giving me the courage to start and finalize this thesis. Second I am so
grateful for the understanding and all rounded support extended by my wife, Wro. Hirut Alemu,
and my children. Third, I am also thankful for my colleagues at United Bank S.C for their
support. Last but not the least; I acknowledge the assistance and valuable comments provided by
my advisor, Asst. Prof. Mohammed Mohmmednur to make this project a reality.

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List of Acronyms/Abbreviations

IFB Interest Free Banking

IFBW Interest Free Banking Window

IBS Islamic Banking Service

NBE National Bank of Ethiopia

SPSS Statistical Package For Social Science

VIF Variance inflation factor

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 List of Tables

Table 3 1 Table for determining sample size of a Known population .........................................27

Table 3. 2 Composition of sample from each branch ....................................................................28

Table 4 1 Demographic characteristics ..........................................................................................32

Table 4.2 Description of response on Shariah compliance ............................................................35

Table 4.3 Customer awareness regarding interest free banking service ........................................37

Table 4.4 Level of advertisement influence on customer‟s awareness ..........................................39

Table 4.5 Level of Perceived relative advantage of the service .................................................40

Table 4.6 Level of Accessibility of the IFB services in all branches of the bank .........................41

Table 4.7 Descriptive Summary of Each variable influences .......................................................42

Table 4. 8 Correlations Result of Variables ...................................................................................44

Table 4.9 Multicollinearity test statistics .......................................................................................46

Table 4. 10 ANOVA ......................................................................................................................49

Table 4 .11 Model Summary ........................................................................................................50

Table 4. 12 Beta Coefficients........................................................................................................51

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 List of Figures

Figure 1 Conceptual Framework of the Study , Akhtar, Mehmood Akhtar (2016)............. 23

Figure 2. Normal P-P plot of Regression of Adoption of IFB (Linearity Test)....................47

Figure 3. Normal P-P Plot of Adoption of IFB (Normality test) ..........................................48

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 Abstract
The objective of this study was to investigate the major factors that affect adoption of interest
free banking at united bank S.C. Addis Ababa. This study has analyzed the effect of Shariah
compliance, awareness, advertisement, perceived relative advantage and accessibility of the
service on adoption of interest free banking intensity. Descriptive and Explanatory (cause effect
relationship) research design was used. Both qualitative and quantitative research approach
were applied in this particular study. The target populations of the study were 8000 IFB
customers of eight branches in Addis Ababa and the total sample size of this study were 367
customers of United bank Share company. Convenience sampling techniques was applied.
Primary and secondary data were used for this study. Adopted Questionnaires using five point
likert scales were used to collect data from respondents. Both descriptive and inferential
statistics (correlation and regression) analysis were used to analyze the data. The analysis
confirms there were significant positive relationships of sharia compliance, perceived relative
advantages, accessibility of the services, advertisement and awareness of the services with
adoption of interest free banking. These factors are expected to have great role for influencing
customers mind. The findings of the study showed that customers can derive a better
understanding of the activities that are undertaken by bank and how the way these activities are
being dealt with and the mentioned variables have significant positive impact on the attitude
towards interest free banking at United Bank S.C . In conclusions, there are need to work on about
over all mentioned variables, on awareness of interest free banking service. The limitation of this
study was that it has conducted in specific geographical area and could not be generalized.

Key Words: Sheriah compliance, Adoption of Interest Free Banking, Advertisement, Relative
advantages and Accessibility of IFB services.

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 CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Banking is the most important and backbone for every economy and community growth.
Countries with better economic systems tend to grow more rapidly because banks play a basic
economic role as financial intermediaries and as facilitators of payments (Levine, 2000).The
Islamic Bank can be defined as a bank which is applying the banking system that is based on the
principle of Islamic law also known as Shariah and will not involve itself in the transaction
which prohibited by Shariah (Abdullah, Sidek, & Adnan, 2012). The conventional banking
system excludes the Muslim society, not by design, but due to its principle of using interest while
playing its financial intermediary role and its involvement in business that the religion does not
allow to be engaged in due to this reason significant portion of the world population remained
unbanked for centuries. Thus, this has created strong reservations against conventional banking
system from the Muslims side and they demanded banking system that does not contradict with
their religion. Kerima Ali Mohammed,(2016).

In accordance with Article 22(2) of Banking Business Proclamation (BBP) No. 592/2008, the
NBE through the BSD No. SBB/51/2011, authorized the business of IFB under the umbrella of
the CB with limited scope. Interest-free banking business refers to banking business in which
mobilizing or advancing funds undertaken in a manner consistent with Islamic finance principles
and mode of operation that avoids receiving or paying interest, and interest-free banking
window, refers to a unit within a conventional bank exclusively offering interest-free banking
services. The authorization for the licensing of the IFB Business under the umbrella of the CB
with limited scope is thus aimed at addressing two contesting national objectives of two
extremes; optimize economic values of IFB to address the interest of its stakeholder and fill the
gap left by the CB in one hand and constrict its operation under the umbrella of the CB with
limited scope for the time being (Teferi 2015). As per this provision, all commercial banks that
are licensed to engage in the CB are privileged to engage in interest free banking (IFB) business
through Conventional Banking branch offices. The IFB business as per the provision refers to
banking business in which mobilizing or advancing funds is undertaken in a manner consistent

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with Islamic finance principles and mode of operation that avoids receiving or paying interest
and the IFB refers to a unit or window within a conventional bank exclusively offering interest
free banking (Orointbank, 2018).

One of the most emerging trends in the global economies is the idea of Interest free banking and
Finance Ahmad, (2000), that emerged in the global landscape as an alternative banking system
which is in line with values and ethos of Islam, and governed by the principles of Shariah Law
that requires not charge interest and avoid any unethical practices in achieving its goals and
objectives, Gait and Worthington, (2008). This form of interest-free banking has developed over
a long period of time in Egypt in 1963 with the introduction of new products in the industry.
According to Fakhrul-Ahsan (1998) and Usman (2003), the role and functions of Islamic
banking within the banking system in a modern economy are very important, and in fact, it is at
the heart of every robust economy.

The Islamic Bank can be defined as a bank which is applying the banking system that is based on
the principle of Islamic law also known as Shariah and will not involve itself in the transaction
which prohibited by Shariah Abdullah, Sidek, & Adnan, (2012). Islamic banking can be defined
as Shariah-compliant banking” that “provides and use financial services and products that
conform to Islamic religious practices and laws Kettell (2010). The Islamic financial law has
long history but Islamic banking and finance industry has very recent origin and came into
existence in 1963 when Mit-Ghamr saving bank in Egypt experimented the first effort of
establishing Islamic banking system that was unsuccessful attempt due to the inappropriate
marketing and management strategy cited by guluma (Platt, 2008). Modern expansion of Islamic
banking has involves through the process of converting the entire financial intermediation of a
country from a conventional system to a full-fledged Islamic system (Iran and Sudan) and by
establishing Islamic banks to compete with conventional banks (Gusau, 2000).

What differs Interest Free Banking from the conventional banking system is based on a broad
system of ethics and moral values based on Islamic religion principle which avoids receiving or
paying of Interest (Riba), profit/ loss sharing, prohibit financing harmful industry to mankind,
avoid uncertainty, supervised by Shariah Supervisor Board and highly depend on Contractual
Relationship (Masood, 2013), while conventional banks depend on interest, borrowers bear the

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total risk, invest in any visible industry, deals with derivatives, have no such a Shariah board and
depend only creditor-debtor contract relationship. Conventional banks use money as a
commodity which leads to inflation. In Islamic banking the money is linked with the real assets
that directly contribute in the economic development (Institute Bank-Bank Malaysia, 2010).
Interest free banking is a narrow concept denoting a number of banking instruments or
operations, which avoid interest. Islamic banking, the more general term is expected not only to
avoid interest-based transactions, prohibited in the Islamic Shariah, but also to avoid unethical
practices and participate actively in achieving the goals and objectives of an Islamic economy
services (Akmel Hailu, 2015).

After the issuance of the working directive, the NBE granted the IFB service license to the
Oromia International Bank S.C (OIB) on September 16, 2013 enabling the bank to pioneer the
Interest Free Banking in Ethiopia (Meraf, 2013). Interest-free banking in Ethiopia started in
September 2013, when the Oromia International Bank S.C launched the service. The
Commercial Bank of Ethiopia joined the market at the end of October, followed by United bank
S.C, which began providing the service on May 1, 2014 and by now many private banks are
starting IFB services . The introduction of interest-free banking in Ethiopian banking industry is
important for the development of banking services, and in addition to provide options for the
customers. As the documents of oromia international bank (June, 2014) indicates that the
interest-free financial products and services offered under separate windows are Wadiya Amanah
account, Qard account, Mudaraba account, Ba‟i –Salam mode of financing, Istisna mode of
financing, Ijarah mode of financing, Musharakah, Mudarabah, Qard al Hassen and Kafala
Interest free (Islamic) banking and finance witnessed a rapid expansion over the last few decades
and it is still currently expanding (El-Hawari et al., 2004). For Interest free (Islamic) banking to
continue this expansion and succeed in any other setting, it has to be accepted and positively
perceived by the potential customers. The advent of the 1984 banking business proclamation has
made the economy to open up its door for emerging of private banks in Ethiopia, which has
gradually evolved in to an industry characterized by stiffer competitive market. (Elias Endale,
2015).

Factors affecting IFB adoption have been at the forefront of several research works in the
developed and some developing world. Nevertheless, there is very much limited published works

3
that investigate the factors influencing the use of interest-free banking from the viewpoint of
customers in the context of developing countries like Ethiopia. The banking sector in Ethiopia in
general is underdeveloped in terms of its outreach and the range of banking products, the sector
is offering to its customer as compared to the level of development that the global banking is
currently stands (Kerima, 2016).

1.1.1. Establishment of United Bank S.C.

United Bank was incorporated as a Share Company on 10 September 1998 in accordance with
the Commercial Code of Ethiopia of 1960 and the Licensing and Supervision of Banking
Business Proclamation No. 84/1994. The Bank obtained a banking services license from the
National Bank of Ethiopia and is registered with the Trade, Industry and Tourism Bureau of the
Addis Ababa City Administration .Over the years united Bank built itself into a progressive and
modern banking institution, endowed with a strong financial structure and strong management,
as well as a large and ever-increasing customers and correspondent base. Today, United Bank is
a full service Bank that offers its customers a wide range of commercial banking services with a
network of 203 Branches and 19 sub-Branches, and a number of additional outlets on the
pipeline (United bank, 2018).

United Bank's priority in the coming years is to strengthen its capital base, maximizing its return
on equity and benefiting from the latest technology in order to keep abreast with the latest
developments in the local and international financial services industry. Going in line with its
tradition of meeting the needs and expectations of its customers through a service package that
enhance customers‟ convenience, United Bank is pleased to announce the commencement of
Interest Free Banking services in its branches starting May 1, 2014. United received the green
light from the National Bank of Ethiopia to launch the service, after going through the necessary
prerequisites including the preparation of a detailed proposal document incorporating policy
matters, procedures, implementation strategy, risk management and other vital issues that are
believed to be critical to the smooth rendering of the service. The application presented to the
NBE received acceptance corresponding with the details of the directive that allowed banks to
render the service alongside other conventional banking services.

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This new service which will involve mobilizing or advancing funds without receiving or paying
interest will be offered on a separate window of the bank‟s branches targeting individuals,
business companies, unions, co-operatives and non-governmental organizations (NGOs). The
services offered under the interest free banking will include deposits in the form of Wadiah and
Mudharabah, loans and advances using musyarakah, murabahah, Istisnah, Salam and Ijarah
principles, and international trade finance on the base of Wakalah and Kafalah, and many more.
According to the procedures used to govern the services under the scheme, loans that require
interest payment are excluded from the service package replaced by a different financing path,
whereby the finance recipients will enter a profit as well as a risk sharing agreement. In the same
manner, the deposits mobilized in the scheme are independent of the financial deposits of the
parallel conventional banking system (United bank, 2018). Therefore the main focus of this
study is to investigate the gaps that affect the adoption of IFB services at united bank S.C, based
on the impact of independent variables indicated on the above

1.2. Statement of the Problem

Business organizations and especially the banking sector are operating in an environment
characterized by a complex and competitive climate (Agbolade, 2011). In today‟s competitive
world, banks are striving to endure survival, in spite of their vital role playing in the economy. In
addition, to achieve their mission and objectives, they have to understand their customers‟
perceptions demand and the challenges of the time (Dusuki & Abdullah, 2007). The practical
evidence shows that Interest free banking have spreading and rising across the world. Some
factors emerge to be interrelated with the dispersion of IFB, specifically the principles of risk-
sharing that underlie financing, the growth of oil-rich economies, the presence of Muslims in the
population, an enabling legal framework, and economic integration with Middle Eastern
countries or proximity to Islamic financial canter (Alam, 2011). Everywhere there is a
considerable number of Muslim society and is not limited to Muslim countries, the prospect for
Islamic banking to extend in a given country rises with the share of the Muslim population.
Trade with the Middle East and economic stability are also conducive to the diffusion of Islamic
banking (Ibrahim, 2012). Almost half of Ethiopian banking commercial industry out of
seventeen banks has commenced Interest free banking service within less than three years while
some others banks are also showed initiation to commence it (Guluma, 2017).

5
One way of the success of the banking services is measured in terms of providing full-fledged
services like IFB in addition to conventional banking for satisfaction of customers and, to win
the competition and to expand market bases, by identifying and challenging the effects of the
factors that affect the adoption of Interest Free Banking services. Even if there are a lot of
opportunities and, united bank S.C. shows high progress in IFBs in recent years, the experiences
shows that still needs improvement in increasing number of customers, accessibility and
awareness creation on IFB. Some related studies are conducted by different researchers in
different part of the world; there are limited numbers of studies conducted in Ethiopia on the
factors that influence the adoption of IFB in Ethiopia. Among these studies the research
undertaken by Mohamed (2012) under the title of “The Prospects, opportunities and Challenges
of Islamic banking in Ethiopia, shows that lack of awareness, regulatory and supervisory
challenges, institutional challenges, lack of support and link institutions, gap with in research and
development in Islamic studies, lack of qualified human resources as well as wrong full
association with specific religion and the global terrorism. The study conducted by Debebe
(2015) by the title of factors affecting customers to use interest free banking is concerned with
examining the willingness of the customers to use IFB. The outcome of this study shows, the
impact assessment on the attitude towards of IFB usage which doesn‟t address the current
problems that very few customers are using interest free banking services relative to the expected
total population.

The study undertaken by Teferi (2015), the contribution of IFB to economic development of
Ethiopia shows the general Macro level effect of IFB, so it doesn‟t show the specific problem of
the bank. The research conducted by Kerima (2016), on Challenges of interest free banking
service in Ethiopia has done based on the government bank (CBE) ,that differ from private bank
,so it has the gap to show the factor affecting adoption of IFB. Guluma (2017) studied on factors
influencing customers behavioural intention to adopt IFB in Ethiopia, is implies general concept
of behavioural study, so it has the gap to show the specific practical factors that affect IFB
adoption.

Therefore due to no further study specifically conducted on IFBW of United bank S.C ,the
researcher is motivated to conduct a study on the title of factors affecting adoption of IFB
services at United bank S.C as a case study, in doing so ,the variables of Sharia compliance

6
,awareness regarding product and services, effect of advertisement, perceived relative advantage
of the IFB service, and the effect of accessibility of the IFB services in all branches of the
united bank S.C were considered as leading variables. Therefore this study tries to assess the
Factors affecting the adoption of interest free banking services at united bank S.C based on the
appropriate measurements using empirical evidences.

1.3. Research Questions

Based on the above problem statement this study is conducted to answer the following questions:
 What is the effect of Shariah compliance on the adoption of IFB?
 Does awareness of the service affect the adoption of IFB?
 To what extent advertisement affect adoption of IFB?
 Is there any perceived relative advantage of the adoption of IFB?
 To what extent IFB is accessible in all branches of the bank?
 Does accessibility has effect on the adoption of IFB?

1.4. Objectives of the study

1.4.1. General Objective

The general objective of the study is to identify empirically the factors affecting adoption of IFB
at united bank S.C.

1.4.2. Specific Objectives

 To investigate the effect of Shariah compliance on the adoption of IFB

 To examine the relationship between awareness of the service and adoption of IFB

 To identify if there is any relationship between advertisement of the service and adoption
of IFB

 To point out the impact of perceived usefulness of the service on the adoption IFB

 To determine the impact of accessibility of IFB services on the adoption of IFB

7
1.5. Limitations of the study

 Generalization has become the limitation to this study because it did not include all
branches and other competing banks as well as under different environment setting.

1.6. Significance of the study

The outputs of the study have theoretical and practical contributions to different stakeholders.
The findings of this study helps to understand the factors that influence the adoption and
operation of IFB use for United Bank S.C, IFB customers of the bank. Additionally this study
help to acquire knowledge and practical experience for the researcher, bank managers, and
policy and decision makers of the bank engaged on IFB services. It also helps for those banks
yet not starting and those under adoption of IFB services by sharing some ideas, and for further
study undertaken hereafter as a starting point.

1.7. Scope of the study

IFB service is presently introduced and offered by different commercial banks and if all branches
adopting IFB services are included the research result would have been comprehensive and
generalized. However, due to time and finance constraints this study delimited to united bank
S.C. factors that influence the adoption of IFB services. Geographically United Bank S.C is not
organized(divided) by districts, due to that purposely selected eight branches located in
different parts of Addis Ababa are covered in this study, because the biggest branches have a lot
of customers and can represent those excluded branches.

1.8. Definition of Basic Terms

Adoption is to accept formally and put into effects. The term “Islamic Banking” is defined as
the conduct of banking operations in consonance with Islamic teachings Mirakhor, (2000)
Ijaraha Financing: Lease financing.

The following definations of basic terms are cited by Teferi ,(2015)

Istisna Financing: Building and plant construction financing.

8
Mudharabah: (trust financing) is a partnership between a bank and a customer in which the
bank provides the capital for a project and the customer or entrepreneur uses his or her expertise
to manage the investment.

Mudarib: Entrepreneurial manager in Mudharabah (trust financing) partnership.

Murabaha Financing: Working capital financing on a cost plus a profit margin basis.
Musharakah/Musyarakah: (partnership financing) refers to an investment partnership in which
all partners share in a project‟s profits on the basis of a specified ratio but losses are shared in
proportion to the amount of capital invested.

Sharia Committee: a team of an independent Sharia Scholars in charge of monitoring

compliance aspect of the IFB . (Bank of Malaysia, 2010)

Sharia Principle: Islamic law.

Wadiah Deposit: Return-free safekeeping deposit.

Wakalah: Agency service. (Bank of Malaysia, 2010)

1.9. Organization of the study

The research paper has five chapters. The first chapter contains the introduction parts that deal
with background, statement of the problem, research questions, objectives, limitations, scope,
and significance, definition of basic terms and organization of the study. The second chapter
deals with review of theoretical and empirical literature. The third chapter describes the
methodology of the study which contains data types and sources, sampling technique, method of
data collection, sample size, data analysis technique, and procedure of the study. The fourth
chapter focus on data analysis and interpretations. The last chapter of the paper presents major
findings, Conclusions and recommendations of the study.

9
 CHAPTER TWO
REVIEW OF RELATED LITERATURE

2.1. Theoretical Background

2.1.1 Basic Concepts and definition of Interest free banking

Interest-free banking business refers to banking business in which mobilizing or advancing funds
is undertaken in a manner consistent with Islamic finance principles and mode of operation that
avoids receiving or paying interest;” and “interest-free banking window” refers to a unit within a
conventional bank exclusively offering interest-free banking services (Teferi, 2015). According
to the study made by Ibrahim (2012), the concept of Islamic Banking and Interest- Free Banking
is synonymously used in Islamic Economics literature as an alternative banking framework to the
interest-based conventional banking practice. However, there is a difference between an interest-
free bank and an Islamic bank but they are sometimes used interchangeably. Islamic banking not
only avoids interest in all its ramifications but also it avoids all other Islamically prohibited
activities. Interest-free banking system on the other hand, does not engage in interest but there is
no reason to suppose that all its other activities will be done strictly according to Islamic law
“Shariah”. Islamic banking, the more general term is expected not only to avoid interest-based
transactions, prohibited in the Islamic Shariah, but also to avoid unethical practices and
participate actively in achieving the goals and objectives of an Islamic economy.

2.1.2 Principles of IFB

The main principles of Islamic banks activities comprise of prohibition of interest (riba) in all
forms of transaction undertaking business and trade activities, based on, fair and legitimate profit
(Mirakhor, 2000). Moreover operations of Islamic banking primarily are based on a profit and
loss sharing (PLS) principle. An Islamic bank does not charge interest but rather participates in
the yield resulting from the use of funds. The depositors also share in the profits of the bank
according to a predetermined ratio. There is, thus a partnership between the Islamic bank and its
depositors, on one side, and between the bank and its investment clients, on the other side,
hereby acting as a manager of depositors‟ resources in productive uses, that is an interest free/
Islamic bank in relation to its clients plays the role of partner, investor and trader. The

10
complexity of Islamic banking comes from the variety (and nomenclature) of the instruments
employed, and in understanding the underpinnings of Islamic law (Kettell, 2011). Islamic
banking is a unique type of banking system that devoid all forms of transactions that are
prohibited in Islam. So for any bank to be classified as Islamic bank, the following basic
principles must be adopted for its operations (Samad, 2004; Bello & Abubakar, 2014).
Predetermined loan repayments as interest (riba) is prohibited, Speculative behaviour is
prohibited, only Shariah-approved contracts are acceptable, profit and loss sharing is at the heart
of the Islamic system, contracts are sacred, the implementation of Zakat the compulsory Islamic
tax and transparency in all transactions. These basic principles are then applied to the various
specific transactions of, for example pledge, deposit, and guarantee, agency, assignment, land
tenancy, waqf foundations (religious or charitable bodies) and partnerships. Interest free banking
is a narrow concept denoting a number of banking instruments or operations, which avoid
interest.

2.1.3 Major Interest Free Banking Products

Islamic financial products offer new opportunities for institutions to address previously
unexplored consumer and business segments. The introduction of Islamic financial products
across the world has been in response to the growing need of a significant segment of the
marketplace that refused to deal with interest-based instruments. Islamic banks aim at addressing
the needs of new segments by creating a range of Islamically acceptable products, the
development of which pose significant challenges arising from the need for Shariah compliance
in addition to regulatory complexities. Marketing such products is another challenge in light of
competition from conventional banks and the need for innovative products (Hassan & Lewis
2007). Interest free/Islamic banking operates according to Islamic law which requires all the
transaction to be Shariah compliant including the non-receipt and payment of interest. It involves
profit-sharing as per agreement and loss/risk sharing as per investment between banks and
customers as its main method. It provides several products through different modes. The
products are recognized based on the contracts instead of the commercial orientation, Kettell
(2011). Islamic banks have devised (and still devising) new instruments/products to enable them
achieve their objectives in accordance with Islamic laws. Al-Sultan (1999).

11
2.1.4 Islamic Banking Deposit Products

According to Kettell (2011), in the mobilization of funds, Islamic banks depend on four main
sources that include shareholders‟ funds, current accounts, investment accounts and savings
accounts. The bank and the investment deposit holders share the realized profit in accordance
with the ratio agreed upon between the parties at the time of contracting. The deposit in the
current account is treated as if they are loans from the clients to the bank and therefore, bear no
yield to the account holders. However, being loans to the bank, their principal is guaranteed by
16 the bank. According to Ziauddin (1994), Hassen & Lewis (2007) and Kettll (2011) the source
of deposit mobilization of IFB products are shown as follows, Kerima Ali (2016).

Unrestricted Investment Deposits (Unrestricted Mudaraba)

This type of deposit is an earning deposit which is mobilized with the knowledge that bank acts
as the Mudarib (manager) and invests the fund without restriction and intervention of the capital
provider in any Shariah compliant manner. The profit on the investment will be shared as per
agreement and loss will be shared by the depositor (capital provider). The bank has discretion to
participate in the investment. The bank can pool the money for its daily IFB business activities.

2.2 Restricted Investment Deposit (Restricted Mudaraba)

Such type of IFB deposit is an earning deposit which is mobilized with the knowledge that bank
acts as the Mudarib (manager) and invests the fund in restricted investment based on active
intervention of the capital provider complemented with professional advice from the bank side.
The profit on the investment will be shared as per agreement and loss will be shared by the
depositor (capital provider).

2.2.1 Wadiah (Safekeeping) Deposit

It is a peculiar non-earning type of IFB deposit that operates under the contract of Wadiah Yad
Dhamanah (guaranteed custody). The bank accepts deposits from its customers looking for safe
custody and convenience and requests permission to make use of the customer funds for
investment purposes promoting transparency. The customers may withdraw their balances at any
time. Profit generated from the use of the customers‟ funds belongs to the bank. However, the
bank may at its absolute discretion rewards the customers by declaring profits to them. Under the
12
contract of Wadiah, the custodian i.e. the Bank is not allowed to mention or to promise any
reward on the deposit received. The owner/depositors too cannot demand any rewards or return
from their Bank on their savings.

2.2.2 Demand Deposit (Amana Current Accounts)

Amana Current accounts are non-earning deposits that operate based on the principle of
alwadiah, whereby the depositors are guaranteed repayment or withdrawal of their funds on
demand. At the same time, the depositor does not receive return for depositing funds in a current
account, because the guaranteed funds will not be used for profit and loss ventures.

2.2.3 Islamic Banking Financing Products

As a general rule, Islamic finance involves the carrying out of investment and /or the purchase of
goods, services and assets. Islamic banks provide financing using two basic methods. The first
depends on profit and loss sharing and the second involves the sale of goods and services on
credit and leads to the indebtedness of the party purchasing those goods and services, Al- Jarhi
and Iqbal (2001). Financial instruments based on Islamic principles have been developed to
facilitate everyday banking activities by providing halal (Shariah-compliant) methods of lending
or borrowing money and still offering some acceptable returns for investors. Theoretically, there
are several IFB financing products which also include other than the below cited ones.
Practically, banks do not provide all of the IFB products. Thus, this research also shows the
popular IFB financing products which is described by the following researcher as major ones.
According to Hassan & Lewis (2007), Al-Jarhi and Iqbal (2001); Kettell (2011); and Bello &
Abubakar (2014) some of popular Islamic financing products being marketed worldwide by
Islamic banks are the following.

2.2.4 Mudaraba (Silent Partnership)

A mudarabah contract is a financial transaction in which there are two partners in the contract.
One of the partners will provide the needed capital (Rabb-ul-Maal) and the other partner will go
into the business as entrepreneur (Mudarib). That is, the Islamic bank will act as the capital
Provider (Rabb-ul-Maal). In this type of financial contract, profits are shared between Islamic
bank and the entrepreneur (client) based on predetermined ratio. However, in the event of loss

13
the Islamic bank (or depositors) bears the loss while the entrepreneur loses his or her effort
provided it were not as a result of his or her negligence.

2.2.5 Murabaha (Cost-Plus Sales Contract)

This type of contract is mostly used in the procurement of equipment. It is a sales contract
between Islamic bank and its client at a fixed profit called mark-up. In this contract, the client
will provide all the specifications of the commodity and the Islamic bank will take the risk of
purchasing it for the client at a cost plus mark-up which the client can either pay in instalment or
sum at a spot or at a stated period.

2.2.6 Ijara (Lease)

Ijarah is synonymous to leasing contract in conventional banking. It is a contract whereby an

Islamic bank purchases an asset and leases it out to its client on the agreement that the client will
be paying a fixed amount at regular interval usually monthly for a specified period of time to the
Islamic bank. It may also include the option of the client purchasing the asset at the end of the
contract from the bank.

2.2.7 Musharaka (Equity Partnership)

Musharaka is a contract in which two or more persons contribute capital for the establishment of
a particular business venture in such a way that each partner has right to either involve in the
administration of the business or not. However, partners may decide to be active or sleeping
partner at their own will. In this kind of transaction in Islamic banking, profits are shared based
on agreed ratio which need not be equal to their individual capital contribution, but loss is shared
strictly based on individual capital contribution. So, Islamic bank will act as a partner in this case
in order to contribute to the capital formation as well as in sharing profits and loss.

14
2.2.8 Salam (Forward Trade Contract)
This is a sale contract whereby Islamic bank agrees to supply some specific commodities to the
buyer (its client) at a future date that is specified in exchange of an advanced full spot payment to
the bank. That is, the client pays the full amount and delivery of the commodity to the client is
done in specific future date by the Islamic bank.

2.2.9 Istisna (contract of manufacture)

It is a contract in which a party orders another to manufacture and provide a commodity, the
description of which, delivery date, price and payment date are all set in the contract. It is used
by Islamic banks, and consists of two separate Istisna contract.

2.3. Religion and adoption of Islamic banking

Kirkpatrick (2005) expressed religion as psychological connection, dominant emotional
relationship to things. Religion is a cause, principle, or a system of beliefs, practices held to with
ardor and faith. Islamic bank has a spirit and philosophy of Islam, regarding interest-free
transactions and risk sharing. Metawa and Almossawi (1998) found the religion as the main
factor affect customer perception in the selection of Islamic banking system and not the yield on
their investment. In addition he found religiosity is ranked highest factor affecting selection
criteria followed by profitability. In UK, the volume of deposits of Muslims in Islamic financial
institutions in primarily influenced by religious reasons, Omer (1992).The same finding is
supported by Othmen and Owen (2001); Walkhid and Afrita (2007): Haron et al (1994), where
religion is major influential factor of IB adoption. Conversely, a Jordan based study found that
religion did not play significant role to adopt an Islamic bank, but profit driven criteria was an
important factor to choose a bank (Erol, C. and El.B. Radi, 1989). Regarding the Islamic banking
selection criteria most of the customers have adopted Islamic banking due to the religious
reasons, but there are some other factors that motivate the customers for the adoption of the
Islamic banking system such as, bank efficiency in the transaction, their confidentiality to its
customers, its working hours etc. (Khattak and Rehman., 2010). Studies by Hegazy (1995) on
Egypt, Naser et al., (1999) on Jordan, Kareem and Afiff (2006) and Rohmah (2006) on Indonesia
and Dusuki and Abdullah (2007) on Malaysia are agree with the findings that religiosity is not
the main reason for people to support Islamic Banks.

15
2.3.1. Factors affecting Adoption of IFB

2.3.1.1 Shariah Compliance

While financial soundness may be enough for retaining the confidence of clients of a
conventional bank, in the case of Islamic bank, Shariah compliance is equally important. An
Islamic bank could fail as much due to non-compliance to the Shariah as for financial
imprudence. Therefore, it should be ensured that all activities of an Islamic bank comply with
Shariah principles Al-Jarhi and Iqbal (2001). According to Kettell (2011), to ensure financial
activities are in conformity with the Shariah law, religious Supervisory boards are mandatory for
Islamic banks. The Shariah Supervisory Board (SSB), sometimes called the Shariah supervisory
committee, examines contracts, dealings and transactions to assure that Islamic beliefs are being
implemented. The board guarantees, and certifies, that the banking activities are halal
(permissible). It is merely an advisory body, but nevertheless it has an authoritative and
respected function because the bank entrusts the SSB with questions as to the permissibility of its
activities. Being part and parcel of Islamic economic activities, Islamic/Interest free banking and
financial activities are therefore subject to the Shariah law.

The Sources of guidance of Islamic financial operations compliances with shariah are derived
from three sources the first one is Quran (primary source of sharia )and the second one is Sunnah
(practise of the prophet) the third one is Ijma(consensus)and also Qias and IJTIHAD (The
reasoning of a group of qualified scholars ,which is aimed at adapting Islamic rules to the
contemporary world .) Islamic Banking Hand Book Institute of Bank of Malaysia (2010)

Despite the growth of Islamic banking worldwide, as the others African countries Ethiopian
banking industry was continued to conduct most of their banking transactions using traditional
banking system because of lack of supportive regulatory and policy regimes that facilitate the
establishment of Islamic financial institutions is the most important worth of mentioning. Since,
Muslims believe that banking with the conventional banks is against their religious faith; large
numbers of potential Muslim customers are not banking with the existing conventional banks
available in the country. Debebe Alemu (2015)

In the Ethiopian context, the IFB convention is introduced in the form of IFBW (interest free
banking windows) short of full-fledge level, which has its own retarding impact on standard of

16
the convention and its contribution in driving the ED and complementing the banking industry in
the process. Moreover, as emerging phenomena, it seems as it may face awareness and, to some
extent, perception or misconception challenges as a value-adding convention to the banking
industry and the economy as well (Teferi, 2015)

2.3.1.2. Awareness of the service and Adoption of IFB

According to Oxford Dictionary; “Awareness is concern about and well-informed interest in a
particular situation or development”. In this study we examine the awareness/knowledge
regarding Product and services, awareness in term of advertisement and awareness about
financial teaching of Islam. Previous studies provide evidences about the impact of awareness
regarding products and services. Rammal and Zurbruegg (2007) discovered that people were
interested in IB products however unawareness to these products was the biggest hurdle in
Australian market. The customer‟s awareness level towards IB products is better in some of the
common products such as current accounts, time deposit account. But most of the customers are
unaware of the specific Islamic financial products such as Murabaha, Ijara Khattak and Rehman
(2010).

2.3.1.3. Perceived Relative Advantage

According to the study made by guluma Abdisa (2017), Relative advantage has been designed to
reflect perceptions of customers which all or certain qualities of the proposed innovation can
offer incremental value to its potential adopter comparing with present available options Rogers,
( 2003). Relative advantage can be explained as economic profitability, discomfort decreasing,
saving in time and effort, low initial cost, social prestige, and/or other potential benefits that
possible user would receive by applying the current innovation ,Gerard (2003). Potential
adopters want to know, if the new idea is better than an existing one. Besides, several scholars
have found relative advantage to be one of the best predictors of an innovations rate of adoption
(Brown et al., 2003; Tan and Teo, 2000; Hsu et al., 2007; Tung & Rieck, 2005; Thambiah et al.,
2011b; Gerrard and Cunningham, 2003). Roger, 2003 and Gerard, 2003 argued that adopters
invariably perceived relative advantage in terms of the economic benefits and the costs resulting
from the adoption of an innovation and improvements that are afforded to their social status. In
addition to these, economic profitability, discomfort decreasing, saving in time and effort, low

17
initial cost, social prestige, the immediacy of the reward and/or other potential benefits that
possible user would receive by applying the current innovation, have been described as the sub-
dimensions of relative advantage. The present study therefore intend to examine relative
advantage within the dimension of economic benefits (profits earnings, reduce the burden of
interest, reduce risk, profit and loss sharing benefits) and fairness (in the conduct of profit
sharing, ethical banking system, equal distribution of wealth).

2.3.1.4 Accessibility of IFB services in all branches

Accessibility is one of the important variables in determining the adoption criteria of Islamic
Banks. It refers to geographically extended number of branches that a particular organization has
in order to provide access to its customers. Haron et al, 1994 found convenience as a major
factor influencing selection criteria of IFB, he conceptualize convenience as wide branch
network, location being near home or work, convenient working hour of ATM, and bank
location. Small network of branches is one of the factors that have significant effect on low
growth of Islamic banking, so Islamic Banks should try to reach more people by opening more
branches and it will certainly increase public confidence on them. Adnan ,( 2011).

2.4. The Need for Islamic Banking in Ethiopia

As horrendous disparities exist between different segments of the Ethiopian society, the
government must provide the disadvantaged classes with the tools they need to improve their
condition, (Mohamed M.Olad, 2012). Access to finance by the poor and the vulnerable groups is
a prerequisite for poverty reduction and social cohesion. Such "financial apartheid" is one of the
main causes of the majority of the unorganized sector; workers, semi-skilled persons, small
farmers are all non-bankable. Exclusion of the majority of the population in terms of growth.
Islamic banking is one way to ameliorate the poor and the disadvantaged segments of the society.
The Ethiopian banking sector has opened up considerably in the past decade or so and openness
to interest-free banks is a logical next step. The potential benefits of allowing Islamic banking
include; decreased economic disparity between the haves and the have not‟s, better integration,
and consequently accelerated economic growth. Government of Ethiopia can leap a step closer
towards the fulfillment of the much cherished dream of "Middle Income Country" by reforming
its banking sector and allowing the establishment of Islamic Banks. Islamic faith prohibits the
use of financial instruments that pay interest, Song and Oosthuizen (2014).

18
The non-availability of interest-free banking products (where the return to the investor is tied to
the bearing of risk) results in some Ethiopians, including those in the economically
disadvantaged strata of the society, not being able to access banking products and services due to
reasons of faith. While interest-free banking is provided in a limited manner through SMFI, its
recommended that measures be taken to permit the delivery of interest-free finance on a larger
commercial scale. This is in consonance with the objectives of inclusion and growth through
innovation. Also, it would be possible, through appropriate measures, to create a framework for
such products without any adverse systemic risk impact. With improved labor capital ratio, our
vulnerable workers associated with agriculture and unorganized sector might be able to compete
effectively with the formal sector workers. Thus Islamic Banking may financially empower
majority of Ethiopian workers and farmers. Cited by Alyu Abate (2016), Song and Oosthuizen
(2014).

In general Financial institutions, Islamic or others, play indispensable roles in financial systems.
The first role is providing support for various financial markets. For instance, exchanges of
various types are institutions that facilitate the functioning of markets, by setting rules of trading
and providing clearinghouse and margin logistical support. (Iqbal and Mirkahor, 2011)

NBE granted the IFB service license to the Oromia International Bank S.C (OIB) on September
16, 2013 enabling the bank to pioneer the Islamic Banking in Ethiopia (Meraf, 2013).
Accordingly OIB launched the IFB operation on December 16, 2013 as a pioneer at its 24 branch
offices and currently expanded out to its other branches. United bank S.C is the third bank which
offering a suite of interest free banking products and services to its clients who are interested in
conducting their personal and business financial transactions in a shariah-compliant manner
through “window model” ,an operational strategy adopted by conventional banking services
operate alongside with IFB services within the same banking hall. It has a separate and dedicated
IT system that segregate the interest free banking window from conventional banking operations.
Mostly religion is the main reason for preferring IFB services which is based on sheria . Because
of that the following activities are not permissible in interest free banking.
Paying or receiving any kind of interest (riba)

19
Engaging in business forbidden by shariah like alcohol, prostitution, pork, armament, tobacco
environmentally and socially damaging business.
Engaging in business involving gambling (Maysir or Qimar),business dealings with
uncertainty(Gharar)

2.5. Empirical Review

IFB industry is highly nascent in comparison to the conventional banking industry. It is striving
to develop its own institutional, operational, and regulatory infrastructures in order to grow and
prosper (Khan & Bhatti, 2008). At international experience, many studies on challenges of
Interest free/Islamic banking have been conducted. These studies have shown that Islamic
banking in Muslim or non-Muslim countries have faced a number of challenges (Iqbal, Ahmed
& Khan (1998); Bello & Abubakar (2014); Njamike (2010); Ibrahim (2012); Kinyanjui (2013);
Jabr( 2003)). Thus, Ethiopia is not an exception. However, to the best knowledge of the
researcher, there is paucity of research work on the topic under study in Ethiopian context and
the researcher believed this will make the study to contribute knowledge and fill the gap in the
area.

Though it is prevalent and customary alternative banking convention in the rest of the world, it is
obvious that the IFB is a very recent phenomenon to the Ethiopian context. As a result, there is
no or little empirical literature conducted on the subject in view of the context and scope pursued
by the researcher. The available literature review so far about the IFB in the Ethiopian case
basically put up the feasibility of introducing IFB in Ethiopia. Accordingly, among the
researchers conducted in the Ethiopian context so far on the subject is the research and surveys
conducted by Sankaramu (2009). At that moment, the statement of the problem was not about
informed or knowledge-based operation of IFB. It was rather about introducing or not of IFB as
a country. Accordingly, the researcher recommended the importance of considering introducing
the IFB into Ethiopia by making use of smooth relationship between the Christians and Muslims
as an opportunity on the basis of its immense and untapped merits in filling the gap left by the
conventional banking in general and various microeconomic benefits in particular (Teferi, 2015).

Akmel (2015).Most of the developments of Islamic finance in the Ethiopia have taken place in
the last four years, but the existence of Sharia-compliant transactions in the Ethiopian financial

20
industry is yet something to be seen. The study undertaken by Debebe (2015) on factors affecting
customers‟ to use interest free banking is concerned with examining the willingness of the
Ethiopian customers to use interest free banking and the factors that may influence their
decision. The result s showed that perceived relative advantage; perceived compatibility;
customers level of awareness and subjective norm, have significant positive impact on the
attitude towards interest free banking in commercial bank of Ethiopia. The outcome of this study
shows impact assessment on the attitude towards IFB usage which doesn‟t address the current
problems.

A study undertaken by Teferi (2015) the contribution of IFB to Economic development of

Ethiopia ,the level of stakeholder awareness and attitude towards the IFB services ,the
comparative advantages of IFB ,the factors that account for the growth of IFB , Challenges and
prospective in the Ethiopian context based on OIB and commercial bank of Ethiopia with the
result of the use of IFB as a more convenient for economic development and considering
revisiting the infrastructure of IFB in Ethiopia could enhance its comfortable operation and its
role in assisting economic development.

A research undertaken by kerima (2016) Challenges on interest free banking services in Ethiopia
with particular reference to the commercial bank of Ethiopia, indicates lack of commitment of
the bank lack of shariah advisor, lack of supportive regulatory directives ,problem related to
Ethiopian commodity Exchange (ECX)law, lack of capacity to deliver IFB products at full range,
lack of trust and confidence of customers unavailability of IFB products in all of its branches and
the IFB being delivered in a window model. This research is undertaken based on the
government inistituion of commercial bank that differ from private banks ,therefore it has the
gap to show to specifically the private banks recently starting operations of IFB and also it lacks
specific structural beliefs in pointing factors fecting adoption of interest free banking.

Guluma (2017) the study on factors Influencing customers behavioural intention to adopt interest
free banking in Ethiopia ,the case of oromia International bank S.C the study was based on the
general frame work of behavioural intention to adopt interest free banking which shows ,
Perceived behavioural control ,subjective norm ,relative advantage ,compatibility, valued people
opinion ,media influence. So it is general behavioural study, and has the gap on the specific
practical factors that influence IFB adoption.

21
A few banks began to offer simple products such Special Non-interest Savings Accounts (i.e
Special Demand Deposit offered by the commercial bank of Ethiopia (CBE) to give a slight
degree of choice flexibility to the Muslim Community. This did not, however, cater for the wider
Muslim consumers. These products are relatively uncomplicated in structure and fell outside the
scope of the mainstream consumers and did not generate significant volumes of customers and
transactions, however, these compared unfavorably with their conventional equivalents in several
respects, including their generally uncompetitive structure and negative real rate of return they
offer.

The growth of the Islamic Financial services remained stuck for almost half a decade since the
first individual and group initiatives surfaced in early 2008. Much has not changed since then.
Not a single commercial bank has announced yet that it will engage Islamic financial products
whether publicly or privately owned, whether through „Special Window‟ or subsidiary. Not a
single” Full-fledged” Islamic Financial Institution has come out still from so many publicized
initiatives to establish what was dubbed as the first Islamic Financial Institution in Ethiopia. Not
a single government initiative or program has still yet to come from the concerned authorities,
kerima Ali (2016).

2.6. Conceptual Frame work

Conceptual framework is defined as an interconnected set of ideas, about how particular

phenomenon functions or related to its parts (Svini; 2010). The main purpose of conceptual
frame work was to clarify concepts and relationships among the variables in the study. The
following conceptual frame work shows the conceptual foundation of the research conducted,
that aims to explain how the indicated independent variables affect the adoption of IFB at United
S .C.

22
Independent Variables Dependent Variable

Sharia Compliance.

Customer awareness Regarding Adoption Of Interest Free Banking.

products & service.

Perceived Relative advantage of

the service.

Accessibility of IFB services in

all branches of the bank.

Advertisement about IFB

Products and Services.

Figure 1 Conceptual Framework of the Study, Akhtar, Mehmood Akhtar (2016)

2.7. Research Hypothesis

Ho: Sharia Compliance hasn‟t a positive and significant effect on adoption of of interest free
banking.

Ha: Sharia Compliance has a positive and significant effect on adoption of interest free banking.

Ho: Customers awareness regarding interest free banking hasn‟t a positive and significant effect
on adoption of interest free banking.

Ha: Customers awareness regarding interest free banking has a positive and significant effect on
adoption of interest free banking .

Ho: Perceived relative advantages of interest free banking hasn‟t a positive and significant
effect on adoption of interest free banking.

23
Ha: Perceived relative advantages of interest free banking has a positive and significant effect
on adoption of interest free banking.

Ho: Accessibility of IFB services in all branches of the bank hasn‟t a positive and significant
effect on adoption of interest free banking.

Ha: Accessibility of IFB services in all branches of the bank has a positive and significant effect
on adoption of interest free banking.

Ho: Advertisement about interest free banking hasn‟t a positive and significant effect on
adoption of interest free banking.

Ha: Advertisement about interest free banking hasn‟t a positive and significant effect on
adoption of interest free banking.

24
 CHAPTER THREE
3. METHODOLOGY OF THE STUDY
3.1 Research Design

Research designs are plans and procedures for the research that span the designs from broad
assumptions to detailed methods of data collection and analysis creswell,(2012)

This study is focus on factors affecting adoption of IFB at United Bank S.C. Thus, research
design is the conceptual frame work within which a research is conducted .The type of research
design that was employed for the purpose of this study is causal research design, for the purpose
of demographic profile of respondents descriptive design was used, and for the rest part of
response causal research design was used. Because Causal study conducted in order to identify
the extent and nature of case and effect relationships among variables, Griffin.M (2012)

3.2 Research Approach

According to Creswell (2003) there are three types of research approaches. The first one is
qualitative , which involves emerging questions and procedures, data typically collected in the
participants setting. The second one is quantitative research, it means for testing objective
theories by examining the relationship among variables. The last one is mixed method research
approach which combines both qualitative and quantitative forms, Creswell (2003). For this
study the researcher used mixed method approach of causal relationship of dependent and
independent variables in the study, because of the researcher collect the attitude of customers of
IFB through questioner the qualitative part and analyzing the ideas using the correlation, and
regression statistics by using SPSS version 20 for quantitative part, that makes the approach of
the research mixed method.

3.3 Population of study

United Bank S.C has more than 203 branches throughout the country. From these branches, 103
branches are city branches. The bank has no district structure, thus the researcher select
purposely 8 branches that had good experience, big and have high turnover of customers on
delivering IFB. Accordingly, these branches had a total of 8000 IFB services user customers.
Therefore, the total population of this study was 8000 IFB customers of the United Bank S.C

25
.The selected branches are Ayer Tena, Yrer Ber, Meskel Squer , Tana, Bomb Tera, Kolfe , Sefere
Selam and Meskel squer.

3.4 Sample Size Determination

To obtain a comprehensive sample, convenience sampling technique is applied for the purpose of
primary data collection .This study will be conducted in Addis Ababa city branches of United
Bank S.C. The numbers of branches of the bank in Addis Ababa are 103 as of April 2018. The
researcher target on eight branches found at different locations of Addis Ababa .The reason for
these branches selection is by assuming those big branches can represent the rest . The selected
branches are Ayer Tena, Yrer Ber, Meskel Squer , Tana, Bomb Tera, Kolfe , Sefere Selam and
Meskel squer branches, with a total interest free banking customers of eight thousand.

The sample size is determined based on Krejcie And Morgan (1970) formula using Owen survey
of 2018 G.C. The researcher target on the relevant and suitable respondents of 366 customers
from IFB users.

26
Table 3 1 Table for determining sample size of a Known population

N S N S N S
10 10 220 140 1200 291
15 14 230 144 1300 297
20 19 240 148 1400 302
25 24 250 152 1500 306
30 28 260 155 1600 310
35 32 270 159 1700 313
40 36 280 162 1800 317
45 40 290 165 1900 320
50 44 300 169 2000 322
55 48 320 175 2200 327
60 52 340 181 2400 331
65 56 360 186 2600 335
70 59 380 191 2800 338
75 63 400 196 3000 341
80 66 420 201 3500 346
85 70 440 205 4000 351
90 73 460 210 4500 354
95 76 480 214 5000 357
100 80 500 217 6000 361
110 86 550 226 7000 364
120 92 600 234 8000 367
130 97 650 242 9000 368
140 103 700 248 10000 370
150 108 750 254 15000 375
160 113 800 260 20000 377
170 118 850 265 30000 379
180 123 900 269 40000 380
190 127 950 274 50000 381
200 132 1000 278 75000 382
210 136 1100 285 10000 384
Note: N is population size ,S is Recommended sample size.

Source : Kerjcie and Morgan (1970)

27
 Table 3. 2 Composition of sample from each branch
No. Branch Name No. of IFB customers X = (n/N)*C

1 Ayer Tena 850 38

2 Yrer Ber 567 26

3 Meskel Squer 321 15

4 Tana 1670 76

5 Bomb Tera 1400 64

6 Kolfe 1865 85

7 Sefere Selam 601 28

8 Alem Bank 726 35

Total 8000 367

Where, n = sample size (366), N = total population (8000), C = total customer of each branch, X
= sample from each branch

Own Survey April 2018

3.5 Sampling Techniques

The researcher was used non probability sampling techniques that the researcher prefers
“Convenience Sampling” for it is difficult to get all customers at the same time and place and to
be able conveniently distribute questionnaires for the targeted population the researcher prefers
convenience sampling .

3.6 Sources of Data

To conduct the study the researcher used two sources of data, primary sources and secondary
sources of data. Primary data sources were close ended , likert scale adopted ,self developed
questioners distributed and collected from selected branches of United Bank S.C IFB user
customers. The secondary data sources were collected from relevant materials, journals, articles

28
magazines, and other documents related with interest free banking services .The questioners
were prepared in three parts. The first part of the questioners consist issues related to the
personal information of the respondents, the second part concerned on the questions used to
assess the factors that affect adoption of interest free banking services at United Bank S.C. to
analyse using five points likert scale which range from strongly disagree to strongly agree.

3.7 Method of Data Collection

To conduct the Study for primary data source, the researcher use questioners which distributed to
United Bank S.C. interest free banking customers of selected branches located in different parts
of Addis Ababa based on the number of interest free banking services users. In order to collect
information regarding factors that affect the adoption of IFB services at United Bank S.C the
respondents filled the questioners and collect timely and ready for analysis. The questioners are
close ended type and measured on a five likert rating scale where :Strongly
Disagree=1;Disagree= 2 ; Neutral =3 ; Agree= 4 ; Strongly Agree= 5.

3.8 Procedure of Data Collection

Data was collected from respondents through structured questionnaires. The questionnaires were
handed over to the customers and given sufficient time to read and respond for the questions.

3.9 Data Analysis Techniques

In order to meet the stated research objectives, the collected data was analysed based on the
nature of the objective. The data gathered from questionnaires was checked for completeness
coded to feed to Statistical package for social sciences (SPSS version 20),to summarize and
analyse a descriptive statistical analysis using tables and percentage for the demographic data of
the respondents. The inferential statistical analysis such as correlation and regression analysis are
used. Correlation analysis used to measure the relationship between the dependent variable
(adoption of IFB) and the factors affecting adoption of IFB (independent variables), while
regression analysis used to see the effects of the determinant variables on adoption of interest
free banking at united bank S.C .and, then it will be supported by interpretation.

29
3.10 Reliability and Validity

3.10.1 Reliability

The researcher conducted a reliability test to measure the internal consistency of the instruments,
by using Coronach Alpha. It provides measure the internal consistency of a test or scale. It is
expressed as number between 0 and 1 and the higher the score of Coronach‟s Alpha, the more
reliable the generated scale is and the closer the alpha coefficients is to one ,the greater the
internal consistency .The following table shows the reliability of the questionnaire conducted on
SPSS version 20.

Reliability Statistics
Cronbach Alpha No of Items
.897 35

3.10.2 Validity

The researcher check the validity of questionnaires that ware developed for the study by getting
comments from the advisor and by making pilot study before it is distributed .Then the
comments from both were considered to revise the questionnaire.

3.11 Ethical Considerations

The researcher has to know and respect the willingness of the respondents and has not disclosed
the respondent‟s identity, and will not have used the information for personal purpose.
Additionally, all participants for the success of the research will be acknowledged. The data
collected will be only for the purpose of the research and it will be kept confidential.

30
 CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION

4.1 Descriptive Response Rate

This chapter presents the analysis and interpretation of results; data were collected through
questionnaire from customers of United Bank S.C. Based on the proposed research design a
total of 367 questionnaires were distributed, however 366 were returned successfully,
whereas 1 was not correctly filled and rejected. Therefore 366 were effectively used for
analysis that shows response rate of 99.72%. According Dusuki, W.A. and Abdullah, I.N.
(2007), above 75% response rate is considered as adequate.

The following table represents the demographic characteristics of the respondents.

31
Table 4 1 Demographic characteristics

Variable Classification Number of Respondents Percentage

Gender Male 210 57.37
Female 156 42.63
Total 366 100
Age 18 – 28 166 45.36
29 -38 74 20.22
39 -48 68 18.58
Above 49 58 15.84
366 100
Marital Status Single 184 50.27
Married 182 49.73
Total 366 100
Education level Certificate 186 50.82
Diploma 96 26.23
First Degree 60 16.39
Masters Degree and Above 18 4.92
Others 6 1.64
Total 366 100
Public Sector 75 20.49
Type of Private Sector 148 40.44
employment Self employed 94 25.69
Student 4 1.09
Others 45 12.29
Total 366 100
Income Less than 3000.00 36 11.83
States(ETB)/Month Between 3001.00 and 79 21.58
5000.00
Between5001.00 and 67 18.31
7000.00
Between 7001.00 and 93 23.40
10,000.00
Between10,001.00 and 55 15.03
15000.00
Above 15000.00 36 9.85
Total 366 100
Source: Own Survey (2018).

32
4.2 Demography of Respondents

4.2.1 Gender and Age of Respondents

The total of 366 respondents were contacted for the purpose of this study, among them 57.37
percent of the respondents were male and the rest 42. 63 percent of them were female
respondents. The descriptive statistics indicates the sample incorporates four different age
categories. The first age category was 18 to 28 years of age, and this category takes 45.36
percent of the respondents. 29 to 38 years of age was the second age group which represent
20.22 percent of the respondents. The last two age groups were 39 to 48 and above 49 years of
age, these age category represents 18.58 and 15.84 percent of the respondents respectively. The
age category indicates majority of the interest free customers are between the ages categories of
18 to 28 years of age.

Out of the total respondents 50.27 percent of them were single and the rest 49.73 percent of the
respondents were married. Observing the statistics, the data seems almost proportional in terms
of marital status.

The education level of respondents were also incorporated on the analysis. Accordingly, 50.82
percent of the respondents were certificate holders whereas, 26.23 percent were diploma level
and 16.39 percent of them first degree holders and 4.92 of the respondents were masters and
above holders respectively and 1.64 percent of the respondents were included in the others
group. In general, the statistics indicates that majority of the interest free bank service customers
were young and educated at different level . This might be because of the more individuals
become educated the more will be their access to information towards interest free banking so
that information access leads to be a customer of the service.

4.2.2 Employment Type and Income Level of Respondents

The income level represents how much income the respondents are generating monthly;
accordingly, 11.83 percent of the respondents had a monthly income of below 3000 birr monthly;
21.58 percent of the respondents generate a monthly income of between 3001 and 5000 birr.
Further, 18.31 percent of the respondents had a monthly income of between 5001 and 7000 birr,
23.40 percent of the respondents earn a monthly income in a range between 7001 and 10000 birr
monthly. 15.03 And 9.83 percent of the respondents also produce an income between 10,001 &

33
15000 and above 15000 respectively. From the analysis one can understand majority of the
respondents were private company employees and run their own business. These shows because
of most of the Muslim community (users of IFB) prefer to engage and run their own business.

4.3. Descriptive Statistics Analysis of Factors Affecting Adoption of Interest Free Banking

4.3.1. Sharia Compliance

Under this sub-issue it is going to be seen the interest free banking from the perspective of
sheriah compliance. Accordingly, more than half of the respondents confirmed that the Bank has
Shiriah advisory Committe; further, more than 70 percent of the respondents replied that Interest
free banking service is Shariah compliant. In addition to this more than 80 percent of the
respondents confirmed that the bank used to keep the money of IFB services in separate vault
and it is provided completely free of interest. Overall, six questions were employed in order to
measure the banks interest free banking service, and hence, 21.03 percent of them strongly
agreed that the service is reconciled with sheriah compliance, 49.45 percent of the respondents
agreed that the service is Sheriah compliance, 22.40 percent of them neither agree nor disagree;
and the rest 5.74 and 1.36 disagreed and strongly disagreed on that the interest free banking is
sheriah compliance. In addition to this, as we observe from the table below shariah compliance
had a mean score of 3.82. Looking in to the mean statistics it is possible to conclude that
respondents were confirmed and agreed that the bank is consider the compliance of Sheriah
when it deliver the interest free banking service. Therefore, the analysis indicates that as much as
possible the bank is practicing the interest free banking service through considering the rules and
regulations of Shariah.

34
Table 4.2 description of response on Shariah compliance

Alternatives

Strongly Disagree Neutral Agree Strongly Mean St.

Dev
Disagree (2) (4) Agree

Statements (1 (5)

The Bank has Shiriah 0 6.56 42.62 36.07 14.75 3.59 0.8190
advisory Committee.

Interest free banking service 1.64 6.56 19.67 49.18 22.95 3.85 0.9042
is Shariah

The bank used to keep the 0 4.92 11.48 62.30 21.31 4 0.7257
money of IFB services in
separate vault.

Interest free banking service 0 3.28 14.75 44.26 37.70 4.16 0.7946
is provided completely free
of interest.

Interest free banking service 3.28 8.2 16.39 52.46 19.67 3.77 0.9668
is offered under separate
window

The bank split profit and 3.28 4.92 29.51 52.46 9.84 3.60 0.8564
loss as per the agreement.

Sharia Compliance 1.36 5.74 22.40 49.45 21.03 3.82 0.8444

35
4.3.2. Customers Awareness Regarding Products and Service

Customer awareness in this research context mean to what extent customers are aware regarding
the interest free banking service. Accordingly, more than 65 percent of the respondents have
awareness about the major types of interest free banking products. The bank offer differing kinds
of interest free banking service such as Quard, Amanah, Mudarabah, Murabahah, Musharaka,
Istisna, Ijarah and Salam. Apparently, more than 55 percent of the respondents have the
awareness and information about the above mentioned interest free banking service. In general,
eleven items were used to understand to what extent customers has awareness regarding the
interest free banking service; accordingly 9.34 percent of the respondents confirmed and strongly
agreed that they have the know about the service, 49.33 percent of them agreed that they have
the awareness, conversely, 21.46 and 18.62 percent of the respondents disagree and strongly
disagree that they have awareness about the service. Moreover, customer‟s awareness got a mean
score of 3.46. Overall, the statistics indicate that customers had the awareness and know how
about the interest free banking service the bank provides .

36
Table 4.3 customer awareness regarding interest free banking service

Alternatives

Strongly Disagree Neutral Agree Strongly Mean St.

Dev
Statements Disagree (2) (4) Agree

(1) (5)

You have awareness about 0 19.67 14.75 52.46 13.11 3.59 .9493
the major types of interest
free banking products.

I know the Interest free 1.64 13.11 11.48 62.30 11.48 3.68 .8988
banking products that
currently provided by the
bank.

I Know that Interest free 3.28 8.20 22.95 52.46 13.11 3.63 .9257
banking products are offered
to Muslim and non-Muslim
users.

I know about Quard 3.28 26.23 16.39 50.82 3.28 3.24 .9880

I know about Amanah 0 14.75 16.39 60.66 8.2 3.62 .8347

I know about Mudarabah 0 16.39 16.39 62.30 4.92 3.55 .8220

I know about Murabahah 1.64 16.39 26.23 49.18 6.56 3.42 .8973

I know about Musharaka 1.64 19.67 22.95 45.90 9.84 3.42 .9679

I know about Istisna 0 26.23 26.23 36.07 11.48 3.32 .9891

I know about Ijarah 1.64 21.31 29.51 37.70 9.84 3.32 .9723

I know about Salam 0 22.95 32.79 32.79 11.48 3.32 .9553

Customers Awareness 1.19 18.62 21.46 49.33 9.39 3.46 0.9273

Regarding products and
service

37
4.3.3. Advertisement about products and services

In most literatures advertisement influence the sales of product and services, in this context
advertisement represents to what extent the advertisement reaches to the customers, accordingly,
more than 62 percent of the respondents confirmed that the media gave them a good feeling
about using interest free banking and close to 54 percent of them replied that they understand the
advertisement from Electronic media and from printed media.. Furthermore, close to half of the
respondents said that the bank promotes about interest free banking services adequately. Apart
from these, five items were employed to measure to what extent the advertisement about
products and services reaches to the customers; accordingly, 11.8 percent of them strongly
agreed that the media advertising influence them to use the interest free banking, 44.91 agreed
that media creates a good awareness regarding the service. Conversely, 16.06 and 5.07 percent of
the respondents disagree and strongly disagreed regarding the awareness creation of the
advertisement. Moreover, advertisement had a mean score of 3.4. The mean score falls
between neutral and agree level, in most cases it approaches to the agree level, which indicate
making the advertisement using either electronic or printed media helps customers to know more
about the service whereby leads them to use the service.

38
Table 4.4 level of advertisement influence on customer’s awareness
Alternatives

Strongly Disagree Neutral Agree Strongly Mean ST.

Dev
Statements Disagree (2) (4) Agree

(1) (5)

The media gave me a good 1.64 14.75 21.31 44.26 18.03 3.62 .9965
feeling about using interest
free banking.

I understand 6.56 16.39 14.75 52.46 9.84 3.42 1.0804

Advertisement on Electronic
media.

The way the bank advertises 4.92 11.48 26.23 45.90 11.48 3.47 1.0038
is very interesting to create
awareness.

The bank promotes about 8.20 21.31 22.95 36.07 11.48 3.21 1.1491
IFB products and services
adequately.

I read and understand 6.56 16.39 22.95 45.90 8.20 3.32 1.0536
advertisement from printed
media.

Advertisement about 5.57 16.06 21.63 44.91 11.80 3.40 1.0566

products and services

4.3.4. Perceived relative advantage of the service

The perceived relative advantage refers to what different service advantage could the service
offer to the customers. Around 46 percent of the respondents confirmed that the interest free
banking services are cheaper as compared to the conventional banking; they (55%) also
suggested that interest free banking is trustworthy to adopt it. In addition to these, more than 60
percent of the respondents said that the bank provides interest free loans, although 24.5 percent
of them neither agree nor disagree regarding the interest free loan. Apart from these, more than
45 percent of the respondents replied that overall interest free banking services are better than the

39
conventional ones. The perceived relative advantage got a mean score of 3.38, lies between
neutral and agree level. Generally, 13.34 percent of the respondents strongly agreed that the
interest free banking had Perceived relative advantage, and 34.66 percent of them agreed the
interest free banking had Perceived relative advantage; on the other hand 14.52 percent of the
respondents disagree that the interest free banking had Perceived relative advantage, and 3.98
percent of them strongly disagree that interest free banking had Perceived relative advantage.
Apart from these, the relative advantage measurement had a mean score of 3.38. The analysis
implied that customers were believed that the interest free banking system had a relative
advantage compared the conventional one in terms of interest free loan, trust worthiness and its
security.
Table 4.5 Level of Perceived relative advantage of the service
Alternatives

Statements Strongly Disagree Neutral Agree Strongly Mean St.

Dev
Disagree (2) (4) Agree

(1) (5)

Profit –loss-sharing between the 3.28 9.84 37.70 39.34 9.84 3.42 .9155
lender and the borrower is
advantageous to you.

Interest free banking services are 3.28 21.31 37.70 24.59 13.11 3.22 1.0326
cheaper as compared to the
conventional banking.

Investments are more secure in 4.92 16.39 32.72 36.07 9.84 3.29 1.0158
interest free banking than
conventional one.

Interest free banking is trustworthy 1.64 11.48 31.15 40.98 14.75 3.55 .9344
to adopt it.

Provides free of interest loan. 3.28 11.48 24.59 39.34 21.31 3.63 1.0428

In general, interest free banking 6.56 14.75 32.79 31.15 14.75 3.32 1.0995
services are better than the
conventional ones.

Awareness program on service of 4.92 16.39 37.70 31.15 9.84 3.24 1.0046
IFB.

Perceived relative advantage of 3.98 14.52 33.47 34.66 13.34 3.38 1.0064
the service

40
4.3.5. Accessibility of the IFB services in all branches of the bank

Under this sub-section to what extent the service is accessible in all branches of the bank would
be assessed. Majority (57%) of the respondents agreed that a fully-fledged service were provided
in all branches and the geographical distribution of the branches were accessible. Apparently,
more than 63 percent of the respondents confirmed that ATM card banking services and internet
banking services was available for IFB in all branches. In addition to these around 75 percent of
the respondents said that the locations of the branches were conventional to customers. With
regard to accessibility, generally, 63.65 percent of the respondents agreed that the interest free
banking service were accessible in all branches of banks; conversely, 16.11 percent of the
respondents disagrees the accessibility of IFB in all branches of the bank, the rest 20.21 percent
of the respondents neither agree nor disagree. Apparently, the accessibility of IFB had a mean
score of 3.58, which lies between neutral and agree level, however, as the mean approaches to
the agree level, the analysis indicates that the IFB service is accessible in if not all but most of
the branches of the bank.
Table 4.6 Level of Accessibility of the IFB services in all branches of the bank
Alternatives

Strongly Disagre Neutral Agree Strongly Mean St. Dev

e
Statements Disagree (4) Agree
(2)
(1) (5)

Full-fledged services are provided in 6.56 11.48 24.59 40.98 16.39 3.49 1.0980
all branches.

The geographical Distribution of the 6.56 14.75 21.31 45.90 11.48 3.40 1.0792
branches are accessible.

Wide electronic communication 3.28 16.39 16.39 54.10 9.84 3.50 .9875
system.

ATM card banking services is 4.92 13.11 19.67 49.18 13.11 3.52 1.0360
available for IFB.

There is Internet banking services 1.64 8.20 22.95 45.90 21.31 3.77 .9321
for IFB in all branches

Convenient branch location. 3.28 6.56 16.39 52.46 21.31 3.81 .9516

Accessibility of the IFB services in 4.37 11.74 20.21 48.08 15.57 3.58 1.0140
all branches of the bank

41
4.4. Descriptive Summary of Each variable influences
Totally there were five factor variable were identified, all of the variables were measured using
Likert scale where 1 represents Strongly Disagree and 5 represents Strongly Agree. Apart from
these mean was used as a measure of central tendency, implies that the interpretation were also
made using the mean result. The first identified variable was Shariah Compliance; this variable
mean score was 3.82 as shown in the table below, this score falls between neutral and agree
level, in most cases in measure of mean if the mean is greater than 3.2 it is considered as agreed,
therefore, the analysis indicates that Shariah compliance that means since the Shariah allows
interest free banking, that makes customers to adopt the interest free banking service.
Apparently, all of the other perceived variables had a mean score of greater than 3.2; this implies
that customers had awareness regarding the interest free banking system; they see and read
advertisements and whereby the advertisement helps to join the interest free banking service.
Moreover, the mean statistics implied that the interest free banking service had a relative
advantage compared to the conventional one so that customers are attracted to use the service.
Likewise, the mean statistics indicates the interest free banking service were accessible in most
branches of the bank

Table 4.7 Descriptive Summary of Each variable influences

Mean St. Minimum Maximum

Deviation
Variables

Sharia Compliance 3.82 0.8444 1 5

Customers Awareness Regarding products and 3.46 0.9273 1 5

service

Advertisement about products and services 3.40 1.0566 1 5

Perceived relative advantage of the service 3.38 1.0064 1 5

Accessibility of the IFB services in all 3.58 1.0140 1 5

branches of the bank

Adoption Of Interest Free Banking 3.83 .8735 1 5

42
4.5 Correlation Analysis
Correlation shows the strength and direction of the relationship between variables. The linear
relationship between variables can be measured by correlation coefficient (r), which is
commonly called Pearson product moment correlation.

Measures of Association and descriptive Adjectives

Measure of Association Descriptive adjective

>0.00 to 0.20: < 0.00 to – 0.20 Very weak or very low
>0.20 to 0.40: < - 0.20 to – 0.40 Weak or low
>0.40 to 0.60: < - 0.40 to – 0.60 Moderate
>0.60 to 0.80: < - 0.60 to – 0.80 Strong or high
>0.80 to 1.0: < - 0.80 to – 1.0 Very strong or very high

43
Table 4. 8 Correlations Result of Variables

Adoption of Shariah Customers Advertisement Perceived Accessibility

Interest free Compliance Awareness about IFBRelative of the IFB
banking regarding products and advantage of services in all
services services the services. branches of
the bank

Pearson
1 .227** .659** .667** .609** .634**
Adoption of Correlation
Interest free
Sig. (2-tailed) .000 .000 .000 .000 .000
banking
N 366 366 366 366 366 366

Pearson
.227** 1 .266** .240** .279** .143**
Correlation
Sheria
Compliance Sig. (2-tailed) .000 .000 .000 .000 .006

N 366 366 366 366 366 366

Pearson
Customers .659** .266** 1 .718** .550** .747**
Correlation
Awareness
regarding Sig. (2-tailed) .000 .000 .000 .000 .000
services
N 366 366 366 366 366 366

Pearson
Advertisement Correlation .667** .240** .718** 1 .836** .745**
about IFB
products and Sig. (2-tailed) .000 .000 .000 .000 .000
services
N 366 366 366 366 366 366

Pearson
Perceived .609** .279** .550** .836** 1 .650**
Correlation
Relative
advantage of the Sig. (2-tailed) .000 .000 .000 .000 .000
services
N 366 366 366 366 366 366

Pearson
Accessibility of Correlation .634** .143** .747** .745** .650** 1
the IFB services
in all branches Sig. (2-tailed) .000 .006 .000 .000 .000
of the bank
N 366 366 366 366 366 366

**. Correlation is significant at the 0.01 level (2-tailed).

Source: own survey 2018.

44
Based on the survey result, the correlation between Sheria compliance and adoption of interest
free banking is positively correlated at (r =.227), (P < 0.01). According to macEachron (1982),
magnitude of correlation, the relationship between the variables is positive and weak. Similarly,
the correlation between Customers awareness regarding services and adoption of interest free
banking is positive and they are correlated at (R=.659), (P < 0.01). Accordingly, the relationship
between the two variables is very strong.

From the survey result, the correlation between advertisement about product and services and
adoption of interest free banking is positive and they are significantly correlated at (R=.667), (P
< 0.01) which reveals a strong correlation between the two variables. Perceived relative
advantages are found to be strongly correlated with adoption of interest free banking with R
value of .609, (P < 0.01). Positive and Strong correlation is found between accessibility of the
IFB services in all branches of the bank and adoption of interest free banking with (R= .634), ( P
< 0.01). In general, the correlation of five variables with adoption of interest free banking is
analysed with the help of SPSS Version 20. Sheriah compliance was found to have positive but
weak correlation with adoption of interest free banking. Customers awareness about products
and services ,advertisement about products and services, Perceived relative advantage and
accessibility of the IFB services in all branches of the bank have found to have very strong and
positive correlation is observed.

4.6 Regression Analysis

Regression analysis is a statistical measure that attempts to determine the strength of the
relationship between one dependent variables and a series of other changing variables known as
independent variables. More specifically, regression analysis helps one understand how the
typical value of the dependent variable (criterion variable) changes when any one of the
independent variables varied, while the other independent variables remain constant.

4.7 Common Assumption Test

The following are common assumption tests of multiple linear regressions done in this study.

4.7.1 Multicolinearity Test

In multiple regression analysis, multi co linearity refers to a situation where a number of
independent variables are closely correlated to one another. Multicollinearity test is done using

45
variance inflation factor (VIF). The VIF indicates whether predictors have a strong linear
relationship with other predictor(S). As a rule of thumb, if the VIF of a variable exeeds10, there
will be a serious multicollinearity problem. The tolerance statistics, which is the reciprocal of
VIF (1/VIF), also used to test multicollinearity. Tolerance value below 0.1 indicates serious
multicollinearity problem.

As depicted on table 4.2 below, the value of VIF does not exceed 10 and the value of tolerance is
not below 0.1. Therefore, it indicates that there is no multicollinearity among the predictor
variables.

Table 4.9 Multicollinearity test statistics

Coefficientsa

Model Collinearity Statistics

Tolerance VIF

Sheriah compliance .873 1.145

Awareness of IFB .352 2.842

Advertisement .196 5.110

1
Relative advantages
.278 3.602
of IFB

Accessibility of IFB
.334 2.994
in all branches

a. Dependent Variable: Adoption Of IFB

Source: own survey 2018.

46
4.7.2 Linearity Test
Linearity refers to the degree to which the change in the dependent variables is related to the
change in the independent variables. The best test for normality distributes error is normal
probability plot of the residuals. If the distribution is normal, the points on such a plot should fall
close to the diagonal reference line. Therefore the below p-p plot approximately fall close to the
diagonal reference line. Thus it fulfils the linearity assumption of multiple linear regressions.

Figure 2. Dependent Variable: Normal P-P plot of Regression of Adoption of IFB

(Linearity Test )

47
4.7.3 Normality Test

The following figure shows the frequency distribution of the standardized residual compared to a
normal distribution. As can been seen from the figure below, the data points are close to the
diagonal line confirming that there is normality.

Figure 3. Normal P-P Plot of Adoption of IFB (Normality test)

4.7.4 Autocorrelation/Durbin Watson Test

According to Andy (2009), the acceptable Durbin- Watson range is between 1.5 and 2.5. In this
study the Durbin-Watson value is 1.621 which is between the acceptable ranges; show that there
were no auto correlation problems in the data used in this research.

48
4.8. ANOVA Model Fit

Table 4. 10 ANOVA

Model Sum of Df Mean Square F Sig.

Squares

Regression 1189.155 5 237.831 82.953 .000b

1 Residual 1032.145 360 2.867

Total 2221.301 365

a. Dependent Variable: Adoption of interest free banking.

b. Predictors: (Constant) Accessibility of IFB Services ,Sheria

Compliance, relative advantage of IFB , Awareness of IFB, Advertisement
about IFB.

The result in the ANOVA table 4.4 above confirmed the significance of the overall model fit by
P-value of 0.000 which is below alpha level of, i.e. 0.05.

49
4.9. Model Summary
Table 4 .11 Model Summary

Model R R Square Adjusted R Std. Error of the Durbin-Watson

Square Estimate

1 .732a .535 .529 1.69324 1.621

a. Dependent Variable: Adoption of IFB.

b. Predictors: (Constant), Accessibility of IFB Services, Sheria Compliance, Relative

advantage of IFB, Awareness of IFB, Advertisement about IFB.

From the table 4.5 above, R is the square root of R. R square is called the coefficient of
determination which indicates how adoption of interest free banking varied with independent
variables (Accessibility of IFB Services, Sheriah Compliance, Relative advantage of IFB,
Awareness of IFB, and Advertisement about IFB) in the organization. From the table, the value
of R2 is 0.535 implying that, 53.5% of the variation of adoption of interest free banking is
explained by the five independent variables (Accessibility of IFB Services ,Sheria Compliance,
Relative advantage of IFB , Awareness of IFB, Advertisement about IFB.) and the unexplained
variables may explain the variation of adoption of interest free banking accounted 46.5%.

50
4.10 Beta Coefficients

Table 4. 12 Beta Coefficients

Model Unstandardized Standardized Sig.

Coefficients Coefficients

B Std. Error Beta

(Constant) .600 .759 .430

Sheriha Compliance .027 .038 .027 .000

Awareness of IFB services .299 .055 .327 .000

1 Advertisement of IFB services .163 .088 .150 .000

Relative advantage of IFB

.160 .053 .205 .003
services

Accessibility of IFB services in

.160 .070 .141 .024
all branches

a. Dependent Variable: Adoption of interest free banking.

The established regression equation was:

Y = β0 + β1x1 + β2x2 + β3x3 + β4x4 + β5x5 + e

Where, Y = the dependent variable (adoption of interest free banking).

β0 = is constant when all variables become zero (y- intercept).

X1 = Sheriah compliance.

X2 = Awareness of IFB services.

51
 X3 = Advertisement of IFB Services

X4 = Relative advantage of IFB

X5 = Accessibility of IFB

e = error term

(B1 to B5 were coefficients of the multiple regression equation).

Y = .6 + 0.027x1 ++ 0.299x2 + 0.163x3 + 0.160x4 + 0.160x5 + 0.465

As we can see from the above table 4.6, multiple regressions of all the predictors are significant
on the adoption of Interest free banking at P < 0.05. Beta weight reveals that the impact of each
sheriah compliance, customers awareness about IFB services , advertisement on IFB services ,
relative advantage of IFB services, and accessibility of IFB services at all branches on adoption
of interest free banking are 0.027, 0.299, 0.163, 0.160 and 0.160 respectively. This informs the
predicted change or any improvement in the dependent variable (adoption of interest free
banking) for every unit increase in the predictor, while other variables being held constant.

Thus the un standardised Beta weight describes that as United Bank increased it‟s awareness
creation by 1% adoption of IFB will respond by 29.9% and as United Bank increased its Sharia
compliance by 1% adoption of IFB will respond by 2.7% and also while the bank increased the
advertisement of IFB by 1% adoption of IFB will increased by 16.3%,as united bank S.c
increased the relative advantage of IFB by 1%adoption of IFB will increased by 16%, and as the
bank increased its accessibility of IFB by 1% adoption of IFB will increased by16%.

52
4.11 Hypothesis Test Result
The researcher used Pearson‟s correlation coefficient to test the hypothesis. The result of the
Pearson‟s correlation presented in table 4.8, interpreted by using the Pearson‟s correlation
coefficient relationship between the predictors and outcome variable.

Hypothesis Hypothesis P-value Relationship Result

No Direction

Ha Sheria compliance has a positive .000 Positive Reject Ho

and significant effect in adoption
of interest free banking.

Ha Custer awareness has a positive .000 Positive Reject Ho

and significant effect in adoption
of interest free banking.

Ha Perceived relative advantages .000 Positive Reject Ho

have a positive and significant
effect in adoption of interest free
banking.

Ha Accessibility of IFB services has .003 Positive Reject Ho

positive and significant effect in
adoption of interest free banking.

Ha Advertisement has a positive and .024 Positive Reject Ho

significant effect in adoption of
interest free banking.

Based on the survey result, the correlation between Sheria compliance and adoption of interest
free banking is positively correlated at (r =.227), (P < 0.01). According to macEachron (1982),
magnitude of correlation, the relationship between the variables is positive and weak. Similarly,
the correlation between Customers awareness regarding services and adoption of interest free
banking is positive and they are correlated at (R=.659), (P < 0.01). Accordingly, the relationship
between the two variables is very strong.

53
From the survey result, the correlation between advertisement about product and services and
adoption of interest free banking is positive and they are significantly correlated at (R=.667), (P
< 0.01) which reveals a strong correlation between the two variables. Perceived relative
advantages are found to be strongly correlated with adoption of interest free banking with R
value of .609, (P < 0.01). Positive and Strong correlation is found between accessibility of the
IFB services in all branches of the bank and adoption of interest free banking with (R= .634), (P
< 0.01). In general, the correlation of five variables with adoption of interest free banking is
analysed with the help of SPSS Version 20. Sheriah compliance was found to have positive but
weak correlation with adoption of interest free banking. Customers awareness about products
and services ,advertisement about products and services, Perceived relative advantage and
accessibility of the IFB services in all branches of the bank have found to have very strong and
positive correlation is observed.

Outcomes of this study propose that awareness about product and services of IFB have the most
significant impact on adoption to Interest free banking with united bank S.C. This shows that
people who are more aware are more likely to adopt IFB. Contradicting this, previous research
on this topic ranked it third, whereas networking and adequate information are prior to adoption
of IFB (Adnan et al., 2011). Findings of current study suggest that advertisement regarding
services is the second and most important criteria for adoption of IFB. The results are supported
by Taylor and Stanley (1999), Kennington et al (1996), who concluded the Perceived relative
advantage and accessibility as a third important factor relative to other estimators.. Again it is
possible to see findings of Haron et al (1994) and Adnan et al (2011) are in conformity with the
current findings. It is proved that accessibility of IFB is a significant antecedent of Adoption of
IFB, in terms of extended number of branches and more convenient branch locations. IFB are
supposed to offer a range of financial Products & Services, in order to create strong customer
base. It is obvious from the findings that sharia compliance level is low, as well as moderate
significant relationship with adoption to IFB is found.

54
 CHAPTER FIVE
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of Major Findings

The research was carried out in order to find out the factors that affect adoption of interest free
banking service at United Bank S.C.

Causal research designs were employed and data were collected from 366 customers. In line
with the objectives the following are the major findings of this study:

366 customers were participated on this study where 57.38 percent of the respondents were male
and the rest 42. 62 percent of them were female respondents and majority of them were
certificate, holders apart from these the very majority of the customer respondents works on self-
employed.

The income level represents how much income the respondents are generating monthly;
accordingly, 11.83 percent of the respondents had a monthly income of below 3000 birr monthly;
21.58 percent of the respondents generate a monthly income of between 3001 and 5000 birr.
Further, 18.31 percent of the respondents had a monthly income of between 5001 and 7000 birr,
23.40 percent of the respondents earn a monthly income in a range between 7001 and 10000 birr
monthly. 15.03 And 9.83 percent of the respondents also produce an income between 10,001 &
15000 and above 15000 respectively. From the analysis one can understand majority of the
respondents were private company employees and run their own business.

 From the findings of quantitative results sheriah compliance have positive influence that
correlated at r= .227, (p < 0.01) however it is positively correlated with adoption of IFB,
being other variables constant.
 The correlation between customers awareness regarding services and adoption of IFB is
positive and significantly correlated at (r = .659), (p < 0.01) this shows that the
relationship between the two variables is very strong.
 From the survey result the correlation between advertisement of IFB about the product
and services and adoption of IFB is positive and significantly correlated with adoption of
IFB with R value of .609, (p < 0.01).
55
  Perceived relative advantages are strongly correlated with adoption of IFB with R value
of .609, (p < 0.01).
 Positive and strong correlation is found between accessibility of the IFB services in
selected branches of the bank and adoption of IFB with ( R = .634), (p<0.01).
 The independent variables Selected for the model,( Shariah compliance ,Awareness
regarding IFB ,Advertisement on IFB, Relative advantage of IFB, and Accessibility of
IFB at United Bank S.C. ) 53.5 % of the variation in adoption of IFB. But, the rest
variations (46.5%) are from other unstudied variables. This implies narrowing the
positive gap will increase the adoption of IFB at united bank S.C.
 From the finding and the results of the analysis it can be concluded that all maintained
factors can affect the adoption of IFB.
 The finding showed that there are gaps of awareness of customers regarding all factors
that have discussed .
 The finding from the regression analysis showed that there are other factors that have not
included in the research which affects the adoption of IFB.

In general, the correlation of five variables with adoption of IFB is analyzed with the help of
SPSS version 20, except Sheriah compliance with positive but weak correlation, with adoption of
IFB; all independent variables have significantly positive and strong relation with the adoption of
IFB at United Bank S.C.

56
5.2 Conclusions

Based on the analysis of the data and findings the following conclusions are drawn:
 From the demographic data of the respondents one can concluded that as the statistics
indicates that majority of the interest free bank service customers were young and
educated at different level and this help the bank to easily promote the services and
products . There is also potential for the bank to retain its customer for long period of
time as the majority of its customers are aged below 40 years.
 The correlation analysis shows that there exist significant and positive relationships
between independent variables and adoption of IFB. Therefore improvement in all
independent variables can increase the adoption of IFB and also at the same time it helps
to retain the existing customers of IFB for the United Bank S.C.
 The finding of the study reveals that based on the correlation and regression results , if
the bank utilize its capacity very well, there is a potential for the adoption of IFB in
United Bank S.C.
 As the finding of the study reveals that the (regression) R square result shows 53.5% of
the variation, narrowing the gap will increase the adoption of IFB at United Bank S.C.
 The finding of the study shows from Beta unstandardized coefficients result shows all
indicated independent variables are primarily important for the adoption of IFB while
Shariah compliance relatively shows moderate effects.

57
5.3 Recommendations

Whether interest free banking is important or not in Ethiopian context needs more intensive
study; however, based on the findings of this study the researcher forwards the following
recommendations:

 Compared to the number of population of Muslim community the number of customers is

insignificant, and hence a focused strategy should be provided that shows a way of
developing and expanding the service as well as competition with other conventional
banks.
 The services of interest free banking should be clear to the customers of the bank, and a
separate window should be provided, if they have complete knowhow about their bank
then they can easily motivated to adopt IFB at United bank S.C.
 Since Sheriah compliance, awareness of IFB, perceived relative advantage, and
advertisement of the service, determine the intensity of adoption of IFB, therefore the
bank needs to work more on public awareness regarding interest free banking to be
adopted by customers.
 The Bank has to increase the accessibility of IFB products through increasing IFBW at
customers‟ convenience and avail its products/services in most of and major branches
with the necessary facility that will increase the marketability of IFB products/services.
 As IFB products are new to the market, it is the responsibility of the bank to market its
products. Thus, the bank has to promote the products/services aggressively by developing
good marketing and promotion strategy that will promote the products to the market and
create awareness to the general public. As the finding of this research showed that
customers have low level of awareness about IFB products, so, awareness creation
particularly towards the target market (the Muslim community) must be done
consistently. The bank has to develop well planned and effective marketing and
promotion strategy like reaching the target market through the religious leader, use
praying days where significant number of the target population easily available to
advertise the IFB products in addition to the mainstream media and customer session.
The awareness creation has to centre to clear the misconception about IFB and its
product/services.

58
  Additionally the bank has work more and committed on marketing of IFB services and
products of the bank for better results and awareness of customers.
Generalization has become the limitation to this study because it did not include all branches and
other competing banks as well as under different environment setting. However, the findings of
this study are able to give some dimensions for practitioners and researchers to measure
customer‟s behavior in future research. And a future research could have as its focus the quality
of services that are available to customers.

59
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64
APPENDICES
St. Mary‟s University

School Of Graduate Studies

Department Of Post Graduate Study for General Masters of Business Administration (MBA)

A: Questionnaires

Dear Sir / Madam

Dear Respondents:

This questionnaire is developed to conduct research on Factors Affecting Adoption Of interest

free banking Services at United Bank S.C. Hence, I hereby kindly request your participation in
completing the questionnaire. I assure you that all information you shall provide will be kept
strictly confidential.

Finally, I thank you very much in advance for your cooperation and time to fill the questionnaire.

For any information and unclear situation please contact me by my Email address:
bisratbekele04@gmail.com; Mobile Phone: 0911648528

Important aspects of the questionnaire

No need to write your name

For all questions, mark or circle the alternative numbers of your choice

Thank you in advance,

Bisrat Bekele

GMBA student in St. Mary‟s University

65
Section I: Demographic profile of respondents; please indicate the following by ticking (√) on
the spaces provided in front of the response options.

1. Gender Male □ Female □

2. Age : 1. 18-28 2.29-38 3.39-48 4. Above 49
3. Marital status: Married Single Separated Widow
4. Educational Level:

1.Certificate □ 2.Diploma Holder □ 3.First Degree Holder □

Masters Degree and above holder □ 5. Others

5. Type of employment:

Public sector Private sector Self-employed Student others

6. - Income States (In ETB/month):-

1-Less than 3000

2-3001--5000.00

35001--7000

4-7001--10,000

5-10,001--15,000

6-Above 15,000

66
Section II: Questionnaires Related with factors that affect adoption of IFB system.

After reading each statement, please rate each of the following statements by putting (√) Mark or
circle on the appropriate number with respect to your level of agreement/disagreement against
each question. (Where; 1=“Strongly Disagree (SD)”2=”Disagree (D)” 3=”Neutral (N)”
4=”Agree (A)” 5=”Strongly

Agree (SA)”)

Statements Alternatives
Sharia Compliance Strongly Disagree Neutral Agree Strongly
Disagree (2) (4) Agree
(1) (5)
1 The Bank has Shiriah advisory
Committee.
2 Interest free banking service is
Shariah compliant
3 The bank used to keep the money of
IFB services in separate vault.
4 Interest free banking service is
provided completely free of
interest.
5 Interest free banking service is
offered under separate window
6 The bank split profit and loss as per
the agreement.
Customers Awareness Regarding
products and service
1 You have awareness about the
major types of interest free banking
products.
2 I know the Interest free banking
products that currently provided by
the bank.

67
3 I Know that Interest free banking
products are offered to Muslim and
non Muslim users.
4 I know about Amanah
5 I know about Mudarabah
6 I know about Murabahah
7 I know about Musharaka
8 I know about Istisna
9 I know about Ijarah
10 I know about Salam
Advertisement about products and
services
1 The media gave me a good feeling
about using interest free banking.
2 I understand Advertisement on
Electronic media.
3 The way the bank advertises is very
interesting to create awareness.
4 The bank promotes about IFB
products and services adequately.
5 I read and understand advertisement
from printed media.
Perceived relative advantage of the
service

1 Profit –loss-sharing between the

lender and the borrower is
advantageous to you.
2 Interest free banking services are
cheaper as compared to the
conventional banking.
3 Investments are more secure in
interest free banking than

68
 conventional one.
4 Interest free banking is trustworthy
to adopt it.
5 Provides free of interest loan.
6 In general, interest free banking
services are better than the
conventional ones.
7 Awareness program on service of
IFB.
Accessibility of the IFB services in
all branches of the bank.
1 Full fledged services are provided
in all branches.
2 The geographical Distribution of
the branches are accessible.
3 Wide electronic communication
system.
4 ATM card banking services is
available for IFB.
5 There is Internet banking services
for IFB in all branches
6 Convenient branch location.
Adoption Of Interest Free Banking
1 In overall, I am adopting the
interest free banking service of
United Bank S.c.

69
 በቅድሰት ማርያም ዩኒቨርሲቲ

ድህረ ምረቃ ትምህርት ክፍሌ

ተ.ቁ :---------

ክቡር መሊሾች

ከወሇድ ነፃ የባንክ አገሌግልት ተጠቃሚ ዯንበኞች መጠይቅ

ይህ መጠይቅ በቅድሰት ማርያም ዩኒቨርሲቲ ድህረ ምረቃ ትምህርት ክፍሌ በቢዝነስ አድሚንስትሬሽን ሇማስተርስ ዱግሪ
ከፊሌ ማሟያ ጥናት የሚያገሇግሌ ሲሆን አሊማው በሕብረት ባንክ አ.ማ በአ.አ ስሇሚሰጠው ከወሇድ ነፃ የባንክ አገሌግልት
መረጃ ሇመሰብሰብ ነው:: መረጃው የሚያገሇግሇው ርዕሱ በሕብርት ባንክ አ.ማ ከወሇድ ነፃ የባንክ አገሌግልቶችን ሇመቀበሌ
እና ሇመጠቀም (adoption) ሊይ ያለ ተፅዕኖ ፈጣሪዎች ‟ ነው:: ( Factors Affecting Adoption Of interest free
banking Services at United Bank S.C) የሚሰበሰበው መረጃ ሇጥናቱ ብቻ የሚውሌ ነው:: ስሇዚህ የሚከተሇትን
ጥያቄዎች እንዱሞለ በአክብሮት እጠይቃሇሁ ::

ሇትብብርዎት በቅድሚያ አመሰግናሇሁ፡፡

አጠቃሊይ መመሪያ

ስምዎትን መፃፍ አያስፈሌግም

አማራጭ ሊሌዋቸው መጠይቆች ከተሰጡት አማራጮች ይምረጡ

70
 ክፍሌ አንድ: የግሌ መረጃ

1.ጾታ ሀ.ወንድ ሇ.ሴት

2.ዕድሜ፡ ------------
3. ሀይማኖት:_ሙስሉም ክርስቲያን ላሊ
4የጋብቻ ሁኔታ ያገባ ያሊገባ
5.የትምህርት ዯረጃ
የመጀመሪያ ዯረጃ ሁሇተኛ ዯረጃ /ሰርትፊኬት ዱፕልማ የመጀመሪያ
ዱግሪ ማስተርስ ዱግሪ እና ከዚያ በሊይ
6. የገቢ መጠን
 ከ 3000 በታች
 ከ3000-5000
 5001-7000
 7001-10000
 10001-15000
 15000 በሊይ

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ክፍሌ ሁሇት ፡ ስሇ ከወሇድ ነፃ የባንክ አገሌግልት ሊይ ተፅዕኖ ፈጣሪ ነገሮች

እባክዎትን ከዚህ በታች ከ1-5 ባሇው መሇኪያ ሇእያንዲነደ ጥያቄ ያልትን አመሇካከት በቀረቡት አማራጮች መሰረት ይህን
ምሌክት√ ያድርጉ ::

1-ስሇ ሸሪዓ መስፈርቶች

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4

1 ባንኩ የሸሪዓ አማካሪ ኮሚቴ

አሇው
2 ከወሇድ ነፃ የባንክ አገሌግልቱ የ
ሸሪዓ መስፈርቶችን ያሟሊ ነው
3 ከወሇድ ነፃ የባንክ አገሌግልቱ
የራሱ የሆነ የተሇየ የገንዘብ
ማስቀመጫ አሇው
4 ከወሇድ ነፃ የባንክ አገሌግልቱ መለ
በመለ ከወሇድ የነጻ ነው
5 ከወሇድ ነፃ የባንክ አገሌግልቱ
በተሇየ መስኮት ይሰጣሌ
6 ከወሇድ ነፃ የባንክ አገሌግልቱ
ትርፍና ኪሳራ በስምምነቱ መሰረት
ተግባራዊ ይዯረጋሌ፡፡

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2. ስሇ የወሇድ ነፃ የባንክ አገሌግልት የተጠቃሚ ግንዛቤ አመሇካከት

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4

1 ስሇ ከወሇድ ነፃ የባንክ
አገሌግልቶች በቂ እውቀት አሇኝ::

2 አሁን በባንኩ እየተሰጡ ያሇትን

ከወሇድ ነፃ የባንክ አገሌግልቶች
አውቃሇሁ
3 ከወሇድ ነፃ የባንክ አገሌግልቶች
የተሇያዩ ሀይማኖት ተከታዮች
መጠቀም እንዯሚችሇ አውቃሇሁ::
4 አማና የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ
5 ሙዱረባ የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ
6 ሙራባሃ የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ
7 ሙሻረካ የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ::
8 ኢስቲስና የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ
9 ኢጃራ የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ
10 ሰሊም የተሰኘውን ከወሇድ ነፃ
የባንክ አገሌግልት አውቃሇሁ

3. ስሇ ከወሇድ ነፃ የባንክ አገሌግልት የማስታወቂያ ተጽእኖ

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4

1 ማስታወቂያዎች ከወሇድ ነፃ
የባንክ አገሌግልት
እንድቀበሌ ተጽዕኖ
አሳድረውብኛሇ፡፡

2 ከኤላክትሮኒክ ሚዱያ
ያገኘሁት መረጃ ከወሇድ ነፃ

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 የባንክ አገሌግልት
እንድጠቀማቸው ተፅዕኖ
አሳድሮብኛሌ ፡

3 ባንኩ ከወሇድ ነፃ የባንክ

አገሌግልትን
የሚያስተዋውቅበት መንገድ
ተወዲጅና ተስማሚ ነው::
4 ባንኩ ከወሇድ ነፃ የባንክ
አገሌግልትን በበቂ ሁኔታ
አስተዋውቋሌ ፡፡
5 ባንኩ ከወሇድ ነፃ የባንክ
አገሌግልትን አስመሌክቶ
የሚያወጣቸውን የተሇያዩ
ማስታወቂያዎች ከህትመት
ውጤት በማግኘት
ተረድቻሇሁ

4. ስሇ አንፃራዊ ብሌጫ

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4
1 ከወሇድ ነፃ የባንክ አገሌግልት
ፋይናንሱ ትርፍና ኪሳራ
መጋራት ሉይ የተመሰረተ ስሇሆነ
ከነባሩ በጣም ጠቃሚ ነው፡፡
2 ከወሇድ ነፃ የባንክ አገሌግልቱ ዋጋ
ከነበሩ የተሻሇ ርካሽ ነው
3 ከወሇድ ነፃ የባንክ አገሌግልቱ
ሇኢንቨስትመንት ከነባሩ የተሻሇ
አስተማማኝ ነው፡፡
4 ከወሇድ ነፃ የባንክ አገሌግልቱ
ተቀበል ስራ ሇይ ሇማዋሌ ከነባሩ
የተሻሇ አስተማማኝ ነው፡፡
5 ከወሇድ ነፃ የባንክ አገሌግልቱ
ያሇወሇድ በማበዯሩ ከነባሩ የተሻሇ
ነው
6 ስሇ ወሇድ ነፃ የባንክ አገሌግልት
የሚሰጠው የግንዛቤ ማስጨበጫ
ከነባሩ የተሻሇ እንዱሆን
አድርጎታሌ፡፡
6 በአጠቃሇይ ከወሇድ ነፃ የባንክ
አገሌግልቱ ከነባሩ የተሻሇ ነው፡፡

74
5. ስሇ ተዯራሽነት

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4
1 በሁለም ቅርንጫፎች የተመሟሊ
ከወሇድ ነፃ የባንክ አገሌግልት
ይሰጣሌ፡፡
2 የባንኩ ቅርነጫፎች የአካባቢ
ስርጭት ተዯራሽነት በቂ ነው፡፡
3 የባንኩ ቅርነጫፎች ሇአገሌግልት
ተስማሚ በሆኑ ቦታዎች ሊይ
ይገኛለ፡፡
4 ከወሇድ ነፃ የባንክ አገሌግልቱ
ኔትወርክ በቂ ነው፡፡
5 ባንኩ ከወሇድ ነፃ ባንክ ኤቲኤም
ካርድ አገሌግልት ይሰጣሌ፡፡
6 ባንኩ ከወሇድ ነፃ ባንክ የኢንተርኔት
አገሌግልት ይሰጣሌ፡፡

6. ስሇ መቀበሌና አድራጎት አሰተሳሰብ (Adoption)

መስፈርቶች በጣም አሌስማማም ገሇሌተኛ እስማማሇሁ በጣም

አሌስማማም 1 እስማማሇሁ 5
2 3 4

1 በሕብረት ባንክ አ.ማ ከወሇድ

ነፃ የባንክ አገሌግልት ያሇኝ
ጠቅሊሊ አቀባበሌናእይታዬ
ከፍተኛ ነው፡፡

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