The Ethiopian Journal of Business and Economics

Drivers of Bank Loans and Advances: Evidence from Ethiopian Banking Business

Taye Tadesse — 2025-06-27

This article examines determinants of Ethiopian commercial banks' loans and advances. Seventeen commercial banks' audited financial reports from 2005-2022 and National Bank of Ethiopia and the World Bank data are used. Results from descriptive analysis indicate that commercial banks' loans and advances have increased over the years and their liquidity level has continuously declined. Government-owned bank dominates the private banks in assets, loans, and deposits. Fixed Effects model discovers deposit interest rates, bank size, market concentration, and exchange rate have a positive significant effect on commercial bank loans and advances. Lending interest rate, bank liquidity, Treasury bill rate, country's political risk index and change in banks' minimum capital requirement exerted negative and significant effect on bank loan and advances. The findings have important policy implications for commercial banks and regulatory authorities. Regardless of its relation to loans and advances, it is of paramount importance for commercial banks as players and National Bank of Ethiopia as a policy maker to give its due consideration to liquidity position for the sustenance of public confidence and to have a sound banking sector. It is better that the commercial banks reduce their lending rates to increase the number of borrowers and be beneficiaries of economies of scale. A peaceful and secure political system is necessary to create enabling operating environment for the commercial banks to extend loans and contribute to economic development.

Constraints to Participation in Strategy-Making: Evidence from a State-Owned Enterprise in Ethiopia

Gemechis Terfa Eticha — 2025-06-27

Strategy making has been considered the purview of top management. Hence, participation in strategy making is often considered a non-issue and not much research has been done on this topic. Even extant research on this subject is predominantly in the context of the developed countries. This paper explores the nature of participation in strategy making in a state-owned enterprise (SOE) in the context of a developing country, Ethiopia. Following a qualitative approach, involving in-depth interviews with managers and employees, the paper explores the dynamics of participation in the strategy making process. Our findings reveal that strategy making was a mere formality in the past. However, the recent liberalization of the sector and the entry of a competitor into the industry have forced the company to take strategy making seriously. Currently, there are attempts to engage the lower-level managers and employees in strategy making processes, at least in the input gathering stages. Our findings also show that participation is constrained by both organizational and socio-cultural factors. A hierarchical structure and decision-making processes limit the participation of a broader range of employees in strategy making processes. Socio-cultural factors further exacerbate these constraints, as high-power distance systematically discourages the participation of those in the lower ranks of the hierarchy.

Effect of Strategic Alignment and Strategic Foresight on Competitive Advantage with Mediating Role of Human Capital a case of SMEs of Sidama Regional State, Ethiopia

Brehanu Borji — 2025-06-27

This study examined effect of strategic alignment and strategic foresight on competitive advantage with mediating role of human capital in SMEs of Sidama regional state in Ethiopia. Structured questionnaire was used to gather data from a sample of 282 respondents using a quantitative research approach. Using SPSS and AMOS software, the researchers used methods such exploratory factor analysis (EFA), Kaiser-Meyer-Olkin (KMO) measure, and structural equation modelling (SEM) to analyze data. The results show that competitive advantage and strategic alignment, as well as strategic foresight and competitive advantage, are significantly correlated. Human capital was also found to be an important mediator, improving the efficiency of both strategy alignment and foresight in reaching competitive results. In addition to this, human capital was found partial mediator between both strategic alignment and strategic foresight and competitive advantage. The findings emphasize how crucial it is to incorporate human capital development into strategic management procedures and how SMEs must cultivate an aligned and forward-thinking culture. For managers and policymakers looking to improve SMEs' strategic competencies in a changing business environment, this research adds to our understanding of how these constructs interact to affect competitive advantage.

Knowledge Management Effect on Ethiopian Commercial Banks by Mediation of Competitive Advantage

Metasebia Adula — 2025-06-27

This study investigates the influence of knowledge management upon performance of organization in the segment of banking, addressing the topic of using knowledge practices to enhance competitive advantage as well as overall performance. The study analyzes data obtained from 391 banking experts using structural equation modelling (SEM) and AMOS software. The analysis employs quantitative indicators to examine the associations between Knowledge Management, Competitive Advantage, along with organizational performance. The study determined that Knowledge Management had a strong beneficial impact upon Organizational Performance (p < 0.001) as well as Competitive Advantage (0.421). Competitive Advantage has a significant standardized effect of 0.801 upon Organizational Performance (p < 0.001), indicating a mediating role in the link among Knowledge Management and Organizational Performance. The outcomes emphasize the prominence of management of knowledge in improving organizational performance through Competitive Advantage. Organizations ought to focus on Knowledge Management projects in order to enhance their performance indicators. Future directions involve designing complete information Management systems, cultivating a culture of information sharing, and aligning knowledge strategies alongside corporate goals for optimum effectiveness.

Financial Technology, Financial Inclusion & Household Consumption in Ethiopia

Meskerem Bogale Gebre — 2025-06-27

Using Ethiopian Scio-economic household survey data collected in 2018/2019 (ESS4), this study investigates the potential effect of FINTECH and financial inclusion on household consumption using Simultaneous Quantile Regression (QREG).The findings indicate that financial inclusion indicators (bank account holding, formal saving, and formal insurance) positively and significantly influence household consumption especially for low and middle income households while wealthier households will benefit from informal social group insurance (Iddir). Findings in heterogeneity analysis reveal that FINTECH has different levels of influence across regions and urban rural locations. Gender interaction reveals that women benefit more from FINTECH at higher income levels. Younger FINTECH customers, particularly those in higher consumption categories, benefit more, but elderly users may struggle to fully utilize FINTECH services. FINTECH and financial inclusion are also complemented by education. Rural households spend less than urban households as per expectations. They also benefit less from FINTECH than their urban counterparts. Finally, the study suggests that both financial inclusion and FINTECH access should be promoted to enhance the household consumption and welfare in Ethiopia.