Abstract:
The main objective of this study was to examine the factors affecting operational performance of
interest free banking services in Ethiopia: the case of commercial bank in Ethiopia, Haramaya
branch. The study has employed descriptive research based on survey and the data are of cross
sectional type. The study has used both primary and secondary data which are quantitative and
qualitative in nature and have been collected through structured and semi structured questionnaire
and interview. In this study, 386 questionnaires were distributed to IFB customers and
employees CBE Haramaya branches. The collected data have been analyzed, and interpreted
accordingly. In this study, 375 and 9 questionnaires were distributed to IFB customers and
employees of the bank respectively. The data was analyzed using descriptive statistics of mean,
frequency and percentage using SPSS version 20 software. Both descriptive and inferential
statistics (correlation and regression) analysis were used to analyse the data. The analysis confirms
there were significant positive relationships capacity of the bank, customer awareness and level
of demand with operational performance of interest free banking services. Based on the analysis
of the obtained data, found out the performance effects to IFB services as: lack of commitment of
the bank, lack of Shariah advisor, lack of supportive regulatory directives, Problem related to
Ethiopian Commodity Exchange (ECX) law, lack of capacity to deliver IFB product at full rage,
lack of awareness of customer about IFB products, lack of trust and confidence of customers,
inadequate marketing and promotion. Accordingly, the following recommendations were
forwarded by the researcher based on the results of the findings in conjunction with literature
review reflections about IFB products, provide sustainable and continuous training to build the
capacity of the manpower, the bank shall increase accessibility of its products with the expected
services. The government of Ethiopia should take more proactive efforts to promote Interest free
banking services in accordance with customers’ satisfaction. The NBE and the Ethiopian
government had better to be in a position to laid dawn sound regulatory plate form and support
toward the expansion of IFB services and product in accordance with Sheriah Law.
