Previous studies country conclusion and knowledge

Previous studies (Country level) ............................................................................................................ 25
2.5.3. Conclusion and Knowledge Gap ........................................................................................................... 26
2.6. Conceptual Framework .............................................................................................................................. 27
CHAPTER THREE: METHODOLOGY ................................................................................................................ 28
3.1. Research Design: ........................................................................................................................................ 28
3.2. Sample Design: .......................................................................................................................................... 29
3.2.1. Population or Universe .......................................................................................................................... 29
3.2.2. Sample Frame ........................................................................................................................................ 29
3.2.3. Sample Units, Sample Technique, and Sample size /Sampling / ........................................................... 30
3.3. Data Source/Types of Data: ....................................................................................................................... 30
3.4. Data Collection Methods: ........................................................................................................................... 30
3.5. Data Analysis: ............................................................................................................................................ 31
3.6. Model Specification: .................................................................................................................................. 31
3.7. Model Assumptions: .................................................................................................................................. 32
3.8. Description of Variables: ........................................................................................................................... 32
3.8.1. Dependent Variable ............................................................................................................................... 32
3.8.2. Independent Variables ........................................................................................................................... 32
CHAPTER FOUR: ANALYSIS AND DISCUSSION ............................................................................................ 34
4.1. The Ranking Process .................................................................................................................................. 34
4.1.1. Capital Adequacy: .................................................................................................................................. 34
4.1.2 Assets Quality: ....................................................................................................................................... 38
4.1.3 Management Efficiency: ........................................................................................................................ 43
4.1.4 Earning Quality: ..................................................................................................................................... 48
4.1.5 Liquidity ................................................................................................................................................ 52
4.1.6 Grand Composite Ranking (overall performance): ................................................................................ 56
4.2 E-view Results ........................................................................................................................................... 57
4.2.1 Results of the Descriptive statistics ....................................................................................................... 57
4.2.2 Discussion on econometric results ............................................................................................................. 58
4.3 Interview Results: ....................................................................................................................................... 63
4.3.1 With bank representatives: ..................................................................................................................... 63
4.3.2 With the supervisory organ representative: ........................................................................................... 64

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CHAPTER FIVE: CONCLUSION AND RECOMMENDATION ...................................................................... 66
5.1. CONCLUSION .......................................................................................................................................... 66
5.2 RECOMMENDATION: ............................................................................................................................ 68
REFERENCES .......................................................................................................................................................... 69
ANNEXES .................................................................................................................................................................. 72
Annex-1: List of banks in Ethiopia .......................................................................................................................... 72
Annex-2: Sample CAMEL Variable Measurements .............................................................................................. 73
Annex-3: Sample Interpretation of CAMELS Composite Rating ......................................................................... 73
Annex-4: Interview Questions- For Target Bank Representatives ....................................................................... 74
Annex-5: Interview Questions- For BSD Representative ....................................................................................... 75
Annex-6: Test for Normality ..................................................................................................................................... 76
Annex-7: Correlation Matrix .................................................................................................................................... 76

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ACRONYMS
AFDB: African Development Bank
AIB: Awash International Bank SC
ATM: Automatic Teller Machine
BIS: Banking Supervision of International Settlement
BOA: Bank of Abyssinia SC
BSD: Banking Supervision Directorate
CAR: Capital Adequacy Ratio
CBK: Central Bank of Kenya
DAB: Dashen Bank SC
ECB: European Central Bank
GDP: Gross Domestic Product
ICT: Information Communication Technology
IMF: International Monetary Fund
MFIs: Micro Finance Institution’s
NBE: National Bank of Ethiopia
NIB: Nib International Bank SC
NIM: Net Interest Margin
ROA: Return on Assets
ROE: Return on Equity
RBS: Risk Based Supervision
SSA: Sub Saharan Africa
UNB: United Bank SC
WEB: Wegagen Bank SC

Financial Performance of Private Commercial Banks in Ethiopia: A CAMEL Approach 2016
1
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Though economic development of a particular country is dependent on a number of factors such
as industrial growth and development, modernization of agriculture, expansion of domestic and
foreign trade, its dependence to largest extent on the banking sector is undeniable and/or banks
play a key role in improving economic efficiency by channeling funds from resource surplus unit
to those with limited access and/or the needy. Misra & Aspal (2013)
According to Zerayehu et al., (2013) a sound financial system is indispensable for a healthy and
vibrant economy. The financial system in Ethiopia, which is characterized as highly profitable,
concentrated, and moderately competitive is dominated by banking Industry and it is also
amongst the major under banked economy in the world (World Bank, 2013). The development of