ASSESSMENT OF CHALLENGES AND OPPORTUNITY OF E-BANKING IN

DASHIN BANKS (CASE OF IN MIZAN TOWN)

MIZAN TEPPI UNIVERSTY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

A Research proposal submitted to accounting and finance for partial

fulfillment of the requirement 0f BA Degree in Accounting and Finance

Advisor; Mr.Muluken

Prepared By – Aliyu Kassa

ID NO :BEE/251/13

MTU
JULY/2025GC

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 Abstract

The general objective of the study will be assessment of opportunities and challenges
for the adoption of e-banking service in Dashen Banks in mizan town branch. From this
general objective, three specific issues were explored. This study will use data from
primary source and some secondary source as a supplement. The data which is
collected from the selected respondent from Dashen Banks in mizan town branch. This
study focus on describing the current situations of the problem and examining the main
challenges and opportunities of e-banking in the Dashen Banks in mizan branch. Mainly
this research aims to describe the phenomenon and assess the current situations of e-
banking. Therefore descriptive research will be use to fulfill the objectives. The
collected data will be analyzed by using descriptive analysis such as table, percentages
and charts.

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 TABLE OF CONTENT

Contents
Abstract…………………………………………………………………………………………………………………………………………………..I
ACRONYMS……………………………………………………………………………………………………………………………………………III
CHAPTER ONE 1
1. INTRODUCTION 1
1.1 Back ground of the study 1
1.2 statement of the study 2
1.3 Research questions 2
1.4 objectives ………………………………………………………………………………………………………………………………………3

1.4.1. General Objective 3

1.4.2. Specific Objectives 3
1.5 Significance of the study 3
1.6 Scope of the study 3
1.7 Organization of the study 4
CHAPTER TWO 4
2.REVIEW OF RELATED LITRATURE 4
2.1 Definition of Electronic banking 4
2.2 Electronic banking classification 5
2.2.1 Telephone banking (Tele banking) 5
2.2.2 Internet banking 5
2.2.3 Mobile banking 5
2.3 Advantages of electronic banking 6
2.3.1 Banks ‘point of view’ 6
2.3.2 Customers’ point of view; 7
2.3.3 National point of view 7
2.4 Delivery channels of E-banking 7
2.4.1 Automated Teller Machines (ATMs) 8
2.6 Point of Sale (POS) 9

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 2.7 Challenges of e-banking 9
2.8 Opportunit of e-banking 10
2.8 Importan of e-banking 11
CHAPTER THREE 11
3. RESEARCH METHODOLOGY 11
3.1 Research Design 11
3.2 Sources of Data 12
3.3 Target Population 12
3.4 Sampling and Sampling Technique 12
3.5 Data collection instruments 13
3.6 Data analysis 13
CHAPTER FOUR 13
4. TIME AND BUDGET 13
4.1 Time budget 13
4.2 cost budget 14

REFERENCES 14

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 ACRONYMS
ATM: Automated teller machine

E-banking: Electronic banking

POS:point of sales

EFT: Electronic fund transfer

UK: United Kingdom

USA: United States of America

SMES: Small and Medium Scale Enterprises

CBE: Commercial Bank of Ethiopia

ICT: Information communication Technology

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 CHAPTER ONE

1. INTRODUCTION

1.1 Back ground of the study

Nowadays modern technology is being introduced in all fields and it is changing the
world with full of innovations. For this reason, the traditional banking services are
getting modernized by the use of electronic banking.

Banks are focusing on their electronic banking activities and are globally expanding e-
banking activities exploring the use of wireless networks and venturing in to some new
areas of electronic commerce. Banks offer e-banking services to expand market share
or as a cost saving strategy to reduce paper work and personnel (WWW.ehow.com).

E-banking is defined as the provision of retail and small value banking products and
services through electronic channel. It implies a service that allows customers to use
some form of computer to access account-banking includes varies banking activities
conducted from sites other than a physical bank location. For instance, all over the
world customer relay on ATMs to withdraw money from their demand deposit accounts
at any hour (Mescon,2002).

E-banking started in the early 1980 both in USA and UK. It really took off with the arrival
of the World Wide Web. The evolution of e-banking started with the use on automatic
teller machines (ATMs) and has online banking. ATMs represent a significant change in
the banking industry because they offer a method of delivering bank services to
customers without the need for contact between customers and staff. (Handerson,
1988).

Electronic fund transfer (EFT) is another form of electronic banking .These

computerized system allows users to conduct financial transaction efficiently from
remote location. (WWW.eurojournals.com).

In addition to ATM and EFT, most major banks and money thrifts and community banks

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now offer internet or online banking to accommodate the growing number of individuals
and businesses that want to transfer money between accounts, check account balance,
pay bills, apply for loans, and handle other transactions at any hour. Online banking is
not only fast and easy for customers but also extremely cost efficient for banks.
(MichaelH.Mescon,2002). The Commercial bank of Ethiopia and Dashen bank have
provided the e-banking services form their users. Some of the electronic technologies
that has provided by the bank are automated teller machines technology, internet
banking, point of sale, and mobile banking.

In this context, the study will attempt to trace the present status of e-banking in
Commercial banks in Ethiopia in the Dashen Bank in Mizan town, visualize the
opportunities and looks at the challenges faced in providing the service.

1.2 Statement of the problem

One main advancement technology has brought to us is the introduction of e-

banking.The internet and different things can do to uplift business procedures, products
and services is a current necessity for business. One of internet’s products is e-banking.
It is a faster way for clients to transact without the banks personnel. E-banking service
expands market share or a cost saving strategy to reduce paper work and personnel.
The internet infrastructure in major cities of Ethiopia is even insufficient; due to lack of
internet facility (http; ivy thesis, typepad.com).
Most of the peoples of Ethiopia is a customer of traditional banking which is
characterized by physical decentralization, with branches scattered around populated
areas to give customers easy geographical access(Ainin et al., 2005).Nowadays an
electronic banking service is coming into existence. But, it is not clear whether all
customers are comfortable with e-banking or not(Daniel &Storey,1997).

Even if there is insufficient internet facility and unclear level of customer’s attitude
towards on the use of e-banking, Ethiopian banks including Dashen Bank in Mizan
branch started e-banking services. So this study will attempt to assess the influencing
challenges and opportunities of inhibiting acceptance of e-banking in Dashen Bank in
Mizan branch.

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1.3 Research questions

This study tries to provide answer for the following basic research questions:

What are the benefits of adopting e-banking service from the view points of
banks?

What are the major challenges of the adoption of e-banking in Dashen Bank in
Mizan Town branch?

What are the accessible opportunities for the adoption of e-banking services in
Dashen Bank in Mizan Town branch?

1.4 Objective of the study

1.4.1. General Objective

The main objective of the study is to determine the challenges and opportunities of e
banking on Dashen Bank in particularly in Mizan Town branch.

1.4.2. Specific Objectives

The specific aims of the study are;

To find the benefits realized by Dashen Bank in the adoption and practice of e-
banking.

To assess the major challenges of the adoption of e-banking service in Dashen

Bank.

To assess the accessible opportunities for the adoption of e-banking service in

Dashen Bank

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1.5 Significance of the study

The study will plays a significance to provide relevant information to public and private
banks as well as to the concerned bodies in addressing the challenges and
opportunities of e-banking in Dashen Bank. The study also used as an initiation for
those who are interested to conduct a detailed and comprehensive study regarding with
the challenges and opportunities of e-banking in Dashen Bank.

1.6 Scope of the study

The study will focused on Dashen Bank in Mizan town branch. It will not include other
commercial banks in Mizan town. Therefor the study will be limited on the Dashen Bank.
The researcher select these banks under consideration of cost and time and under the
assumption that they have better e-banking application than other commercial banks in
Mizan town.

1.7 Organization of the study

This study is organized into four chapters: Chapter one focuses on the back ground of
the study, problem statement, objectives and significance, and scope of the study. In
chapter two, contains review of related literature. In chapter three, deals with research
design and methodology of the study which include the study design, source of data,
target population, sampling, data collection instrument, and statistical analysis. Chapter
four also focuses on cost and time budget.

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 CHAPTER TWO

2. LITRATURE REVIEW2.1 Definition of Electronic banking

Electronic banking is the modern topic in the era of science and technology. Though
th
electronic banking started in 1980’s but the revolution has taken place in 20 century.
Since then electronic banking concept is flourished with populous model, theory and
practical concept. So, before going to discuss any core content of electronic banking, it
is good to memorize the fundamental concept of electronic banking which helps to
realize basic concepts of electronic banking.

Electronic banking is umbrella term for the process by which a customer may perform
banking transaction electronically without visiting a brick-and-mortar institution.
Therefore transaction related to bank activities via Electronic mean and medium is
called electronic banking (Handerson, 1988).

Different authors have defined it in different ways based on their understanding of the
application of electronic banking. According to Daniel (1999), electronic banking is
electronic connection between the bank and customer in order to prepare, manage and
control financial transactions. In the opinion of Daniel (1999), e-banking is online
banking (or Internet banking) which allows customers to conduct financial transactions
on a secure website operated by their retail or virtual bank, credit union or building
society. This implies that E-banking is a service that allows an account holder to obtain
account information and manage certain banking transactions through a personal
computer via the financial institution web site on the internet.

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2.2 Electronic banking classification

In the view point of use and access media, electronic banking can be classified in to
three narrow sections (Mescon, 2003).

Telephone banking (the oldest and poorest one)

Internet banking (online banking)

Mobile banking

2.2.1 Telephone banking (Tele banking)

Telephone banking is a service provided by a financial institution that enables

customers of the financial institution to perform financial transaction over the
telephone, without the need to visit a bank branch or automated teller machine.

It allows consumers to phone their financial institutions with instructions to pay certain
bill or to transfer funds between accounts (FTC, 2006). Bank’s point of view, telephone
banking reduces cost of handling transactions by reducing the need for customers to
visit a bank branch for non-cash withdrawal and deposit transaction.

2.2.2 Internet banking

Internet banking refers to systems that enable bank customers to get access to their
accounts and general information on bank products and services through the use of
banks website, without the intervention or inconvenience of sending letters, faxes,
original signatures and telephone confirmations (Thulani et al, 2009). For those that
have access to the internet and a computer all you need to do is proceed to your banks
website and login. From there you have access to all of your accounts that you have at
that bank. Transfer funds between your accounts with ease. You can also use online
banking to see how much money you have in your accounts and where the money you
have spent has gone. Internet banking allows customers of a financial institution to
conduct financial transactions on a secure website operated by the institution, which
can be a retail or virtual bank, credit union or society .It may include of any transactions
related to online usage.

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2.2.3 Mobile banking

Mobile banking is a term used for performing balance checks, account transactions,
payments, credit applications and other banking transactions through a mobile device
such as a mobile phone or personal digital assistant (Michael H.mescon, 2002).Mobile
banking is used in many parts of the world with little or no infrastructure, especially
remote and rural areas. Customers can make their transactions anywhere via mobile.

2.3 Advantages of electronic banking

After getting the number of services provided by the Ethiopian banks through electronic
banking it is easy to what advantages we are getting by establishing and using
electronic banking. The advantage can be classified in three category, these are;
National point of view ,Banks’ point of view and Customers’ point of view(Robert,2002).

Electronic banking systems provided easy access to banking services. Electronic

banking (e-banking) reduces the transaction costs of banking for both Small and
Medium Enterprises (SMEs) and banks. SMEs need not visit banks for banking
transactions, providing round the clock services (Cheng, 2006). Banks can benefit from
lower transaction costs as E-banking requires less paper work, less staffs and physical
branches (Cheng, 2006)

2.3.1 Banks ‘point of view’

From the banks’ view point, banks are getting some specific advantages after starting
the electronic banking services. These benefits are; E banking reduces the capital
expenditure and staff cost of the bank.

“Profit maximization; the main goal of every company was to maximize profits for its
owners and banks were not any exception. Banks are increasing its profit by reducing
the cost of paper, time, etc. By using electronic banking. Thus automated electronic
banking services offered a perfect opportunity for maximizing profits. “Increase
services quality; features of electronic banking services include less time, complete
transaction, no human conflict and presence etc.thus the quality of services of bank is

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increasing day by day.

“Increased customer rate; It is the most noticeable change in bank after starting e-
banking services. Customers are accepting this medium beside a traditional account.
Ultimately, the profit of bank is increased.

2.3.2 Customers’ point of view;

The main benefit from the bank customers’ point of view was significant saving of time
by the automation of banking services processing and introduction of an easy
maintenance tools for managing customer’s money. The main benefits of e-banking
were as follows;

Reduce costs: in accessing and using the banking service

Increased comfort and time serving: Transaction can be made even after banking
hour without the physical interaction of the bank 24 hours a day

Speed: The response of the medium was very fast; therefore customers actually
waited till the last minute before concluding a fund transfer.

Convenience: all the banking transaction performed from the comfort of the
home or office or from the place a customer wants to.

Better cash management. E-banking facilities speed up cash cycle and increases
efficiency of business processes as large variety of cash management
instruments is available on internet sites of banks.

2.3.3 National point of view

As e-banking provide opportunity to banking sector to enlarge their customer base, it

has a consequence to increase the volume of credit creation which in turn results in
better economic condition. The positive impacts of electronic banking are immense for
economic development of a nation. Some of the economic benefits of e-banking as
identified by (Dawd, 2009) are as follow:

Reduction of the cost for printing cash notes and its related distribution

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 Enhancement of Aggregate Deposit

Banking the un-banked

Increasing the potential for hard currency generation

2.4 Delivery channels of E-banking

E- Banking services are delivered through various electronic means collectively called
electronic delivery channels. Electronic Banking is really not one technology, but
anattempt to merge several different technologies. The various delivering channels for
E –banking is discussed as follows:

2.4.1 Automated Teller Machines (ATMs)

ATM is also called 24-hour tellers are electronic terminals which give consumers the
opportunity to bank at almost any time (FTC, 2006).

It is described as a combination of a computer terminal, record-keeping system and

Cash vault in one unit, permitting customers to enter the bank’s book keeping system
with a plastic card containing a Personal Identification Number (PIN) or by punching a
special code number into the computer terminal linked to the bank’s computerized
records 24 hours a day (Rose, 1999).

To withdraw cash, or transfer funds between accounts, a consumer needs an ATM card
and a personal identification number. Once the customer login, access to transactions
are displayed on the screen. It offers several retail banking services to customers.

2.4.1.1 Advantages of ATM for the banks

There is a saving in costs because staffs are not needed for routine tasks.

The machines have capacity to handle with very high volume of works.

Outlets for banking services can be provided in a wide choice of location, not
restricted to branch sites.

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2.4.1.2 Disadvantage of ATM for the banks

There is a loss of personal contact with customer which may make selling other
services more difficult.

2.4.1.3 Advantage of ATM for customers

Service is very quick

Machines are available in many location and alsoin operation when branches are
shut

2.4.1.4 Disadvantage of ATM for customers

Services are impersonal.

May be difficult to keep track of transaction because machines don’t always web
(Handerson,1998)

2.5 Point of Sale (POS)

POS is an on-line system that allows customers to transfer funds instantaneously from
their bank accounts to merchant accounts when making purchases (at purchase points).
It is an electronic payment type that allows credit/debit card holders make payments at
sales or purchase outlets. It allows customers to perform the following services: Retail
Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Transaction, printing
mini statement etc. (Kuma)

2.6 Challenges of e-banking

The concept of e-banking includes all types of banking activities performed through
electronic networks. It is the most recent delivery channel of banking services, which is
used for both business-to-business and business-to-customer transactions.

Since e-banking offers some smart services benefiting both banks and customers
compared with traditional banking system, it has become essential to make necessary
room for banks to increase e- banking. Among others, attractiveness of e-banking

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includes: it lowers transaction cost; provide 24- hour services; allows remote
transactions facilities that replace physical presence of a customer in a bank branch
and; increases transaction speed and accuracy. On the other hand, traditional banking is
time-consuming and more costly and therefore, e-banking is replacing traditional
banking all over the world.

Banking in Ethiopia faces numerous challenges to fully adopt and adapt e-banking
applications and seizes the opportunities presented by ICT applications in general.

Key challenges for e-banking applications are:

Low level of internet penetration and poorly developed telecommunication

infrastructure: lack of infrastructure for telecommunication, internets and online
payments slow down smooth development and improvements in e-commerce in
Ethiopia. Most rural areas of the country, where the majority of small and
medium scale business are concentrated, have no internet facilities and are
unable to engage in e-commerce activities.

High rate of illiteracy: low literacy rate is a serious obstacle for the adoption of e-
banking in Ethiopia as it hinders the accessibility of banking services. For citizens
to fully enjoy the benefits of e-banking.There should not only know how to read
and write but also possess basic ICT literacy.

Lack of Technological Infrastructure – the implementation of e-payment is been

impeded by unavailability of ICT infrastructure. Most rural areas where majority
of small and medium scale industries are concentrated have no access to
internet facilities and ICT Equipment

Costs – where available, the cost of ICT is a critical factor relative to per capital
income. This makes the cost of entry higher compared to developed countries.

Regulatory and Legal Issues – inexistence of proper legal and regulatory

framework.

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Resistance to changes in technology among customers and staff due to:

Lack of awareness on the benefits of new technologies

Lack of trained personnel in key organizations and

-Frequent connectivity failure in telephone lines

Frequent power interruption: lack of reliable power supply is akey challenge for
smoothly running e-banking in Ethiopia.

2.7Opportunities of E-banking for the customers

the benefit of E-banking for Customers as follows: the main benefit from the bank
customers “point of view is significant saving of time by the automation of banking
services processing and introduction of an easy maintenance tools for managing
customer‘s money.

The main advantages of E-banking for corporate customers are as follows:-

Reduced costs in accessing and using the banking services.

Increased comfort and time saving — transactions can be made 7x24, without
requiring the physical interaction with the bank.

Quick and continuous access to information: Corporations will have easier

access to information as, they can check on multiple accounts at the click of a
button.

Better cash management: E-banking facilities speed up cash cycle and increases
efficiency of business processes as large variety of cash management
instruments is available on internet sites.

For example, it is possible to manage company‘s short term cash via internet
banks

(investments in over-night, short- and long term deposits, in commercial papers,

in

bonds and equities, in money market funds). Private customers seek slightly
different

kind of benefits from E-banking.

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 Reduced costs: This is in terms of the cost of availing and using the various

banking products and services.

Convenience: All the banking transactions can be performed from the comfort of
the

home or office or from the place a customer wants.

Speed: The response of the medium is very fast; therefore customers can
actually wait

till the last minute before concluding a fund transfer.

2.8 Importance of E-banking for the Bank

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

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 CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1Research Design

Research design is usually a plan or blue print which specifies how data relating to a
given problem should be collected and analyzed. It provides the procedural outlines for
the conduct of any investigation. The study will focus on describing the current
situations of the problem and examining the main challenges and opportunities of e-
banking in Ethiopia. Mainly this study aims to explain the phenomenon and assess the
current situations of e-banking. Therefore, descriptive research design will used to fulfill
the objective.

Sources of Data

In order to attain the targeted objective of this study the researcher will use both
primary data and secondary data

Primary sources

This area of data collection was first hand i,e by the user and these referred to the data
gathered as a result of direct interaction with the respondents. Primary data were
usually obtained from the field through interviews and questionnaires or recording of
official transacthion

Secondary sources

These are data that obtained second hand from published or recorded data include
different documents, reports and financial statements. The data which is collected from
those selected respondents from Dashen Banks.

3.3 Target Population

According to ( Abdulmalik, 2006), population in this context has been defined as all
conceivable elements, objects or observations relating to a particular phenomenon of

17
interest to research, i.e. it is the totality of items, object, persons, issue or observation
who share at least a common attribute or characteristic on which the research in
centered. This could be people, objects, cities, countries… etc.

In this research the target populations are employees of dashen banks in Mizan town.
The collected from Dashen Banks that are found in Mizan town in order to get the
required data. .

3.4 Sampling and Sampling Technique

Sampling: involves the selection of a number of study units from a defined study
population. Sampling - is the statistical process of selecting a subset (called a “sample”)
of a population of interest for purposes of making observations and statistical
inferences about that population.

The sample for this study are Dashen Banks in Mizan town branch by using a
convenience sampling method.

22 respondents are taken from e-banking service providers such as managers and
assistance managers are those in Dashen Banks in Mizan town branch by using
purposive non probability sampling technique.

3.5 Data collection instruments

The primary data was collected mainly from employees and bank managers of Dashen
Banks through open-ended and closed-ended questions and interview. While the
secondary data was obtained from literature review and other related reports.

3.6 Data analysis

After collecting the relevant data, the collected data will analyzed by using descriptive
method of data analysis like tabulation and percentage.

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 CHAPTE FOUR

4. TIME AND COST BUDGET

4.1. Time budget

No Activities Sep Oct Nov

1 Data collection X

2 Further literature review x

3 Data processing and classification x

4 Data analysis and interpretation x

5 Typing analyzed data on the ordinal paper x

6 Final paper submission an presentation x

4.2 Cost budget

No Description Measurement unit cost Birr cent

birr cent

1 Transportation Distance 500 00 500 00

2 Paper Package 500 00 500 00

3 Typing Ream 1000 00 1000 00

4 Pen Number 5 00 125 00

5 Pencil Number 2 00 30 00

6 Paper (questionnaires Number 200 00

duplicating)

7 Miscellaneous expenses 500 00

Total 2780 00

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Ayana(2012). Challenge of e-banking

Bank Away(2001). Customer point of view

Ainin, S, Lim C.H., &Wee,A.(2005). Prospect and challengeof e-banking in Malaysia.

Cheng.T. C. E., (2006). Adoption of internet banking.

Daniel, E., &Storey, C. (1997). Online banking.

Gardachew(2010).key challenge of e-banking

Federal Trade Commission, FTC, (2006) FTC facts for consumers.

th
Banking operation, Mj .Handeson, 1988(6 edition) London

http; ivy thesis typepad.com

th
Business today, Michael H. Mescon, 2002 (4 edition) USA.

th
Robert, 2002 (6 edition), the new international money game, London

th
Rose, P. S. (1999). Commercial bank management, (4 edition) Irwin/McGraw. Hill,
Boston, USA

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International telecommunication union for development (2006).commitment of
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Thulani, D., Tofara, C & Langton, R. (2009). Adoption and use of internet banking in
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WWW.ehow.com

WWW.eurojournal.com

YayehyiradKitaw (2006). E-government in Africa, prospects, challenges and practices.

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