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ODA BULTUM UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
ASSESSMENT OF FACTORS AFFECTING THE COMPETITIVENESS OF

COMMERCIAL BANK OF ETHIOPIA: (IN CASE OF CHIRO BRANCH)
BY: BETELIHEM MIRO

I'D: 1071/13
A RESEARCH PAPER SUBMITTED TO DEPARTMENT OF ACCOUNTING

AND FINANCE FOR PARTIAL FULFILLMENT OF REQUIREMENT FOR
THE BACHELOR OF ART (BA) DEGREE IN ACCOUNTING AND
FINANCE
ADVISOR: TIHITNA (MSc)
DEC, 2024
CHIRO, ETHIOPIA
ACKNOWLEDGEMENT
First of all would like to praise the almighty God for all his unspeakable gifts throughout my life,
Secondly I would like to express my deep gratitude to Oda bultum University College of
business and economics for this golden educational opportunity. and I would like to thanks my
adviser Inst. Tihtna for assisting and providing important information and comments while
preparing this research paper. I am also very grateful for my family who were beside me
throughout my endeavor in their moral and material support, Finally I would like to extend my
sincere thanks to my friends for giving me their plentiful support for doing this
I
ABSTRACT
This study was conducted on Assessment of factors affecting the competitiveness of commercial
bank of Ethiopia in case study of chiro branch. the researcher would examine commercial bank
activates factor that affect competitiveness of commercial bank in Banking industry, bank play a
great role for the customers’ personal life and business activities by giving awareness about the
service provided by bank and by saving their money to prevent them from unexpected dangerous
and robbery and also Banks play a key role in improving economic efficiency by channeling
funds from resource surplus unit to those with better productive investment opportunities.
The researcher used descriptive survey in order to assess factor affecting the competitiveness of
commercial bank it tries to describe and explain paper through qualitative and quantitative type
of data. Researcher also collect and analyses data to meet objective and give answer to question
would use both primary and secondary data. In order to assess factor that affect bank
competitiveness the study encompass methodology of study such as, description of study area,
target population, sampling technique, sample size was included in this paper. So, the
researchers was proposed solution based on gathered relevant information for the management
of banks about existing and changing environment. From This finding many parties was
benefited from the result that has emerged from the results of the study and these parties are;
Bank managers, Investors, and Customers who are interested in knowing the ability of
commercial bank to deposit their deposit based on the indicators of success of the companies.
This finding was also be used as a base for further research findings on the area.
KEY WORD: COMMERCIAL BANK, COMPETITION, CUSTOMER, INNOVATION
II
Contents
ACKNOWLEDGEMENT ............................................................................................................... I
ABSTRACT ................................................................................................................................... II
ACRONYM AND ABBREVIATION ...................................................................................... V
CHAPTER ONE ........................................................................................................................... 1
1. INTRODUCTION................................................................................................................. 1
1.1. Background of the Study .................................................................................................. 1
1.2. Background of the Organization ...................................................................................... 3
1.3. Statement of the problem ................................................................................................. 4
1.4. Basic research questions................................................................................................... 5
1.5. Objective of the study ...................................................................................................... 5
1.5.1. General objective ...................................................................................................... 5
1.5.2. Specific objective ...................................................................................................... 5
1.6. Significance of the study .................................................................................................. 6
1.7. Scope of the study ............................................................................................................ 6
1.8. Organizations of the Study ............................................................................................... 6
CHAPTER TWO .......................................................................................................................... 7
2. REVIEW OF RELATED LITERATURE ......................................................................... 7
2.1. Concept of Competition in bank ...................................................................................... 7
2.2. Generic Competitive Strategies .................................................................................... 7
2.2.1. Competitive Advantage in Service Quality .............................................................. 8
2.2.2. Competitive Advantage in Technology and Operations ........................................... 8
2.2.3. Competitive Advantage in Human Resources .......................................................... 8
2.2.4. Competitive Advantage in Leadership Quality......................................................... 9
2.3. Banks Profitability............................................................................................................ 9
2.3.1. Profit Measures ......................................................................................................... 9
2.3.2. Determinant of profitability .................................................................................... 10
2.3.3. Factors affecting the profitability of the bank......................................................... 11
2.4. Determinants of Banking Competition .......................................................................... 11
2.5. Liability of Commercial Bank .................................................................................... 11
2.6. Empirical Literature Review .......................................................................................... 12
CHAPTER THREE .................................................................................................................... 14
3. RESEARCH METHODOLOGY.......................................................................................... 14
III
INTRODUCTION .................................................................................................................... 14
3.1. Research Design................................................................................................................. 14
3.3. Research approach ............................................................................................................. 14
3.4. source of data and collection technique ............................................................................ 15
3.4.1. Source of data ................................................................................................................. 15
3.6. Method of data analysis ..................................................................................................... 16
CHAPTER-FOUR ...................................................................................................................... 17
DATA ANALYSIS AND INTERPRETATION ....................................................................... 17
4.1. Introduction ........................................................................................................................ 17
4.2. Part one: Analysis of questionnaires for customer respondents ........................................ 18
4.2.1. Sex distribution of customer respondents ................................................................... 18
4.2.2. Age distribution of customers respondents ................................................................. 18
4.2.3. Occupation of customer .............................................................................................. 19
4.2.4. Customer service and satisfaction ............................................................................... 20
4.2.5. Customers using private bank ..................................................................................... 21
4.2.6. Contribution of bank for customer personal life ......................................................... 21
4.2.7. Services of bank .......................................................................................................... 22
4.2.8. Types of securities ...................................................................................................... 25
4.3. Part two: - Analysis of questionnaires for employees respondents ................................... 25
4.3.1. Sex distribution of employee respondents .................................................................. 25
4.3.2. Age distribution of employees .................................................................................... 26
4.3.3. Position of employees ................................................................................................. 27
4.3.4. Duration of employees in the bank ............................................................................. 28
4.3.5. Service rendered by the bank audits Profitability ....................................................... 28
4.3.6. Types of securities used for advancing loan ............................................................... 30
4.3.7. Level of competition ................................................................................................... 30
4.3.8. The impact of market competition on profitability and market share of the bank. .... 31
4.3.9. Participation of bank on investment ........................................................................... 31
4.3.10. Impact of capitalization of asset utilization and professional capitalization asset
utilization and professional ................................................................................................... 32
5.1. Conclusion ......................................................................................................................... 34
5.2. Recommendation ............................................................................................................... 35
REFERENCES ............................................................................................................................ 36
APPENDIX-I ................................................................................................................................. 1
APPENDEX_2 ............................................................................................................................... 1
IV
ACRONYM AND ABBREVIATION
NCA, Network Computing And Applications

CBE -Commercial Bank of Ethiopia
ROA -Return on assets
ROE -Return on equity
ATMs -Automatic Teller Machines
NIM -Net interest margin
V
CHAPTER ONE
1. INTRODUCTION
1.1. Background of the Study

Banks play a key role in improving economic efficiency by channeling funds from resource
surplus unit to those with better productive investment opportunities. Banks also play key role in
trade and payment system by significantly reducing transaction costs and increasing convenience
(NCA, 2006).
In less monetized countries, like Ethiopia, whilst financial sector is dominated by banking
industry, effective and efficient functioning of the latter has significant role in accelerating
economic growth. To enhance the role of banks in an economy, competition was an important
driving force; without competition, it was improbable to bring about efficiency and foster
financial sector development. In other words, insufficient competition may result in substantial
social losses on account of higher price, higher transaction cost, lower credit supply, lack of
innovation and poor service quality. Although competition has a positive effect on efficiency and
economic growth, there was certain characteristics that may indicate restrictions on banking. In
the absence of proper information processing (where the problem was eminent in less developed
economies), banking industry is more vulnerable to instability relative to other industries, owing
to the existence of short term liability versus long term assets and the presence of highly
leveraged firms and banks that have an incentive to engage in risky behavior (Northcott, 2004).
Intensive competition may lead to excessive risk taking by banks, which would result in
deterioration of the quality of banks’ lending portfolio and balance sheets. If banks suffer
deterioration in their balance sheets and so have a substantial contraction in their capital, they
had fewer resources to lend, hence a decline in investment spending, and slower economic
activity. If the deterioration in bank balance sheets is severe enough, banks would start to fail,
and fear can spread from one bank to another. Depositors, fearing for the safety of their deposits
and not knowing the quality of banks’ loan portfolios, withdraw their deposits to the point that
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multiple bank failures occur, whose ultimate consequence would be severe contraction in
economic activity. This suggests the need for some degree of market power in achieving stability
and efficient allocation of resources in banking industry (Padoda, 2000).
Large internationally active banks and securities firms have responded to the opportunities and
challenges of an increasingly competitive global market environment with a wide range of
strategies and approaches. A variety of factors— including the development of global financial
markets operating across national boundaries, the increased access of foreign competitors to
domestic financial markets, and the expanding availability of traditional banking services from
nontraditional sources— have acted to alter the competitive environment in which these financial
institutions operate. These developments have both changed the character of markets for existing
bank products and services and introduced new markets in which banks and securities firms must
compete both domestically and internationally. Consequently, the factors that determine
competitive success for large financial institutions now reflect the greater degree of international
integration characterizing the various markets for bank products and services (Beverly H, 2003).
Bank performance gets a great deal of attention in the economic literature considering that banks
serve a pivotal role in the economy. Moreover, the stream of bank failures experienced in the
United States of America during the great depression of the 1940s prompted considerable
attention to bank performance. The attention has grown ever since then (Heffernan 2005). As
noted in Olweny & Shipo (2011) the recent global financial crisis of 2007/2008 also
demonstrated the importance of bank performance both in national and international economies
and the need to keep it under surveillance at all times.
Assessment of factor affecting the competitiveness of commercial bank of Ethiopia at Chiro
Branch. was advantage for the development of organization by identifying which factors are
affecting the growth of profitability, the level of service quality, investment development
expenditure and what are initiated in the organization. In this study the main focusing area was
identification of factor which affects competitiveness of commercial bank of Ethiopia in case
study of Chiro Branch. which have an effect on the banks operation and profitability.
2
1.2. Background of the Organization
Modern banking in Ethiopia started in 1905 with the establishment of Bank of Abyssinia, which
was based on a fifty year franchise given to the British-owned National Bank of Egypt. This
bank continued until 1931. Later on it was wholly purchased by government of Ethiopia and
renamed “the bank of Ethiopia”. This bank operated until the Italian invasion in 1936.
From 1936-1942 (Remember these year were marked by Italian occupation) there were a few
Italian bank operating. After the over the fascist Italy the commercial bank was legally
established as a share company in 1963 to take over the commercial banking activates of state
bank of Ethiopia which was found in 1942 with twin objective of performing the duties of
commercial bank and central banking during the 1974 revolution. Commercial bank of Ethiopia
got its strength by merging with the private owned Addis Ababa bank in 1964. Since then it has
been playing significant role in the development endeavor of the country the commercial bank of
Ethiopia ,which is striving to become a world-class bank is rendering the state of art and reliable
services to its millions of customer both at home and abroad . The business strategies of the bank
focus on the interest of the public services (Haque &Tariq, 2012).
As the fiscal year 2010/11, the bank had over 800 branches stretched across the length and
breadth of the country, and over employees whom it regards its key assets. The state owned
commercial bank of Ethiopia still dominate the market intermediaries’ of assets, capital and
customer base and branch network, despite the growing competition from private bank over the
last 15 years. This makes it one of the most reliable strong commercial bank in the county and
the region. Its strong capital base, close to seven decades of a rich experience in the market and
wide branch network throughout the country for its service and increase its overall revenue on
sustainable bases.
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1.3. Statement of the problem
Large internationally active banks and securities firms have responded to the opportunities and
challenges of an increasingly competitive global market environment with a wide range of
strategies and approaches. According to (Samual Alemu,2015) A variety of factors— including
the development of global financial markets operating across national boundaries, the increased
access of foreign competitors to domestic financial markets, and the expanding availability of
traditional banking services from nontraditional sources— have acted to alter the competitive
environment in which these financial institutions operate. These developments have both
changed the character of markets for existing bank products and services and introduced new
markets in which banks and securities firms must compete both domestically and internationally.
Consequently, the factors that determine competitive success for large financial institutions now
reflect the greater degree of international integration characterizing (Beverly, 2003).
The goal of every business organization can be divided into two; that are profit maximization
and wealth maximization. Since managers are evaluated by operational efficiency and
effectiveness, their choice is to increase the firm’s profitability. The firm profitability is affected
by internal and external factors. Internal factors include shortage of capacity, fund raising
problem, and lack of qualified employees. Externally, competitiveness may be affected by level
of competition, shortage of raw material, governmental rule, economic instability, political
situation, environmental factor, socio-cultural changes and technology (Pandey, 2007).
The banking environment in Ethiopia has, for the past decades, undergone many regulatory and
financial reforms like other African countries and the rest of developing world. These reforms
have brought about many structural changes in the banking sector of the country and have also
encouraged private banks to enter and expand their operations in the industry (Lelissa 2007).
Despite these changes, currently, the banking industry in Ethiopia is characterized by operational
inefficiency, little and insufficient competition and perhaps can be distinguished by its market
concentration towards the big government owned commercial bank and having undiversified
ownership structure (Lelisa 2007). The existence of less efficiency and little & insufficient
competition in the country‟s banking industry is a clear indicator of relatively poor performance
of the sector compared to the developed world financial institutions. Thus, it is important to
4
know the determinants of banks profitability for an efficient management of banking operations
aimed at ensuring growth in profits and efficiency.
According to Desselgn M. (2012) who concluded that the basic determinant factors which affect
the profitability of CBE include, low customer satisfaction and customer handling, poor time
management habit in providing bank service and lack of well trained and skilled employees. But
some areas of determinant factors of profitability such as, competition lack of proper asset
utilization and capitalization by CBE, lack of credit worthiness of customers and lack of
awareness of customers’ about borrowing system are uncovered areas of the study. In the context
of the above discussions, the purpose of this study is to assess factors affecting the
competitiveness (profitability) of commercial banks of Ethiopia at chiro Branch.
1.4. Basic research questions
At the end of this study, the study was try to seek answers for the following questions
1. What are the factors that affect competitiveness of the bank?
2. What is the level of competitiveness and the quality of service offered?
3. How do customers feel about the bank service?
4. What are the problems in relation to credit service as compared to other bank?
1.5. Objective of the study

1.5.1. General objective
The general objective of the study is to assess the factors that affect the competitiveness of
Commercial Bank of Ethiopia at Chiro Branch.
1.5.2. Specific objective

The study was try to address a number of specific objectives. Some of these are:-
 To assess the factors that affect competitiveness of the bank
 To assess the level of competitiveness and the quality of service offered by Commercial
Bank of Ethiopia at Chiro Branch.
 To identity customers feeling about the service offered by the bank
 To identity the problems in relation to credit service as compared to other bank.
5
1.6. Significance of the study
Since the objective of the study was to assess factors affecting the competitiveness of
Commercial Bank of Ethiopia at Chiro Branch., the study was attempt to identify those factors:
Bank’s competitors on market share the extent of customer service of the bank and investigate
the level of satisfaction. So, the researchers was proposed solution based on gathered relevant
information for the management of banks about existing and changing environment. From This
finding many parties was benefited from the result that has emerged from the results of the study
and these parties are; Bank managers, Investors, and Customers who are interested in knowing
the ability of commercial bank to deposit their deposit based on the indicators of success of the
companies. This finding was also be used as a base for further research findings on the area.
1.7. Scope of the study

The study was conducted on factors affecting competitiveness of Commercial Bank of Ethiopia
at Chiro Branch. The study was limited only in assessing the specific factors and problems that
affect the competitiveness of CBE because of time and finance shortage, so it is impossible to
cover each and every operation of Commercial Bank of Ethiopia.
1.8. Organizations of the Study
The paper was organized into five main chapters. The first chapter is an introductory part which
contains back ground of the study, statement of the problem, objectives of the study, significance
of the study, research questions, scope of the study, and organization of the study. The second
chapter provides an overview of the related literature. The third chapter contains research design,
source of data, method of data collection, sample size and sampling technique, data processing
and analysis, data presentation. The fourth chapter presents analysis and presentations of data
and the fifth chapter provides conclusion and recommendation.
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CHAPTER TWO
2. REVIEW OF RELATED LITERATURE
2.1. Concept of Competition in bank

Competitiveness is defined as the ability of a firm to do better than benchmark companies in
terms of profitability, sales, or market share and also competition defined as the ability of a given
firm to successfully compete in a given business environment. Similarly competitiveness
considers its ability to compensate employees and generate superior returns for shareholders.
The concept of competition, although initially limited to economic thinking, over the years, has
been given different interpretations for diverse sectors. Adam Smith (1759) was the first to
describe competition as a central element of economy. Léon (2014) exhaustively explains the
two major competition concepts developed by various economists. Rather than run the risk of
repeating parts of Léon’s research, the general thought behind the two theories of competition
was briefly discussed.
As in any other sector, the importance of competition in the financial sector has been affirmed.
Competition in the financial sector matters for the enhancement of efficiency in production,
According to (Leon, 2014), quality of product and innovation in the sector. But he also mentions
the recent financial crisis to stress the effect of excessive competition which can result in
instability in the financial sector. He theorizes that among other factors the effect of competition
in the financial market can be seen in three dimension; efficiency in the financial sector, access
to financial services and stability in the financial sector. These three dimensions are also
mentioned in Hakam et al. (2013) as the positive externalities of banking competition. First, in
theory, increased competition leads to financial sector development and efficiency. This,
essentially, means lower cost, enhanced efficiency, greater product innovation and improved
quality (Claessens, 2009).
2.2. Generic Competitive Strategies

A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run
is sustainable competitive advantage. There are two basic types of competitive advantage a firm
can possess: low cost or differentiation. The two basic types of competitive advantage combined
with the scope of activities for which a firm seeks to achieve them, lead to three generic
7
strategies for achieving above average performance in an industry: cost leadership,
differentiation, and focus (Porter 2011).
2.2.1. Competitive Advantage in Service Quality

Over the past two decades, quality has been heralded as the source of competitive advantage.
Quality has gone through an evolution process, from an operational level to a strategic level, and
some scholars have given strong support for the view that quality must be adopted as a strategic
goal in organizations (Adam, 1992).
Porter (2011) categorized quality as a primary basis for differentiation strategy. He contends that
firms adopting this strategy would uniquely position their products based on several attributes
leading to a premium price. He specifically suggests that quality creates a differentiation point
which separates, even insulates, a firm from competitive rivalry by creating customer loyalty as
well as lowering price sensitivity. In this way, the firm able to be protected from competitive
forces that reduce profitability.
2.2.2. Competitive Advantage in Technology and Operations

The integration of technology with strategy is not enough, and technology management should
involve the strategic guidance of technology as a source of sustainable competitive advantage
(Werther et al., 1994).Failure may indeed begin when the very 17 early stages o f a project
converge too quickly on an IT strategy. It may begin when not enough attention has been given
to the market leader’s use of IT and attention has been prematurely focused on requirements
planning, systems design, project management, schedules and budgets. While it is important to
align corporate and IT strategy (Hirschheim and Sabherwal, 2001) it is not unreasonable to
suggest that, at the same time, effective integration strategies depend upon an understanding of
how competitors use this technology in support of their own company’s strategic objectives. The
challenge, then, is to avoid the temptation to move too quickly at the early stages and to take the
time necessary to understand the competitive environment.
2.2.3. Competitive Advantage in Human Resources

Adequate number of employees and effective training strategies that focus on an organization's
intangible assets would have significant impact on the competitive advantage of any organization
(Brown 2001). Organization theory and person-environment fit has consistently demonstrated
the need for congruity orbit between organization structure, process, technology and
8
environment as well as between people and their organization 21 (Pervin, 1999; Schein and
Diamante, 2000; Thompson, 2003).The reduced cost and increased capabilities of computer
technology has triggered significant increases in the delivery of knowledge, which includes
computer based training, web-based training, multimedia learning environments and e-leaming
(Brown, 2001).
2.2.4. Competitive Advantage in Leadership Quality

Several definitions of leadership have been given by different management writers. Rosebush &
Taylor (1989) describe leadership as an influence process directed at shaping the behavior of
others which can be interpreted to mean that leadership is shaping the behavior of others through
influence. Schwartz (2012) describes leadership as the art of inspiring subordinates to perform
their duties willingly, competently and enthusiastically. So a leader becomes one who by
example and talent plays a directing role and commands influence over others. In simple terms
leadership could be described as getting others to follow or getting others to do things willingly.
2.3. Banks Profitability

Like all businesses, banks get profit by earning more money than what they pay in expenses. The
major portion of banks profit comes from the fees that they charge for their services and the
interest that they earn on their assets. Their major expense is the interest paid on their liabilities.
The major assets a bank are its loans to individual, businesses and other organization and the
securities that it holds while its major liabilities are not paid on time and its deposit and the
money that it borrows either from other banks or selling commercial paper in the money market
(Samuel Alemu, 2015).
2.3.1. Profit Measures

The tradition measures of the profitability of any business are return on assets (ROA) return on
equity (ROE) and Net interest margin Assets are used by businesses to generate income loans
and securities are banks assets and one used to provide most of bank income. However, to make
loans and to buy securities a bank must have money which comes privately from the banks
owners in the form of bank capital from depositors, and form money that it borrows from other
banks or by selling debt securities. A bank buys assets primary with funds obtained from its
liabilities as can be seen from the classic accounting equation. However, not all assets can be
used to earn income because banks must have cash to satisfy cash withdrawal request of
9
customers. This vault cash is held its vaults in other plays on its premises such as tellers, drawers
and inside its Automated Teller Machine (ATMS) and this earns no interest. A bank must have
kept a separate a loan loss reserves to cover possible loss when borrowers are unable to pay back
their loans. The money held in a loan loss reserve account cannot be counted as revenue and thus
does not contribute to profit (source: http/www.federal reserve /2008/ articles/ bank profit/).
Net interest margin (NIM) is a measurement comparing the net interest income a financial firm
generates from credit products like loan and mortgages, with the outgoing interest it pays holders
of savings accounts and certificates of deposit (CDs).Expressed as a percentage, the NIM is
profitability indicator that approximates the likelihood of a bank or investment firm thriving over
the long haul.
2.3.2. Determinant of profitability

The determinants of bank profitability can be divided in to two main categories namely internal
factor and external factors.
A. Internal determinants
Internal determinants of bank performance can be defined as factors that are influenced by a
bank’s management decisions. Such management effects would definitely affect the operating
results of banks. Although a quality management leads to a good bank performance it is difficult
if not impossible to assess management quality directly. In fact it is implicitly assumed that such
a quality would be reflected in the operating performance. As such it is not uncommon examine
a bank’s performance interim of those financial variables found in those financial statements
those statement the balance sheet and income statement are the two principle ones. (Javaid, S,
2011)
B. External Determinants
Eternal determinants or bank profitability are factor that are beyond the control of bank
management. They represent events outside the influence of bank. However, the management
can anticipate changes in the eternal environment and try to position the institution to take
advantage of the external determinants are macroeconomic factors & financial structure variable.
(Anna P.I Vong, 2003)
10
2.3.3. Factors affecting the profitability of the bank
Profitability is affected by changes in sale price cost capitalization, professionalism, operations
& asset utilization.
 Capitalization: refers to the contributed and available capital for the business to meet
future obligations expand the business or improve existing assets.
 Professionalism: treating the vinery as a professional business and something done for
function is very import and for the success of that business.
 Operation: factor affecting vinery profitability and viability include: facility maintenance,
supply chain management, varietal focuses and asset utilization.
 Asset utilization: lives industries significant investment in asset. It is important to make
the most out of the assets a winner’s owner through asset utilization. (Brigham, F, 1995).
2.4. Determinants of Banking Competition

The question of the determinants of banking competition was only, to some extent, treated by the
economic theory because of the complexity of identifying factors that affect the degree of
competition (Hakam et al., 2013). Although there are no theoretical foundations as to what the 14
determinants of banking competition are, different researches forward their own number of
determinants to help them in their empirical applications.
According to Hakam et al. (2013) theorize that liberalization and a constant economic growth
stimulates competition and the promotion of the financial innovation. On a national and regional
plan, three indicators were set to see whether the policies implemented at different times were in
favor of bank competition, i.e. Indicators of structure, efficiency and performance and
development and stability. They regressed the H-statistics from the Panzar-Rosse Model against
rate of economic growth, credit-gap, stock exchange- gap capitalization, degree of concentration
of the three large banks of MENA and rate of inflation. With an adjusted R-squared .79 and level
of significance of 10%, all the variables included were statistically significant.
2.5. Liability of Commercial Bank

The liabilities of commercial banks are claims omit. These are the items which from the source
of its fund of the liabilities. The share capital of the bank is the first item which is contributed by
this shareholder and is a liability to them. The second item is the reserve fund. It consists of
cumulated resources which are meant to meet contingencies such as losses in any year. The bank
11
is required to keep certain percentage of its annual profit in the reserve fund. The reserve fund is
also a liability to shareholders. The third item comprises both the time and demand deposits.
Deposits are the debits of the bank to its customers. They are the main sources from which the
bank gets fund for investment and are indirectly the source of its income. By keeping a certain
percentage of its time and demand deposits in cash, the bank lends the remained amount on
interest. A borrowing from other banks is the fourth item. The bank usually borrows secured and
unsecured loans from central bank. Secured loans are on the basis of some recognized securities
and unsecured loans out of its reserve funds lying with the central bank. According to
(Newedechi,2010).
The sixth item relates to bills for collection. These are the bills of exchange which the bank
collects on behalf of its customer and credits the amount to their accounts. Hence it is a liability
to the bank on behalf of its customers. These are the claims on the bank which it has to meet
when the bills mature. The eight items were contingent liabilities relate to those claims on the
bank which are unforeseen such as outstanding forward exchange contracts claims on
acknowledged debts etc. In the last time, profit and loss are shown profits payable to the
shareholders which are a liability on the bank. (Newdechi, 2005).
2.6. Empirical Literature Review

In Ethiopian context, one cannot confidently argue that there has been rigorous banking
competition. During the pre-1975 imperial era, there had few banks (dominated by foreign
ownership) and the absorptive capacity of the economy was too low even to accommodate
moderate competition. In the Derge regime (1975-1991), private banks were fully nationalized
and left no room for competition. After the down fall of the Derge regime in 1991, private banks
were again allowed to operate consistent with the ideology of market oriented economic policy
(Alemayehu, 1986). Accordingly, new private banks were established and their role and position
in the industry have been flourished from time to time. The major questions that the paper tries to
address include: Is the hitherto leading position of the Commercial Bank of Ethiopia (here after
CBE) emanated from its efficiency, lack of competition or anything else? If there is competition
in the Ethiopian banking industry, how could it be explained? If there is weak competition, what
are the possible explanations for it? How and who would take an initiative to improve the
prevailing competitive banking environment in Ethiopia? What would be the effects on the
domestic banking business, if foreign banks would be allowed to enter to Ethiopia? The
12
objective of the study is to assess the trend, nature, and extent of competition in the Ethiopian
banking industry and provide suggestions as to how optimal banking competitive environment is
achieved given the existing reality in the country.
Bikker and Spierdijk (2008) argue that identifying the main determinants of the level of
competition is important in developing an optimal policy to foster competition. They categorize
the potential determinants of competition into five types of factors. Market structure
(Concentration Ratios), Contestability variables (Activity restrictions and Restrictions on foreign
investments), Inter-industry competition (Capital markets), Institutional variables (Regulation
Index and Socialist History index) and Macro-economic conditions (GDP per capita and real
annual GDP growth) were regressed against competition for 76 countries. With an adjusted R2
of .82, the potential determinants had explained competition. Sanya and Gaertner (2012) run the
average value of the Lerner Index (a proxy of competition) against market structure,
contestability, level of economic development, institutional framework, bank specific conditions
and liquidity preference of banks. They found that all variables were statistically significant.
After conducting on empirical literature review on the factors influencing the competitiveness of
commercial bank ,it is evident that there is a significant gab in the existing research regarding the
specific challenges faced by the commercial bank of Ethiopia at the chiro branch.while previous
studies have highlighted general factors affecting bank competitiveness, such as service
quality,technology utilization and customer satisfaction,there is a lack of in_ depth analysis
focusing on the unique circumstances and challenges encountered by this particular branch.
13
CHAPTER THREE
3. RESEARCH METHODOLOGY
INTRODUCTION
3.1. Research Design

The researchers used descriptive type of research to analyze and assess the main factors that
affect the competitiveness of the organization; Commercial Bank of Ethiopia at Chiro Branch.
Because descriptive type of research attempts to answer the question like, who, when, what and
where. The researchers used quantitative and qualitative type of data .Because quantitative type
of data consists of numerically measured data, while qualitative type of data consists of
attributes, and measured by non-numerical data.
3.2. Description of the study area

Chiro ( also called Carcar curio in oromo and 'Asebe Teferi' in previous time) is a town and
Sagas in eastern Ethiopia chiro town is located in the west hararghe zone in oromia regional
state, Ethiopia. it has a latitude and longitude of 9°05'N 40°52' and an altitude of 1826 meters
above sea level.it is the administrative center of the west hararghe zone in promised regional
state.
3.3. Research approach

Research approach is more concerning with the way in which data are collect and analysis is
made to answer research questions and meet objectives. The two methods that provide in the
research method are Quantitative and Qualitative, where one of them is not better than the others,
all of this depends on how the researcher want to do a research of study (Ghauri and Kjell, 2005).
The research used both qualitative and quantitative approach to address the research questions.
Quantitative techniques use numerical data and use statistical analysis to arrive at meaningful
conclusion. On the other hand, qualitative method that the research used non- numerical
descriptive analysis that used full for interpretation and analysis works.According to (Ghauri and
kejell,2015)
14
3.4. source of data and collection technique
by utilizing both primary and secondary data sources, the research aimed to gather
comprehensive information to analyze the factors influencing the competitiveness of the
commercial bank of Ethiopia at chiro branch.by employing a combination of primary data
collection through questionnaires and secondary data collection through literature review, the
study aimed to gather a comprehensive dataset to analyze and assess the factors impacting the
competitiveness of commercial bank of Ethiopia.
3.4.1. Source of data

The source of data include both primary and secondary sources. Primary data were collected
through questionnaires distributed to employees, customers, managers, chief cashiers, and
supervisors of the commercial bank of Ethiopia at chiro branch the questionnaires were designed
to gather information directly from individuals involved in the operations of the bank. Secondary
data were obtained from various sources such as: Annual reports of the commercial bank of
Ethiopia, bank documents, Review literature on the subject from polished and unpublished
material.
3.4.2. Data collection technique
To achieve the objective of the study, the researchers used primary source of data. Primary
source of data were gather from officers and customers of Commercial Bank of Ethiopia at Chiro
Branch. by questionnaires. In order to get primary data both closed ended and open ended
questionnaires was used. Secondary source of data were obtained from different second hand
books such as annual report of Commercial Bank of Ethiopia, bank document and review of
literature on the subject which was published and unpublished materials.
3.5. Population And sample selection
By selecting samples from the target population using judgmental sampling, the study aimed to
gather data from a representative group of employees and customers to assess the factors
influencing the competitiveness of the commercial bank of Ethiopian at the chiro branch.
3.5.1. Population of the study
The population of the study comprised employees, customers, managers, chief cashiers, and
supervisors of the commercial bank of Ethiopian at chiro branch. These individuals were
considered as the target population for gathering data related to the factors affecting the
competitiveness the bank.
15
3.5.2. Sample selection
Employees: a sample of 15 employees from the bank was selected to participate in the study. The
selection of employees was based on factors such as age, education, gender, position in the bank,
and level of experience. Customers: a sample of 30 customers of the commercial bank of
Ethiopia at chiro branch was selected to provide insights into the quality of service offered by the
bank and their satisfaction levels.
3.6. Method of data analysis

The researcher used descriptive analysis method in order to analyze the data that had been
conducted through interview and structured questionnaires, because the descriptive data analysis
methods helps to reduce the collected data in to summary format and row data in to format that
makes them easy to understand and interpret. Through this method the row data are converted to
understand able to form by using table and percentages. Secondary data and interviews were
described by word without any numerical measures.
16
CHAPTER-FOUR
DATA ANALYSIS AND INTERPRETATION
4.1. Introduction
This section presents the results of questionnaires that the researchers has collected from the
customers, employees, manager, chief cashier and supervisor of Commercial Bank of Ethiopia in
Chiro Branch regarding the assessment of factors affecting the competitiveness of CBE. Here,
the researchers distributed 45 questionnaires to respondents’ gather appropriate data. But, six (6)
of them did not return, because of the respondents carelessness to hold the questionnaires in a
safe place.
So this chapter present the information gathered through questionnaires to identify and
investigate the inherent problems of the CBE in Chiro Branch.
Furthermore, to present appropriate analysis interpretation and to present the precise value of the
data of the readers, some of the questionnaires item are tabulated and presented by using charts
and table with detailed necessary interpretation.
This chapter has two parts: the first part is concerned with assessing customer attitude and
perception towards the bank service and its performance. The second part presents the
employees and management response towards the required issue or response about factors that
affect the bank competitiveness and its performance.
In order to help the research, 30 questionnaires were distributed to the customers of Commercial
Bank of Ethiopia but unfortunately, 4 of the questionnaires were not answered and 2 were lost.
The analysis below explains findings from the research questionnaires.
17
4.2. Part one: Analysis of questionnaires for customer respondents
4.2.1. Sex distribution of customer respondents
Identification of sex distribution of customers is very important to know the female and male
participation and involvement in the habit of using the banking service and to make an attempt in
knowing who is poor in the habit of using banking service or to develop the habit of banking in
the society as a whole.
Table 4.1: The customer sex distribution
Sex of respondent No. of respondent In percentage %

Male 17 70.8
Female 7 29.2
Total 24 100
Source: - Researchers own survey
Table 4.1 shows that from the total target respondent of 24 customer 17(70.8%) of the customers
are male and only 7(29.2%) of them were females. Thus, from the above result the researcher
can conclude that, the majority of the customers were male, and female participation is very low
as compared to the male participation.
4.2.2. Age distribution of customers respondents
Chart 4.1 Age distribution of customer respondents
18
Source: Researchers own survey
From chart 4.1, we can understand that most of the bank customers which accounts for37.5%
belong in the age range of 18-25years and this customers are 9 in number, the next 20.8% of the
customers belongs to 26-35 years and the number of this customers are 5 in number and 36-50
years belongs in the percentile range of 25% (6 in numbers) and the remaining 4 customers
which are 16.7% are above 50 years and from the above result one can understand that the
majority of the customers of the bank are adults.
So one can also say that this adults which are in the age range of 18-25 are loyal and honest
customers to the bank and if they are treated and they are given best of banking service, they
could become the best bank customers than any other age groups and they could also advise
others to use the bank as their primary choice.
4.2.3. Occupation of customer
Identifying the occupation of customers has much importance. It can help banker in identifying
different types of customers and understand their banking service needs.
Chart 4.2 Occupation of customers
19
Source: questionnaires
Chart 4.1 shows that most of target customers which are the employees constitute 41.70% and
are 10 in number, the next customer who comes next to the employees are the merchant with 6
customers and 25% and then comes the traders accounting for 20% and with the number of 5
customers. Respondents who were included in other occupation accounts13%. But, unfortunately
there were no farmer customer was included in the respondents selected.
4.2.4. Customer service and satisfaction
Banks are financial institutions with many function they accept deposit and make loan, issue
credit like letter of credit and travel cheese, accept bill of exchange give safe custody of valuable,
documents, money transfer, service, saving account current/demand service loan service and to
identify the kind of the banking service mostly used by customers. Customers of the bank were
asked questions about the services they use and their response were summarized below.
Table 4.2.service by bank
S.No Item No of respondent In percentage%

1 What kind of service do you use?
Saving account 12 50
Money transfer account 4 16.7
Current account 3 12.5
Loan service account 5 20.8
Total 24 100
From table 4.2, the researcher concluded that most of the customers are users of saving account
which accounts for 50% and 12 in number. Users of loan service account come next with 5
customers and accounts 20.8% from the total percentage of customer. Then, users of money
market continue; accounting for 16.7% and 4 customers. Last but not list current account takes
share for 12.5% and 3 customers from the 24 willing respondents. From the above data the
researcher concluded that most of the customers are users of saving account.
20
4.2.5. Customers using private bank
Identifying the customers using other private bank or even other bank is very important to the
bank so that it can know its competition as well as to improve the bank and win over people to
achieve its goal. It would also help banker in identifying different types of customers and their
banking service needs.
Table 4.3.Satisfaction of customer
No. Item No. of respondent In percentage %

1 Do you use other private banks?
Yes 18 75
No 6 25
Total 24 100
Source: - Researchers own survey
As the researcher showed in table 4.3, 18 respondents (75%) agreed that they use other private
banks but the remaining 6 respondents (25%) answered NO to the question that they use other
private banks.
In addition to the question why they use private banks; the customers were also asked why they
use other private banks. The respondents who use other private banks answered that it’s because
that to use other loan service, to deposit their cash in different places, and better customer
service.
4.2.6. Contribution of bank for customer personal life

Banks play a significant role in every countries economy; because they accept deposit and make
loans. It channelized funds from people who wants to save their money and to people who wants
to put it for productive purpose. By doing such service banks play a significant role in improving
the standard of living in particular and economic growth in general; to identify the contribution
of the bank for customers personal and business activity, customers of the bank gave their
response and it’s summarized as in the table below.
Table 4.4.Contribution of bank for personal life
21
1 What is the bank contribution for your business
activity and personal life?
saving accounts 7 29.2
money transfer 1 4.2
giving loans for establishing new project 6 25
Safety of money 4 16.6
No response 6 25
Total 24 100
From the table 4.4, the researcher concluded that most of customers use saving account which is
29.2% or 7 customers, then giving loan for establishing new project follows with 25% which are
6 respondents, next to giving loan the activity that follows it is giving safe place for the money
customers deposit with 16.6% or 4 customers. Money transfer accounts for 4.2% or 1 respondent
and the last 6 respondents (25%) from total 24 respondents are categorized under no response.
This shows that we should be reminded that even if the bank contributes or benefits the customer
in the personal life and business activities it doesn’t mean that customers of the bank are satisfied
by the banks service as whole.
4.2.7. Services of bank

Banks provide many services for the community. They play a very important role by performing
the two essential function by depositing and lending money the bank provides loans by keeping
itself as an intermediary to joint depositors and borrowers to increase productivity of the country
by earning a commission for it service. To identify whether the customer asked a loan before or
not the customers were asked and their responses were as follows.
22
Table 4.5 Loan service
No. Item No.of respondents In percentage %
1 Have you ever asked the

Bank for a loan previously?
Yes 10 41.7
No 14 58.3
Total 24 100
2 Have you faced any problem when you
ask for a loan?
Yes 3 12.5
No 21 87.5
Total 24 100
From table 4.5, one can understand that10 respondents (41.7%) have asked the bank for a loan
and these customers might have been accepted or answered “YES”. This customers answered
“NO”, this 58.3% of the respondents were also asked why they haven’t asked and they
mentioned some points like lack of security, lack of awareness about the credit system, long and
complicated process to present legal document that ensure time ownership of properties to
transfer collateral to the bank, high interest amount and fearing the risk of failure to repay the
loan because of periodical change of exchange rate. In connection with the above question, the
customers were also asked if they have faced any problem when they asked for loan service. 21
customers or 87.5% of the customers responded that they haven’t faced any problems; but the
remaining 3 respondents(12.5%) indicated that they have faced some problems like that of the
bank asking high collateral and taking long and complicated process to give loan and services.
Again with related to the above question the customer of the bank were asked their view, to
identify the types of borrowing system they most uses and summarized and presented below.
23
Table 4.6 Type of borrowing system
1 What type of borrowing system do you use?
short term loan 6 25.5
medium term loan 10 50
long term loan 6 25
merchandise loan - -
Total 24 100
According to table 4.6, the majority of the customer, which are 10 (50%) of the total borrowers
use medium term loans. Then short term is preferred with 25% or 6 of the respondents choosing
it. Last but not list long term loan borrowers with 2 respondents or 25% of them choosing. From
the above table the researcher concluded that most of the customer use medium loan term.
In addition to the above question the customers of the bank were asked how much they were
satisfied by the bank credit system and their response summarized in the table below.
Table 4.7 Customer satisfaction
1 How much you are satisfied by the bank credit

system?
very much 10 62.5
Little 8 31.25
Unsatisfied 6 6.25
Total 24 100
From table 4.7, researcher understand the majority 62.5% of the customers were satisfied by the
bank credit service and 8 of the respondents fell that the bank needs to work more if it wants to
satisfy its customers and these respondents choose little satisfaction with 31.25% from the total
respondents. 6 respondent (6.25%) of the customer was unsatisfied by the bank credit service. So
the researchers conclude that the bank more or less satisfies the majority of its customer. In
relation to the above question the customers were asked whether if they have repaid their loan on
24
timely basis or not. The respondent’s answered they all have repaid their loan at specified period,
from these the researchers concluded that the customers were honest of their promise and also
have played a great role in the profitability of bank as well as competitiveness
4.2.8. Types of securities

Analysis of a customer experience of borrowing and their level of satisfaction on credit service is
already done. Banks usually secure their loan in one way or another. In some case a bank grant
loan on a personal securities of the borrower. Generally banks requires a collateral like building
(residential), vehicle, machineries, good for merchandise, movable and immovable properties
were required as necessary for the repayment of loan for the probability of default by the
customer to repay the loan.
4.3. Part two: - Analysis of questionnaires for employees respondents
4.3.1. Sex distribution of employee respondents
Identification of sex of banker is important in the banking service activity to identify females and
males participation
Table 4.8 sex distribution of employees
Respondent /Sex No of respondent In percentage
Male 11 73.3
Female 4 26.7
Total 15 100
The table 4.8, shows as from the total respondent of 15 employees of the bank 11(73.3%) of
them are male and 4(26.7%) of the employees are female, from the above result the researcher
concluded that male employees of the bank accounts a great number having more than twice of
female employees. So the researcher reminds the commercial bank manager to increase the
number of female employees in assumption of increasing female participation as a whole.
25
4.3.2. Age distribution of employees
Chart 4.3 Age distribution employee respondents

From chart 4.3, one can understand that of most the employees of the bank accounting 46.7% (7
respondents belongs to 18-25 age group. 4(26.7%) of employees belongs to 26-35 years, 3(20%)
of the employees were between 36-50 years and the remaining 1(6.6%) employee was more than
50 years of age. This data shows majority of the employees of the bank are a combination of
young and mature, which would give the bank both motivation and experience. Supervision and
professional training helps give quality service to customers in order to make their branch organs
Identifying the education level of employees is very essential and important for the successful
operation of the bank as well as for other business organizations to give quality service
effectively and efficiently. Education levels of employees in the CBE of Chiro branch are shown
below by using pie chart.
26
Chart 4.4.education status of employees
Source- Researchers own survey

Chart4.3, shows that most of employees, 11(73.3%) of them are BA degree holder and 1(6.7%)
of them were college diploma holders but the remaining 3 respondents (20%) are graduates with
a master’s degree. The above result shows that the educational status of the banks employee
should be considered very well for competition and up grading those low educational
backgrounds and training special educations like computer technology and modern banking
service training is important for all employee of the bank.
4.3.3. Position of employees

Table 4.9.position of employees
Position of employee No of respondent In percentage%
Manager 1 6.7
Supervisor 1 6.7
Employee 13 86.7
Not respondent - -
Total 15 100
As shown in table 4.10. From the total of 15 respondents 1(6.7%) respondent were supervisors
and 13(86.7%) of the respondent are employees and 1(6.7%) respondents were manager and
none of the respondent did not give response, from these the researcher concluded that most of
the respondents were the employees.
27
4.3.4. Duration of employees in the bank
Knowing how long the employees were working in the bank is important to the researcher so as
to help understand how well the employee’s contribution to the bank is in terms of profitability,
customer service and sharing their experience to the new employees. Most of the respondents
answered that they have been in the bank for more than 5 years and few answered that they have
worked there for most of their life and insuring their trust worthiness by dedicating more than 8
years for the bank.
4.3.5. Service rendered by the bank audits Profitability

Banks are organized to perform a number of functions, primarily for the purpose of carrying
profit, mostly they attract deposit all kinds current saving accounts and fixed accounts but not
only this, banks also provide loans and advance for those who are in need of it with others
service like money transfer, safe custodian with little service charges.
Employees of bank were asked what type of banking services render by the branch to get profit
and the employee’s response were as follows. The bank currently provides deposit mobilization,
money transfer, purchase of foreign currency, and also provides loans to various business,
individual and institutions with particular emphasis to priority sector at the economy to give
service and to gate profit.
Banks earn profit though process of transforming funds and providing service like any other
production process of any other firms.
The profit performance of any bank would be related to many factors including market share or
service quality.
To identify whether the bank was profitable or not and to investigate the reason for non-
profitability; employees of the bank were asked and their response were as follows.
Table 4.10.Profitability of the bank
s.no Item No of respondent In percentage %
1 Is the bank is profitable?
Yes 11 73.3
No 4 26.7
Total 15 100
Source: questionnaires
28
Majority of the employee 11(73.3%) of them think that the bank is profitable and 4(26.7%) of
the employees think that the bank is not profitable so; the researcher conclude that even though
the bank is profitable it was not as much profitable enough as its objectives.
In relation to the above question the employees were asked the reason why the bank is not
profitable, the response of the employees was that because of it was newly opened, because they
provide loan for small numbers of customers and high salary payment and people’s habit in
using bank services. Again with related the above question the researcher asked the employees
that what factors affect profitability of the bank: the response of the employees was that,
existence of high credit interest, existence of large amount of saving account which bears interest
for customer (liabilities to the bank were the main foots and also emergence of new optical
competitors, default loan, risk of import and export accidentand also lack of capitalization, asset
utilization and professionalism. From the above analysis the researcher conclude that having
excess of deposit and other factor affect profitability’s. In addition to above question the
employees of bank were asked by researcher to investigate /to identify/ which service was
demanded by customer, and the response obtain from the employees were as follows.
Table 4.11 Service demanded by customer
S.No Item No of respondent In percentage %
1 Which services are more demanded
by your customer?
Saving deposit 9 60
Demand deposit 5 33.3
Fived deposit - -
Time deposit 1 6.7
Total 15 100
As it can be seen from table 4.11, majority of the employees or 9 (60%) of them said that they
use saving deposit, 5(33.3%) the employees said that customer need demand deposit and the
remaining Respondent 1(6.7%) said that customers wants time deposit.
From these researcher conclude that the customer deposit their money to save from emergency
instead of advancing loan.
29
4.3.6. Types of securities used for advancing loan
Bank frequently secure the loan in one way or another. In some cases the bank may grant a loan
on personal security of the borrower or on personal securities of other person as guarantee.
To identify what kind of securities are required by the bank to advance loan employees of the
bank were asked and responded as follows; bank requires collateral like buildings both
(nonresidential and residential), Vehicle, motors, small project, bank guarantee like lien, pledge
and etc. From this in the researcher concluded that it was not easy to take loans from the
organization (bank) for ordinary peoples, since such securities are difficult to acquire.
In addition to these, the employee of the bank were also asked the method of charging securities
to cover the advance loan of the bank and the employee responded as; they were charging based
on the national bank of Ethiopia scale /based on legal document of the customer/ and
performance of the government.
4.3.7. Level of competition

Knowing the level of competition was helped the bank in understanding who their competitors
are and try to improve its self to bring bank its customers and to attract new customers.
Table 4.12 Level of competition
s.no Item No of respondent In percentage %
1 Level of Competition?
Strong 8 53.3
Medium 5 33.3
Weak 2 13.3
Total 15 100
From table 4.11, the researcher concluded that 8 respondents (53.3%) think that there is strong
competition with other banks, and 5(33.3%) think that there is a medium amount of competition
between CBE and the other banks. But 2(13.3%) respondents think that there is weak or no
competition at all.
Therefore, the researcher can conclude that there are important things that the bank should
improve to present its self-better than the rest of the banks or organizations.
30
4.3.8. The impact of market competition on profitability and market share of the bank.
Private banks which are established in recent year and expanded widely at the current times has
several effects on the market share and profitability of the CBE by providing best service to
customers, computerization of financial information in relation to these employees of the bank
were asked about the effect of market competition on the bank profitability and most of the
respondents answered that there is not much effect in the market share. The institution follows its
ways and rules which they think makes the bank better than its competitors.
4.3.9. Participation of bank on investment

Participation of bank on investment has significant role for the development of the economy of
the country. So the banks participation on investment helps to improve the life standard of the
employer by increasing the daily income and opening opportunity of job for them and also it has
positive effect on the economy of the country.
In order to identify participation of bank on investment or notes the employees were asked and
their response were as follows
Table 4.13 Participation of bank on investment
S.No Item No. of respondent In percentage %
1 Does your bank (organization) is
participate on investment?
Yes 10 66.7
No 4 26.7
Not respondent 1 6.7
Total 15 100
Source- Researchers own survey
As it can be seen from table 4.13, majority of the employee 10(66.7%) of them said that the bank
participates on investment, 4(26.7%) of the employee said that the bank does not participate on
investment and 1(6.7%) did not give response. So the researchers conclude that even though the
bank participation on the investment is not enough and should participate in the investment area
so that it could help the society, the economy, as well as itself.
31
In addition to the above question employees were asked on what type of investment the bank
participates, if the banks participates on investment and what the reasons behind the bank in not
participating on investment
Table 4.14.Types of investment
1 If your answer is yes on what type
of investment your bank invest?
Government security and insurance, 7 47
import and export
Saving and buying of bond and 8 53
industries
From table 4.14, the researchers understand that 8 (53%) of bank participate on selling and
buying bond and industry and the other 7(47%) of the bank respondents answered that bank
participate on government security and insurance and also import and export. So the researchers
conclude that most of bank participates on selling and buying of bond and industry.
In relation to the above question employers were asked to identify either the bank was profitable
or not from the investment; the response of them was almost all of them i.e. 13(65%) of them
said the bank is profitable.
4.3.10. Impact of capitalization of asset utilization and professional capitalization asset

utilization and professional
All these are refers to contribute and available capital for the business to meet future obligations,
expand the business or improve existing assets and it’s important to make the most out of the
asset winners, owners, owns through asset utilization. With related to the above idea the
employee were asked the impact of capitalization asset mutilation and professional and the
response of them as follows.
Table 4.15 Effect of capitalization
1 Are capitalization, asset utilization
and professionalism affecting the
32
profitability the bank?
Yes 12 70
No 3 30
Total 15 100
The researcher understands that 12(70%) of the employees said that it affects profitability of the
bank and 3(30%) of the employee said it does not affect the profitability of the bank. The
researcher concludes that capitalization, asset utilization and professional affect the profitability
of the bank.
In addition of the above question the employees of bank are asked how capitalization, asset
utilization and professionalism affect the profit of bank and their response is as increase of
capitalization, professionalism and increase of asset utilization, there is also increase of
expenditure.
With related to the above question employees are also asked why the profitability of bank is not
affected by capitalization, asset utilization and professionalism and their; response was the bank
manager control every activity of the bank system and upgrading the capacity of the workers.
33
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
5.1. Conclusion
All the data analysis and the detailed discussions made in the preceding parts of this study are
means to lead the researcher to possible conclusion and recommendation. So in the study of this
paper, an attempt has been made to find out or investigate the main factors that affect the
competitiveness of the bank. According to the findings, the following conclusion has been made
based on the overall data analysis and interpretation.
5. Low customer satisfaction and customer handling, lack of competitiveness ,less
efficiency and time management habit in providing banking service for customers was
observed due to lack of well trained, skilled and professional employees with compared
to private bank.
6. Lack of profitability of bank because of large amount of deposited account, little number
of loan advance, existence of high credit interest, and existence of large amount of saving
of credit interest.
7. Bank play a great role for the customers’ personal life and business activities by giving
awareness about the service provided by bank and by saving their money to prevent them
from unexpected dangerous and robbery.
8. Bank also provides credit service which enables the customer to participate in different
investment and this indirectly leader to reduce unemployment in the country, opening job
for job seekers.
9. Lack of participation of bank on investment due to the newly established in recent year
and due to their financial status, even though all bank is not participate on investment,
most of the bank participate on investment and maximize their profit. This indirectly
leads/helped to increase economy of the country.
10. Lack of asset utilization and capitalization because bank expects that as asset utilization
and capitalization increase, expenditure or cost also increases.
11. Low participation of customer to ask bank for loan advance or to borrowing money from
bank because of lack of awareness about borrowing system of the bank, fear of failure to
repay the loan on the due date, under valuation of collateral securities by the bank if the
34
borrower of security and fixed prescription of acceptable collateral by the bank the
customer participation to borrow was reduced.
5.2. Recommendation
In order to give the solution for the problem raised knowing of the cause of problem is required,
the researcher suggest the following recommendation.
 To alleviate the problem related to the employee’s competiveness efficiency and time
management habit; increasing the banking services within a short period of time and to
improve the customer handling technique of employee, the bank has to train to the
employees and upgrade the level of employees’ competencies.
 It is advisable to introduce new technology, providing best banking products and service,
to maximize banks profitability & competitiveness.
 It is better to develop the habit of banking in the society and increase the awareness of the
customer, to reduce the problem related to large number of deposit and small amount of
loan advance and also by improving the loan policies; the bank would be helpful for
increasing the number of loan and advance services user with a view to overcome
difficulties.
 The bank should participate on investment by improving his financial status and also
should participate on asset utilization by controlling every activity of the bank system and
up grading the capacity of worker. Some measures suggested on credit service were.
 The customer must able to produce acceptable evidence for verification of value of asset
offered as security.
 Bank should maintain technical staff required valuation of assets to avoid complaints
raised against be determined with reference of the earning capacity of the customers and
by arranging the first installment after a reasonable time gap enable the borrower to
establish his position and strength his repaying capacity.
 Developing the habit of banking and up grading the awareness of the customer and the
society by giving training.
 The bank should take character and technical ability of the borrower, the prospective of
the business or activities the nature and quality of good producer.
35
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 Beverly H, (2003). Competitiveness of international, financial institutions argued They
banks & securities firms.
 Heffernans, (2005), Olweny & shipowner (2011). Effects of banking sectoral factors on
the profitability of commercial banks.
 Rosebush & Taylor (2010). Improving banking's reputation
 Adam smith (1759). "the father of economics"
 Claessens, (2009). Competition in the financial sector over view of competition polices.
 Hakam et al, (1994)
 Anna P.I Vong (2003).Determinants of Bank profitability and competitiveness, 6th
edition, page27-34.
 Bringham.F, (2005), Fundamental of financial management, 7th edition, page65-67
 Porter, (2011) competitive strategies employed in the banking industry.
 Werther et, al (1999)
 Hirschheim & sabherwal, (2001). Effects of merger strategies on competitive in banking
industry.
 Pervin,(1968), Schen & Diamante,(1999,Thompson,(2009). Factors influencing
competitive advantage among commercial bank.
 Demagogue kunt&Haizingha (2009) & Abreu &medes (2000))
 Desalegn.M, (2012), Factors Affecting the Profitability of the Banks, Financial
Management 10th edition, page20-24
 HabtamuNigusee (2012), research paper on Determinants of private bank profitability.
 Haque& Tariq,( 2012).Financial markets, 5th edition, page 56-70.
 Leon (2014)
 Javaid, S., Anwar, J., Zaman, K. &Gafoor, A. (2011). Determinants of Bank Profitability
in Pakistan: Internal Factor Analysis. Mediterranean Journal of Social Sciences, 2(1), 59-
7
 Ghauri & kjell, (2015) "Bank provisioning behavior & procyclicality"
36
 Bikker & kjell,(2005).the impact of stress on employees performance of commercial
bank.
 Pandey, I. M. (2007), Definition of competitor and their factors, Financial Management
9th ed.; Vikash Publishing House, New Delhi: India. Page 50-56
 Newedechi (2010)
 Samuel Alemu, (2015), The Determinants Of Bank Profitability,Intermediate accounting
(6th edition), Mc-Graw-Hill; New York: USA.page 27-29.
37
APPENDIX-I
FACULTY OF BUSINESS AND ECONOMICS
DEPARTEMENT OF ACCOUNTING AND FINANCE
Questionnaire stobe filled by the customers of CBE Chiro branch.
Dear respondents:
This questionnaire would be designed to collect information for assessing factors affecting
competitiveness of commercial bank of Ethiopia Chiro branch. So you are kindly requested
to complete this questioner genuinely and honestly. I promise you that information you provide
would be kept confidentially and used for academic purpose only. I therefore kindly request you
to respond each question. Please fill the question below
INSTRUCTION
There is no need to write your name. Please indicate your answer with “√” make and write
important information when it is needed
PART -1 .QUESTIONARY ABOUT RTESPONDENT’S DATA
 Genera back ground.
1.1 Sex male female
1.2 Age 18- 25 26-35 36-50 above 50
1.3 Occupations merchant
Farmer
Employee
Traders
If there is other, please specify -----------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
2 What kind of service do you use?
Saving account service current demand
Money transfer service loan service
3 Do you use other private bank? Yes No
3.1. If your answer is yes, to question number 3, why? ---------------------------------------------------
------------------------------------------------------------------------------------
Page 1
3.2. If your answer is No, to question number 3, why? --------------------------------------------------
-----------------------------------------------------
4. If your answer is No, to question number 3 are you satisfied by the bank service?
……………………………………………………………………………………………
5. If your answer is yes, what make you satisfied? --------------------------------------------------------
------------------------------------------------------------------------------------------------------------
6. What is the banks contribution for your business activity and personal life? ----------------------
----------------------------------------------------------------------------------------------------------
7. Have you ever asked the bank for a loan previously?
Yes No
8. If your answer is No, to question no 7 why you haven’t asked---------------------------------------
-----------------------------------------------------------------------------------------------------------
9. If your answer is yes, to question no7 have you faced any problem when you ask for a loan
before?
Yes No
10. If your answer is yes, to question 7 what was a problem? -------------------------------------------
------------------------------------------------------------------------------------------------------------
11. What type of borrowing system do you use?
Short term loan
Medium term loan
Long term lone
Merchandize loan
If others, please specify --------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
12. How much you are satisfied by the banks credit system?
Very much
Little
Unsatisfied
13. Did you repay your loan to the bank timely? Yes No
14. If yes what type of security of the bank asked you for advancing of a loan? ----------------------
------------------------------------------------------------------------------------------------------------
Page 2
APPENDEX_2
FACULTY OF BUSINESS AND ECONOMICS
DEPARTEMENT OF ACCOUNTING AND FIANANCE
DEPARTEMENT OF ACCOUNTING AND FIANANCE
Questioners to be filled by manager, supervisor and employees of commercial bank of
Ethiopia Chiro branch.
Dear respondents:
This questioner is designed to collect information from assessing factor affecting
competitiveness of commercial bank of Ethiopia Chiro Branch from managers, supervisors
and employees of the bank. I promise you all data you provide would be kept confidentially and
would be used for academic purpose only. I therefore kindly request you to complete this
questionnaire genuinely and honest. Please fill the questions provided below.
INSTRUCTION
There is no need to write your name. Please indicate your answer with “√” make and write
important information when it is needed
PART _1 QUESTIONNARE ABOUT RESPONDENT DATA.
General back ground
1.1 sex male female
1.2age 18-25 26-35 36-50 above 50
1.3 education status
College diploma
First degree
Master
1.4. Position
Manager
Supervisor
Employee
Page 1
1.5 For how long have you been working in the bank? ----------------------------------
PART -2 questionnaires about the organization.
1. What type of service does your organization provide to its customers? -----------------------------
------------------------------------------------------------------------------------------------------------
2. Is the bank is profitable? Yes No
2.1If the answer is NO what is the reason?------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
--------------------------
2.2. What factors affect profitability? ----------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
3. Which services are more demanded by your customer?
Saving deposit
Fixed deposit
Demand deposit Time deposit
4. What security or securities are required for advancing loans to customers? ------------------------
------------------------------------------------------------------------------------------------------------
5. What are the methods used by the bank to cover its loan? --------------------------------------------
-----------------------------------------------------------------------------------------------
6. What is the level of competiveness in the market?
Strong Medium Weak
7. What is the effect of market competition in the profitability of the bank? --------------------------
------------------------------------------------------------------------------------------------------------
8. Is there any decrease in number of borrowers due to the emergence of new competition? -------
-----------------------------------------------------------------------------------------------------------
9. What is the problem in advancing and repayment of a loan? -----------------------------------------
------------------------------------------------------------------------------------------------------------
Page 2
10. What are the banks strategies to compete with the competitor to maintain its market share? --
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------
11. What are the main problems that the bank currently faces? Specify. -------------------------------
-----------------------------------------------------------------------------------------------------------
12. Is capitalization, asset utilization and professionalism affects the profitability of the bank?
Yes No
12.1 If your answer is yes how? ------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
12.2 If your answer is NO why-------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-
Page 3

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ODA BULTUM UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

ASSESSMENT OF FACTORS AFFECTING THE COMPETITIVENESS OF

BY: BETELIHEM MIRO

A RESEARCH PAPER SUBMITTED TO DEPARTMENT OF ACCOUNTING

ADVISOR: TIHITNA (MSc)

KEY WORD: COMMERCIAL BANK, COMPETITION, CUSTOMER, INNOVATION

NCA, Network Computing And Applications

1.1. Background of the Study

1.4. Basic research questions

1.5. Objective of the study

1.5.2. Specific objective

1.7. Scope of the study

1.8. Organizations of the Study

2.1. Concept of Competition in bank

2.2. Generic Competitive Strategies

2.2.1. Competitive Advantage in Service Quality

2.2.2. Competitive Advantage in Technology and Operations

2.2.3. Competitive Advantage in Human Resources

2.2.4. Competitive Advantage in Leadership Quality

2.3. Banks Profitability

2.3.1. Profit Measures

2.3.2. Determinant of profitability

2.4. Determinants of Banking Competition

2.5. Liability of Commercial Bank

2.6. Empirical Literature Review

3.1. Research Design

3.2. Description of the study area

3.3. Research approach

3.4.1. Source of data

3.6. Method of data analysis

Table 4.1: The customer sex distribution

Sex of respondent No. of respondent In percentage %

4.2.2. Age distribution of customers respondents

Chart 4.1 Age distribution of customer respondents

4.2.3. Occupation of customer

Chart 4.2 Occupation of customers

4.2.4. Customer service and satisfaction

Table 4.2.service by bank

S.No Item No of respondent In percentage%

Source: Researchers own survey

Table 4.3.Satisfaction of customer

No. Item No. of respondent In percentage %

4.2.6. Contribution of bank for customer personal life

4.2.7. Services of bank

1 Have you ever asked the

1 How much you are satisfied by the bank credit

4.2.8. Types of securities

Chart 4.3 Age distribution employee respondents

Source- Researchers own survey

4.3.3. Position of employees

4.3.5. Service rendered by the bank audits Profitability

4.3.7. Level of competition

4.3.9. Participation of bank on investment

4.3.10. Impact of capitalization of asset utilization and professional capitalization asset

 Northcott,(2004). "competition in banking a Review of the literature "

PART -2 questionnaires about the organization.

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