The Effect of Banking Innovations on Financial Performance of Private Commercial Banks in Ethiopia

Abstract

This study aimed to investigate the effect of bank innovations on the financial performance of private commercial banks in Ethiopia. The data was collected from the National Bank of Ethiopia. Results using fixed-effect panel least square regression with the aid of E-views 10 econometric software revealed that increasing the number of ATMs, increasing the number of agent banking, increasing the number of mobile banking users, increasing the number of electronic fund transfer and debit card holders have a positive and statistically significant impact on Return on Asset of private commercial banks in Ethiopia. Based on the study’s finding, it was concluded that the adoption of bank innovations by private commercial banks in Ethiopia resulted in positive and statistically significant impact on financial performance. Based on the findings of the study, it was recommended that the bank’s management focus its effort on enhancing the status of bank innovation services and develop marketing policies that encourage customers to use bank innovation services.