This research aimed at finding out the impact of Information and Communication Technology (ICT) on performance of Ethiopian Private Banks using Dashen Bank S.C. and United Bank S.C. as a case study. It used customers’ satisfaction and employees’ performance/efficiency as independent variables to measure performance of the banks. In addition the research tried to investigate major challenges encountered  by customers in using Technology-based services/products. Structured questionnaire was used to collect relevant data for the research. The data gathered through the questionnaire was analyzed by Statistical Package for Social Science (SPSS) version 16. T-statistic test was carried out to determine the significance of the independent variables on dependent variable. Simple linear regression analysis was also carried out to determine the effect of the independent variables on dependent variable. It was found from the research that Information and Communication Technology indeed has a positive significance impact on performance of Ethiopian Private Banks in respect with satisfying their customer and improve their employees’ performance. The simple linear regression analysis also showed a positive coefficient of 0.803 and 0.725 for customer satisfaction and employees performance respectively, which simply mean that there is strong positive relationship between Information and Communication Technology and customers’ satisfaction and employees’ performance of the banks. The research also identified that the major challenges discouraging customer to use Technology-based services/products of the banks are; mobile and internet connectivity problem and lack of Information and Communication infrastructures. In general, Information and Communication Technology has positively impacted performance of Ethiopian private banks.

Key Words: ICT, Customer satisfaction, Employee performance, bank performance, challenges.

Table of Content

Declaration I

Acknowledgment… II

Table of Content… III

List of Table… VI

List of Figure VIII

Abstract… IX

1. Chapter One: Introduction… 1

Background of the Study…1

Statement of the Problem3

Research Questions5

Research Hypothesis5

Objective of the Study6

Significance of the Study6

Scope/Delimitation and Limitation7

Organization of the Study…7

2. Chapter Two: Literature Review… 9

Brief History of Banking in Ethiopia9

Importance of ICT in Financial Service Delivery…11

Benefit of ICT in Banking Industry11

Relationship between ICT and Organizational

Performance: Banking Industry… 13

Types of Technological Facilities/Channels

In Banking Industry… 15

ICT and Ethiopian Private Banking Industry…18

Theoretical Framework…20

Measuring Customer Satisfaction…20

Measuring Staff Productivity…24

The Challenges of ICT Application on Commercial Banks…26

3. Chapter Three: Methodology of the Study… 30


Operationalization of the Research Topic…30

Research Design…31

Source of Data…31

Target Population…32

Sampling Design…32

Data Collection Instrument…33

Method of Data Analysis…33

4. Chapter Four: Data Presentation, Analysis and Interpretation… 34

4.1 Introduction……………………………………………………………. 34

Demographic Data Presentation…34

Customers’ Responses…34

Employees’  Responses36

Descriptive Analysis of Data Collected37

Impact of ICT on Customers’ Satisfaction…37

Impact of ICT on Employees’ Performance/Productivity45


Hypothesis  Testing53

Hypothesis One: Impact of ICT on

Customers’ Satisfaction… 53

Hypothesis Two: Impact of ICT on Employees’ Performance/Productivity55

5. Chapter Five: Conclusion and Recommendation… 59


Impact of ICT on Customers’ Satisfaction…59

Impact of ICT on Employees’ Performance/Productivity…60



Bibliography… 63

Appendices… 70

List of Table

Table List of Banks in Ethiopia as at June 2014.

Table Delivery Platform available for Electronic Banking

Table Feature of banking services rendered by Ethiopian banks

Table Summary of Related Studies

Table Factors Affecting Customer Satisfaction

Table Measurements of Worker performance

Table Rate of Respondents

Table Customers’ demographic information

Table Employees’ demographic information

Table This Bank provides most of Technology-based services/products and the services are almost available

Table The Technology-based services/products provided by this bank works accurately and are error-free and reliable

Table The Technology-based services/products allows me to complete transactions quickly and saves me a lot of time, especially when I am pressed for time

Table I feel the Technology-based services/products provided by this  bank are safe and the risk associated with it is low

Table The Technology-based services/products provide precise and sufficient information I need (account statement and balance enquiry)

Table The Technology-based services/products provided by this bank are easy to use and user-friendly

Table The Technology-based services/products minimize inconvenience by providing anywhere and anytime banking (banking at home/office at 24/7)

Table The charges associated with Technology-based services/products are reasonably fair and lower the transaction cost of banking

Table When I contact this bank’s customer service via e-mail, phone, interactive website and fax, my requests are always anticipated properly and always answered promptly

Table This bank resolves my complaints quickly and offers a fair compensation for its mistakes

Table Overall, I am satisfied with the bank Technology-based services

Table I say positive things about the bank to other people

Table I will encourage friends and relatives to use the service offered by the bank

Table Summary of Descriptive statistics of impact of ICT on Customers’ satisfaction

Table Information and Communication Technology helps employees to achieve a larger number of tasks

Table Information and Communication Technology helps to lesson workload of employees

Table Information and Communication Technology helps employees to deliver output timely

Table Information and Communication Technology helps employees to reduce errors

Table Information and Communication Technology helps employees to perform their work within the required specifications

Table Information and Communication Technology helps employees to improve work continuously

Table Information and Communication Technology helps employees to deliver consistent output even in high work pressure

Table Information and Communication Technology helps employees to improve their effort to learn more and apply new knowledge

Table Information and Communication Technology helps to achieve greater flexibility in work

Table Overall, Information and Communication Technology enhance performance of bank employees

Table Information and Communication Technology has made work easier and interesting

Table Information and Communication Technology improve effectiveness of communication flow (via internet or intranet) and decision making process

Table Summary of Descriptive statistics of impact of ICT on employees’ performance

Table Summary of descriptive statistic of Challenges

Table One sample Statistic

Table One sample Test

Table Simple Linear Regression model Summary

Table One Sample Statistic

Table One Sample Test

Table Simple Linear Regression Model Summary

List of Figures

Fig Conceptual framework relating ICT to  the  performance  of  Banking Industry

1.1 Background of the Study



Today‟s business environment is very dynamic and intense as a result of technological advancement and introduction of information and communication technology as a competitive advantage of any organization. Information and communication technology (ICT) is the automation of processes, controls, and information production using computers, telecommunications, software and other gadgets that ensure smooth and efficient running of activities. It is a term that largely covers the coupling of electronic technology for the information needs of a business at all levels (Agbolade, 2011). Laudon and Laudon (2012) define Information Technology as all the hardware and software that a firm needs to use in order to achieve its business objectives. Therefore, it can be explained in business context as “a set of interrelated components that collect (or retrieve), store, and distribute information to support decision making and control in an organization” (Yeboah et. al, 2013).

In the last few decades, application of information technology in business strategies has become at the very heart of the competitive process. As economy moves from lower to higher stages of development, business processes are shifting from simpler to modern and complex techniques of production. In this regard information technology has played a great role in changing input- output relationship of production activities. Business organization, especially the banking industry is operating in a complex and competitive environment characterized by changing conditions and highly unpredictable economic climate with ICT being at the center of the change curve (Agbolade, 2011).

Moreover, the rapid diffusion of the ICT in the current business environment during recent decades has affected many organization‟s business process and organizational strategies. Many studies have shown that world organizations have been inspired by the rapid and persistent upgrading of technology and scientific knowledge. Rapid changes in computer and communication technologies have altered the way organizations do business and decision making process which is reflected on their operational effectiveness. In this regard Chakrabarty (2011) argued that technology has revolutionized every industry in the world by rendering faster

and cost effective delivery of products and services to customers, who in the normal course could not have afforded the same. At the same time it also enhanced producers of goods and services to remain viable and profitable.

With increasing global competition and quick spreading of knowledge, the future of many businesses depend upon their ability to innovate (Talegeta, 2012). Information technology is one of the most important tools along with innovations in organizations and it plays a critical role in development of new products and services. Rai, et. al. (1996) concurred that, IT provides new forms of customer services, new distribution channels, new information based products, improved productivity, and has the capacity to influence industry structure. According to Agrawal and Jain (2013), the major impetus for innovation has been globalization of financial system, deregulation, and great advances in technology. Thus, in increasingly integrated financial systems facing higher volatilities, more competition and wide varieties of risks, financial innovation has become an essence to provide new products and strategies to better suit different circumstances of time and market and to meet different requirements of participants in financial system.

Banks, like other business organizations, are deploying innovative products and services to ensure their future survival and meet the changing expectation of their customers. In this intense globally competitive market, banks should strive to satisfy the needs of their customers through providing quality customer service and improve their customer relation management. According to Agrawal and Jain (2013), while banks are striving to strengthen customer relationship and move towards „relationship banking,‟ customers are increasingly moving away from the confines of traditional branch banking and seeking the convenience of remote electronic banking. In this regard Information technology and the communication networking system have revolutionized the working of banks and financial entities all over the world.

Indeed, there is no doubt that the majority of business organizations, particularly banks, consider computer technology as core competency measure to gain their competitive advantage. In this regard Jalal-Karim and Hamdan (2010) concurred that in recent years, the utilization of information technology has been increased in service industries, particularly, the banking industry, which by using information technology related products such as internet banking, electronic payments, security investments, information exchange, can deliver high quality

services to clients with less effort. Theoretically, alternative banking channels/e-channels will enhance good performance of banking services and increase the level of customer satisfaction by providing anytime, anywhere and multi way banking services including varieties of services, conveniences, speed, efficiency, security and cost effectiveness (Kumbhar, 2011). Therefore every bank should accentuate the impact of technology on their customers‟ satisfaction and employees‟ performance.

Banking in Ethiopia began in 1905 with the bank of Abyssinia, a private company controlled by the bank of Egypt (Asefa, 2011). However introduction of information technology into the banking industry is the last decade phenomena. Currently most of Ethiopian Banks have started providing Technology-based services/products like ATM (payment cards), Mobile banking, Internet Banking, SMS banking and Electronic fund transfer to their customers. Gemechu (2012), argued that technology innovation play a crucial role in Banking industry by creating value for banks and customers, that it enables customers to perform banking transaction without visiting a brick and mortar banking system. However, banks in Ethiopia still engaged in aggressive branch expansion and extended hour‟s office services. Indeed as Asefa (2011) contend, the electronic banking in Ethiopia is facing lot of challenges due to lack of software, awareness, fear of risk and lack of trained persons in the industry. Nevertheless, in order to surmount local and global competition, Ethiopian private banks need to appreciate the role of information and communication technology on their performance and properly ascertain the challenge thereon.

1.2. Statement of the Problem

Information and communication technology (ICT) has in particular brought a complete paradigm shift on the bank‟s performance and on the customer service delivery in the banking industry (Aliyu and Tasmin, 2012). Nowadays the banking system is slowly shifting from traditional banking towards relationship banking. Traditionally the relationship between the bank and its customers handled by face to face interaction in a branch, whereas, in contemporary banking, customers are demanding more flexible and accessible services everywhere and anytime. Technology has made a lot of impact on banking services owing to its role in gathering and analyzing information. The 21st century has witnessed a lot of technological innovation in banking sector. Some of the services that technology is providing to the financial services are:

ATMs, Mobile Banking, Branch network, Telephone Banking, Internet Banking just to mention a few (Yeboah et. al, 2013). In general ICT allows the present day banks to meet the expectation of their more demanding customers who are more techno-savvy compared with their counterparties of the yester years.

In today‟s fast changing world, banking environment has become highly competitive and banks are required to respond quickly to the dynamics of fast changing customers‟ expectations. To be able to survive and exceed in this changing market, banks are striving to improve their customer service delivery and productivity through adaptation of electronic banking. Electronic banking is generally an extension of traditional banking, using the internet as an electric delivery channel for banking products and services. The banking today is redefined and re-engineered with the use of IT and banks start offering more sophisticated services to customers with continuous product and process innovation (Tiwari and Kumar, 2012). Today‟s dynamic and stiff market competition forced banks to spend all their resources on improvement of service delivery and value added activities in order to survive and become productive. Yeboah et al, (2013) believes that total automation of banking is an imperative need for all banks to attract more customers, provide efficient and quality services, and survive in the emerging new competition, apart from the profit motive which is the primary objective of the banks.

Information technology has become inevitable and is seen as the only way for banks to survive in the increasingly competitive banking arena (Benerjea & Dawinji, 2011). Thus, it just doesn‟t make sense to put off investment in these most basic of technology that lay the foundation for the very future of banking. It is absolutely critical for future revenue and engagements of banks (King, 2013). In fact, many organizations have invested their time and resources for the betterment of their services and products. Yeboah et. al, (2013) argued that Banks, in particular have invested huge sums of money in IT, having their products and services basically supported by it. Identifying the IT investment and its role in the banking industry is very crucial point for the success of the modern banks and Yeboah et, al (2013) insisted that banks should properly understand the impact of ICT on their efficient service delivery, customer satisfaction and employees‟ productivity in order to maximize the return on its investment. On the other hand, Agbolade (2011) claimed that the most significant shortcoming in the banking industry today is a wide failure on the part of senior management in banks to grasp the importance of technology

and incorporate it into their strategic plans accordingly. In addition to this, the management is oblivious to the current banking situation that requires their determination to fully address all the challenges related with ICT.

Even though many studies have been conducted on impact of ICT on banking performance, limited studies are available in Ethiopia that investigate the impact of ICT on performance of Ethiopian Private Banks and the challenges thereon. Hence, more studies are still required to understand the relevance of ICT in Ethiopian Private Banks and to give a better insight for decision makers of the industry.

Therefore, this study seeks to examine the impact of information and communication technology on performance of Ethiopian Private Banks and to assess the challenges they encounter in providing Technology-based services/products to their customers.

Research Question

Based on the statement of the problem and review of related literature, this study seeks answers for the following questions:

Ø To what extent does ICT have any effect on customers‟ satisfaction in Ethiopian Private Banks industry?

Ø To what extent has ICT affected employee performance/productivity in discharging their duties and responsibilities?

Ø What are the main challenges that discourage customers to use Technology-based products and services provided by the banks?

Research Hypothesis

The study proposes the following hypotheses for empirical testing.

Hypothesis 1:

The adaptation of Information and Communication Technology has a significant impact on customers‟ satisfaction in Ethiopian Private Banks‟ Industry.

Hypothesis Two:

Application of Information and Communication Technology has affected employees‟ performance in Ethiopian Private Banks industry.

Objective of the study

General Objective

The general objective of the study is to examine the impact of Information and communication technology on performance of the Ethiopian private banking industry.

Specific Objective

Ø To examine the impact of Information and Communication Technology on customers‟ satisfaction in Ethiopian private banks industry.

Ø To examine the impact of Information and Communication Technology on employees‟ performance in Ethiopian private banks industry.

Ø To investigate the main challenges those discourage customers to use Technology-based services/products of the banks.

Ø To recommend appropriate measures to be taken to maximize every drop of investment banks made on Information and Communication Technology.

Significance of the study

In today‟s more competitive global market environment, adoption and use of Information and Communication Technology in banking operation is not just an optional decision for banks to ensure their profitability and survival in the future. It is believed that only banks that overhaul the whole of their customer service and delivery system and apply Information and Communication Technology to their operations are likely to survive and prosper in the contemporary business environment. Even though applying Information and Communication Technology into their operation is a recent phenomenon in Ethiopian banking industry, Ethiopian banks should re-examine their service and delivery system in order to cope up with the dynamism of Information and Communication Technology. Thus, senior managers of banks should adequately understand and be able to measure the impact of Information and

Communication Technology on betterment of their performance in general and customer service quality and staff productivity in particular.

However, there are only few studies that examined the role of Information and Communication Technology on banking services in Ethiopia and its challenges thereon. Hence, the purpose of the present study is to explore the role of ICT in the Ethiopian Banking Industry based on selected cases. The result of the study helps bankers, bank managers and any relevant decision maker to be aware of the role Information and Communication Technology plays on performance of Ethiopian private banks. Moreover, the result of the study may provide additional research insight into how Information and Communication Technology affects the performance of banking and inspires other researchers to conduct more researches in the area.

1.7 Scope/Delimitation and limitation of the study

This study is confined only to know the impact of ICT on customers‟ satisfaction and employees‟ performance/productivity of selected Ethiopian private banks. The study was conducted based on Dashen Bank and United Bank; for they are pioneers to move towards adopting Information and Communication Technology and networking their branches and to move to core banking which is the platform for all Technology-based services/products. The participants of the study were also selected from Addis Ababa branches of the two selected banks.

The first limitation of the study relates to the sampling procedure i.e. convenience sampling, which limits the generalizability of the research findings. The second limitation relates to the sample size for primary data sources; the number of participants included in the sample may not be good representative of the population. As last limitation, the study failed to measure the financial impact of adoption and use of the ICT in the banking industry. Future research is, therefore, recommended to address the above stated limitations.

1.8. Organization of the Study

The study consists of five chapters. Chapter one is the introduction chapter which presents background of the study, statement of the problem, research question, research hypothesis,

objective of the study, significance of the study, scope and limitation of the study. The second chapter deals with review of related literatures regarding the topic of the study. The third chapter discusses the research methodology and methods employed by the current study. Chapter four presents the data analysis results and their interpretation. Finally, based on the analysis and interpretation of the findings, chapter five presents the conclusion and recommendation.





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