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The Assessment On The Contribution of Dashen Bank of Jimma Branch For The Development of Jimma Town
The Assessment On The Contribution of Dashen Bank of Jimma Branch For The Development of Jimma Town
JIMMA UNIVERSITY
COLLEGE OF BUSINESS AND
ECONOMICS
DEPARTMENT OF MANAGEMENT
May, 2012
Jimma, Ethiopia
2
ACKNOWLEDGMENT
At last, not least, I would like to thank Firehiwot Yimer for her diligent
work in typing of this research project.
I
ABSTRACT
II
TABLE OF CONTENTS
CONTENT PAGE
Acknowledgement...........................................................................I
Abstract..........................................................................................II
Table of Contents ..........................................................................III
List of Tables .................................................................................IV
Chapter One
1. Introduction ..............................................................................1
1.1 Background of the study.......................................................... 1
1.2 Background of the organization ...............................................3
1.3 Statement of the problem .........................................................5
1.4 Objectives of the study .............................................................6
1.4.1 General objective ...............................................................6
1.4.2 Specific objective ................................................................6
1.5 Significance of the study...........................................................7
1.6 Scope of the study....................................................................8
1.7. Limitation of the Study ...........................................................8
1.8. Organization of the Paper........................................................8
Chapter Two
2. Literature review ........................................................................9
2.1. Contribution of Banks to Economic Development ................9
2.2. Foreign aid .........................................................................10
2.3 Why foreign aid/loan ...........................................................11
2.4. Functions of Dashen Bank .................................................12
2.5. Investment Policy of Dashen Bank ......................................13
Chapter Three
3. Methodology .............................................................................14
3.1 Source of data ......................................................................14
3.2 Methods of data collection......................................................14
III
3.3 Method of sampling and sample size determination ...............14
3.4 Method of Data Analysis .......................................................15
Chapter Four
4. Data Presentation and Analysis ................................................16
4. Presentation and Analysis of Primary data................................16
Chapter Five
5. Summary, Conclusion and Recommendation ...........................27
5.1. Summary ...........................................................................27
5.2. Conclusion ........................................................................28
5.3. Recommendation ...............................................................30
Reference ............................................................................32
Questionnaire......................................................................33
IV
List of Tables
V
CHAPTER ONE
1. INTRODUCTION
1
And the bank accepts the following assets as collateral
- Building
- Motor Vehicles
- Construction machinery
The reason for the study is to assess the contribution of Dashen bank for
the economic development of the society, it especially in depth the bank
contribution of the local people and increasing the people’s awareness
about the importance of the Dashen Bank.
2
1.2 BACKGROUND OF THE ORGANIZATION
Among Banks in Ethiopia, Dashen bank is the bank that has a great
market share with 64 branches.
From its establishment in 1995 up to now, Dashen bank play a great role
in the economic development and progress of a country. Currently
Dashen bank has about 22000 account holders and more than 1000
employees.
3
Mission of the organization: Provides efficient and customer focused
domestic and international banking services. Over coming to continue
challenges for excellence through the application of appropriate
technology. The organizational structure of the bank constitutes of the
general assembly of share holders at the top followed by board of
directors, the presidents, the vice presidents and various departments
division and area bank (From the bank manual).
4
1.3 STATEMENT OF THE PROBLEM
5
1.4 OBJECTIVE OF THE STUDY
6
1.5 SIGNIFICANCE OF THE STUDY
The study a great significance for both a financial institution and the
society. The bank can get the necessary details about problems that
related to the economic contribution to the development of the town. On
the other hand the society increases their awareness about the bank
services and it may enable the society to capitalize the opportunity the
bank provide to make use of idle resources.
The study plays a great role by informing Dashen banks function for the
society, it will help to eliminate (to reduce) problems regarding to
improper usage of loans, it helps to improve and to increase the over all
development.
7
1.6 SCOPE OF THE STUDY
While conducted this study the researcher faced different obstacles such
as shortage of reference material because some contents of the bank are
strictly forbidden for external party, shortage of time, the respondents
have less interest to give information, there were careless and emotional
response, managers were busy to give enough information.
This paper includes five chapters, from those chapters chapter one
describes about the introductory part of this research project. Chapter
two states about the review of literature to this study and chapter three
of this research project describe the methodology section. The other two
chapters (chapter four and chapter five) describe the presentation and
analysis of the data and summary, conclusion and recommendation
respectively.
8
CHAPTER TWO
2. LITERATURE REVIEW
9
small scale industries in rural areas. The provision of credit to
agriculture sector has greatly helped in raising agriculture productivity
and income of the farmers (www.slideshare.net/ contribution of banks to
economic development).
Influencing Economic Activity: the banks can also influence the economic
activity of the country through its influence on availability of credit. The
rate of interest, if the banks are able to increase the amount of money in
circulation through credit creation or by lowering the rate of interest. It
directly affects economic development. A low rate of interest can
encourage investment. The credit creation activity can raise aggregate
demand which leads to more production in the economy
(www.slideshare.net/ contribution of banks to economic development).
10
modern one, faster their industrial development and decrease regional
imbalances.
The factors that hinder development are multiple. The most important
factors are in adequate saving because of the low level of income and
unavailability of enough foreign exchange/capital so, in fusion of out side
resources are believed to be a necessary condition for countries to grow
at a relatively faster rate. The question is what type of our side resources
do countries need to obtain? Our focus will be on aid/ loan. Financial
resources as any other resources are limited in supply. For the
developing countries to come out of their low level of development
investment in different sectors of the economy (industry, agriculture,
infrastructure and others) is must.
Direct finance: This happens when surplus unit lend directly to the
deficit unit. This type of funding has high risk in the events of
bankruptcy and timely settlement of the debt. Due to these reasons the
scale of accelerating the economic development process by direct
financing is not significant.
11
Indirect finance; intermediaries like domestic bank attract surplus and
lend to deficit unit. This initiates and facilitates the development process
by transferring the risk of maturity. This type of financing has the means
to pool domestic resources and provide the required investment capital
for projects (Economic development 9th edition page 22).
12
Miscellaneous service: In addition to above functions Dashen bank issues
different types of credit instruments such as cheques, drafts and
travelers, which facilitate transaction. The bank also issue letters of
credit and acts as a reference to its clients. It underwrites shares and
debentures of companies and helps in the collection of capital from
different places (loyd B. Thomas, Money, Banking and financial markets,
1996, page 193).
13
CHAPTER THREE
METHODOLOGY OF THE STUDY
The researcher used both primary and secondary data sources. The
primary data were collected from managers, employees and customers of
Dashen bank of Jimma branch. The secondary data were obtained from
monthly and quarterly progress report and audit report of the bank.
The data was collected from the current customer and employee of the
bank. The researcher was select samples by using non probability
techniques depending on the range of elements of the target population.
Therefore, the researcher would use judgmental or purposive sampling
technique to obtain both qualitative and quantitative data from the target
population.
14
The reason why this sampling technique was selected is that it is less
complicated to collect the data, less expensive, less time consuming and
enables the researcher to get the required data only from concerned
bodies.
The total target population for this study is 2165, from this population
45 are employees of the bank and the rest are customers. The researcher
was selected 66 of customers and 28 of employees by using the formula:
n= Z2 p.q.N (by Kothar; 2004)
(N-1)e2 + Z2 p.q
After the relevant data was collected descriptive method of data analysis
were used. The analysis was indicate the transformation of raw data in to
a form that makes easy to understand and interpret it.
15
CHAPTER FOUR
4. DATA PRESENTATION AND ANALYSIS
16
From this the researcher conclude that Dashen bank of Jimma branch is
highly dominated by male customers and most of them are between the
age of 20-35, only few users are above the age of 65.
Occupation No of Percentage
respondents
Merchant 22 26.51
Employee 29 34.94
Farmer 12 14.46
Other 20 24.09
Total 83 100
Source: The Collected primary data
The above table shows that 22 (26.51%) are merchants, 29 (34.94%) are
employees, 12 (14.46%) are farmers and the remaining 20 (24.09%) are
others, like drivers, servants, students, and the like.
From this the researcher conclude that Dashen bank of Jimma branch is
highly dominated by governmental employees followed by merchants and
farmers are the lowest users.
Religion No of Percentage
respondents
Orthodox 50 6025
Muslim 20 24.09
Protestant 13 15.66
Other 0 0
Total 83 100
Source: primary data from the respondents
The above table shows the religion of respondents; 50 (60.25%) are
orthodoxians, 20 (24.09%) are muslims, 13 (15.66%) are protestantes
and none of the respondents are others.
17
From this the researcher concludes that the large number of respondents
(60.25%) are orthodoxians, it indicates that the Dashen bank of Jimma
branch is highly used by orthodox religion followers. The lowest number
of respondents are the followers of protestantesm.
Respondents 51-100 101-300 301-600 601-1200 1201-2000 2001-3000 >3000 Total (%)
Merchant 0 (0%) 2(2.4%) 1(1.2%) 10(12%) 2(2.4%) 6(7.2%) 1(1.2%) 26.4%
Employee 0 (0%) 1(1.2%) 1(1.2%) 6(7.2%) 12(14.5%) 7(8.5%) 2(2.4%) 35.2%
Farmer 2(2.4%) 0 (0%) 2(2.4%) 5(6%) 1(1.2%) 2(2.4%) 1(1.2%) 15.4%
Other 1(1.2%) 3(3.6%) 6(7.2%) 3(3.7%) 3(3.6%) 2(2.46%) 1(1.2%) 23%
Total in column 3(3.6%) 6(7.2%) 10(12%) 24(28.9%) 18(21.7%) 17(20.6%) 5(6%) 100%
Source: primary data obtained from questionnaire
The above table illustrates the monthly income of the target population
for study. The purpose of this item is to understand the economic status
of the society.
From above table the researcher concludes that the monthly income of
employees is higher than that of other respondents, which is 35.2%.
Large number of respondent’s monthly income is between 601-1200
ranges, which are 28.9%.
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Is there any problem with No of
regulating to the delivering of respondents Percentage
bank service?
Yes 44 53
No 39 47
Total 83 100
Source: primary data from the respondents
As the above table shows that from the total number of respondents
44(53%) are said that there is a problem with regarding to the delivering
of bank service/product. The rest 39(47%) of the respondents are said
there is no problem with regarding to the delivering of bank service.
From this the researcher conclude that out of a total respondents the
highest percentage shows the existence of a problem with regarding to
the delivering of bank service, for example the provided collateral will not
cover the amount of loan, the transaction cost problems, the business
center is not comfortable for follow up activity and the like.
From above information the researcher recommend that the bank should
have appraisal for the purpose of estimating the collateral proportion
with loan amount and the bank give advices for its customers to comfort
its business center for the purpose of follow up activity.
19
there any loan that you have not No of Percentage
re-paid? respondents
Yes 24 29
No 59 71
Total 83 100
Source: primary data from the respondents
As the above table shows 24(29%) of respondents have not re-paid their
lone and 59(71%) of the respondents have any their loan to the bank.
From this the researcher conclude that most of the respondents have re-
pay the loan effectively and only small number of respondents have not
re-pay their loan to the bank.
The above table shows problems on the customers’ side that affect the
banks contribution. Out of the total respondents 45(54%) of the
respondents said that there is a problem and the rest 38 (46%) of the
respondents said there is no problem with regarding to customers. 54%
of respondents said that there is a problem, example the customer not
repay the loan at a time, lack of awareness about the bank service, not
use the lone for specified purpose, risk aversion behavior and so on.
From this the researcher conclude that large number of respondents said
there is the problem on the customer side and lower number of
20
respondents said no problem that affect contribution of the bank on the
customer side.
Response No of Percentage
respondents
Very much/highly 23 28
satisfied
Much/satisfied 49 59
Unsatisfied 11 13
Total 83 100
Source: Primary data
From the above information the researcher recommended that the bank
should try to increase the degree of its customer’s satisfaction by brining
modern technology, by training employees, by cooperating with other
branches, by making the interest rate attractive, and so on.
21
Response No of Percentage
respondents
Borrowed for the purpose of:
To start new business 20 24.1
For building house 11 13.2
To expand the previous 11 13.2
business 4 4.8
For farming purpose 13 15.8
For commercial purpose 3 3.6
For other activities
Sub total 62 74.7
Not borrowed 21 25.3
Total 83 100
Source: Primary data
As the above table indicates out of the total respondents 24.1% are
borrowed money from the bank for the purpose of starting new business,
11 (13.2%) customers borrow for building house, 11 (13.2%) are borrow
to expand the previous business, 4 (4.8%) for farming purpose,
13(15.8%) of customers borrow for commercial purpose, and the rest
borrowed customers for other activities like covering basic needs, to buy
goods and so on. As indicated from above table also 21(25.3%) of
customers have not borrowed money from the bank.
From this the researcher conclude that large number of respondents
borrow money and lowest number of respondents not borrow because of
lack of collateral, lack of knowledge and understanding of the
respondents, by the risk aversion behavior and so on.
From the above information the researcher recommended that the bank
try to create awareness for its customers, comfort its regulatory system
and try to full fill different facilities.
22
Table 10: An overview analysis of the people’s attitude towards the bank
service
Response No of Percentage
respondents
Very good 23 27.7
Good 51 61.5
Poor 9 10.8
Total 83 100
Source: Primary data
The above table shows that out of the total respondents 23(27.7%),
51(61.5%), 9 (10.8%) of the respondents said that very good, good and
poor respectively. When 10.8% of the respondents said poor, they put the
following reasons; the bank not effectively rendered its service, there is
no creation of awareness, money restriction to give lone and so on.
From this the researchers conclude that large number of respondents
have good attitude about the bank service. It indicates that Dashen bank
of Jimma branch is the good mechanism of economic development of the
town.
Response No of Percentage
respondents
High/much 50 60.2
Low 33 39.8
None 0 0
Total 83 100
Source: Primary data
23
As stated in the above table 50(60.2%) of the respondents said that
Dashen bank of Jimma branch has high contribution and the rest 33
(39.8%) of the respondents said the bank contribution for economic
development is low because the bank not do more in advertizing
importance of its service.
From this the researcher conclude that Dashen bank of Jimma branch is
highly contributed to the society by giving lone for investment and by
giving effective bank service.
Response No of Percentage
respondents
Building health care 21 25.3
Road construction 28 33.7
Building real state 11 13.3
Others 23 27.7
Total 83 100
Source: Primary data
As it can be seen from the above table out of the total respondents
21(25.3%) of the respondents said that the bank contribute for the
development of the town by the way of building health care, 28(33.7%) of
respondents said by the way of road construction, 11 (13.3%) of
respondents said by the way of building real state, and the rest
23(27.7%) of respondents said the bank contribute to the development of
the town by other means/ways like by giving knowledge to the society, by
giving banking service, by making investment and so on.
From this the researcher concludes that the banks contribution to the
town development is highly lies on road construction followed by other
services. The least contribution is lies on the building of houses.
24
An overview of the bank contribution to the town or society (as per the
result obtained)
The following paragraphs reveals the result and discussion regarding the
bank’s effort made to the society with regarding to its mission that could
contribute to the development of the loyal customers and the different
motives creating method the bank used to attract other non-loyal
customers.
25
The banks employee supervision of the debtors to repay their lone at a
time without any difficult is very interesting and supportive as to the
response of the employees some of the point given by them concerning
this fact are as flows:
Conducting and make up keeping regular communication with
borrowers, through remainders and convinent communication
media to accelerate re payments.
Provision of appropriate and regular advise to customers
concerning and the problems encountered by the borrowers.
Conducting schedule visits of the customer business sites to asses
repayment ability, etc.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1. Summary
This study was conducted on the “assessment of the contribution of
Dashen Bank of Jimma Branch for the development of Jimma town”. The
study also concerned the societies awareness about the importance of
financial institution/bank, the income level of the target population and
the customers attitude for the bank.
26
Bank is a financial institution, bank employees are financial expertise
and the society have little knowledge (even some have nothing) about
saving and investment, therefore the bank as much as possible took its
effects and knowledge to encourage the society to develop the habit of
saving and investment importance for economic development.
In this paper both primary and secondary data sources were used. The
primary data was collected from managers, employees and customers of
Dashen bank of Jimma branch. The secondary data was obtained from
the bank’s written materials and reports of the bank.
As the primary data obtained shows, the bank is making loan grant on
some tangible assets and depository checks for the society in order to
develop the habit of saving. Some ways of saving away from the deposit
and able to make investment and to improve their living standard. After
the data was gathered from the target population through different
methods, it would analyze and discussed qualitatively and quantitatively
to the indicated result.
All the result discussed are regarding the current situation of the bank
(every information in concerning the 2004 customers and bankers
response. The bank’s contribution to the development of the society is
highly contributed by giving loans for investment, increasing per capita
27
income, and by providing effective bank services. Dashen bank of Jimma
branch is highly dominated by male customers and most of them are
between the ages of 20.35, years old.
About 34.94% of the bank customers are governmental employees and
those employees cover the highest portion of the monthly income of
respondents. Most of the respondents have repaid their loan in a timely
manner. The highest number of respondents says that they get much
satisfaction by the bank service. The bank highly contributes to the
economic development of the town in different means; like road
construction, building health care and the like.
5.2. Conclusion
As per the problems identified on “the assessment of contribution of
Dashen bank for the development of Jimma town” the following
conclusions are drown.
From the analyses of the data obtained from different sources the target
population can be confidentially said that Dashen bank of Jimma branch
is highly dominated by male customers and most of them are between
the ages of 20-32 years and also dominated by governmental employee
customers whose monthly income is higher than that of farmers and
merchants. When come to the religion of the respondents the bank is
highly dominated by orthodox religion followers.
28
Problems that affect banks contribution; from the number of
respondents in the study area said that there are problems that affect
banks contribution on the customer side. For example the borrowers of
the bank have bad economic condition, lack of awareness about the
bank service, not using the loan for the specified purpose. And also there
is problem with regarding to the delivering of bank service, for example
the provided collateral will not cover the amount of loan, their business
center is not comfort for follow up activity.
As a general fact the main reason for the society’s out of line to use
the financial institutions service is lack of awareness about the
importance of taking lone.
In general, the societies. Lower awareness, the bank regulatory
system and other similar factors as contributed to the limited bank
contribution for the society’s development and the societies access
to the service. Therefore for the development in particularly still it
needs the combined effort of the government, the existence of
financial expertise and the like.
5.3. Recommendations
29
extent that the society is awarded. Therefore the possible
salutation would be:
Increasing the motivation of the society for saving and credit.
Providing rules for filling up the loan contract.
Teaching the society about the resources planning and
utilization.
Consulting firm arrangement for skill formation, skill
development, identification of resources, production
technique and making systems etc. this and the like
information may increase the society’s efforts towards
generating income and induce the idea of saving and credit.
2. The bank should try to increase the degree of its customer
satisfaction by making the interest rate attractive, by comforting
its regulatory system, brining modern technology, training
employees, cooperating with other branches and by taking other
actions which helps to increase customer satisfaction.
3. The existing credit scheme is not very successful. Credit is not
granted to those who are most in need or to those undertaking the
most profitable activities, due to the bank regulatory system.
Therefore the government has to take the necessary actions like:
Try to see the reason for the failure of conventional credit
schemes and find solutions.
Try to integrate new approaches to credit for the society
those having lower income.
4. The government should exploit all domestic possible sources for
mobilization of development finance. However Dashen banks are
the most important financial intermediaries, they still have
problems of capital in adequacy and in efficiency. Therefore the
banks try to work to have adequate and sufficient capital. The
30
government also and the bank provide real interest rates for savers
and viable investments for the economy.
5. The government should encourage non-governmental organizations
to participate for the development of the society trough addition of
competition to the market to make better society access to credit.
6. As shown in the result analysis section, the service offered by the
bank did not satisfy some customers of the bank with this regard
the bank should try to increase the quality of service by:
Taking suggestions from customers.
Training employees about the ways of customer attraction.
Giving fast service
Etc.
REFERENCE
31
Juliha Haile and Geoffrey Whitehead, 1981, Elements of
Banking. 3rd edition, Great Britain. Richard day Lid.
Kothari, C.R, 2004, Research methodology, Methods and
Techniques, 2nd edition
Loyd B. Thomas, 1996, Money, Banking and financial markets,
8th edition.
ML. Jhingan, 1999, Money, Banking, International Trade and
Public Finance, 7th edition.
Shekhar. K.C 1961, Banking Theory and practice 18th
received edition.
Solomon Alemu (PhD.) 2005, Research Methods in Business and
Social Science.
Whiting. D.P, 1985, Mastering Banking, London Macmillan
Education Ltd.
32
QUESTIONNAIRE
JIMMA UNIVERSITY
COLLEGE OF BUSINESS & ECONOMICS
DEPARTMENT OF MANAGEMENT
Tick the appropriate boxes on applicable to you and fill the relevant
information on the space provided.
I. General background
Age: 20-35 36-50 51-65 >65
Sex Male Female
Occupation: Merchant Employee Farmer
Other
Religion: Orthodox Muslim Protestant
Other
II. Family members (in number) Male Female
1. How much is you monthly income?
0-15 51-100 101-300
301-600 601-1200 1201-2000
2001- 3000 >3000
33
2. Is there any problem with regarding to the delivering
of bank service/ product/? Yes No
3. If your answer for question 2 is yes please mention some of them:-
1. __________________________
2. __________________________
3. __________________________
4. __________________________
4. If you are customer of the bank, is there any loan that you have not
re- paid? Yes No
5. If your answer for question 4 is yes, why?
________________________________________________________________
________________________________________________________________
________________________________________________________________
6. If your answer for questionnaire “4” is no, did you rapid the lone at a
time? Yes No
7. Is there a problem that affect the banks contribution on the customer
side?
8. If your answer for question 7 is yes please mention some of them
1. __________________________
2. __________________________
3. __________________________
4. __________________________
9. If you are currently using the banks service/product, how much you
are satisfied by the service?
Very much Much Little
10. If your answer for question 9 is little please mention the
reasons.__________________________________________________________
____________________________________________________________
_ ___________________________________________________________
__
34
11. Have you ever asked for bank lone previously?
Yes No
12. If your answer for question 11 is yes for what purpose?
To start new business For farming purpose
For building house For commercial purpose
To expand your previous business
For others please specify
13. If your answer for question 11 is no, please specify reasons.
________________________________________________________________
________________________________________________________________
________________________________________________________________
14. What is you attitude to wards the bank service?
Very good Good Poor
15. If your answer for question 14 is poor, please mention reasons
________________________________________________________________
________________________________________________________________
________________________________________________________________
16. How much the bank contribute to the development the town?
Very much Little None
17. In what way the bank contribute to the town development?
Road construction Building real
state Build health care
Other specify_______________
35