The Effect of Financial Innovations on Financial Performance of Banks: The Case of Commercial Banks in Ethiopia
Author(s)
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Abstract
The purpose of this study was to examine the effect of financial innovations on the financial performance of commercial banks in Ethiopia. The researcher used an explanatory study to assess the impact of financial innovation on profitability. The study observes the effect of financial innovations on the net interest margin as the fundamental index of profitability. The study uses annual reports or financial statements of all Ethiopian commercial banks covering the period from 2016 to 2020. The explanatory variables are identified to reveal their relationship and influence on the financial performance of banks. These independent variables are the number of ATM Machines, the number of POS Terminals, and the number of international cardholders. Data were analyzed using descriptive statistics and inferential statistics. The researcher used linear regression model with the aid of SPSS version 21. Three explanatory variables were included in this study, and out of these, two variables are found to have a statistically significant impact on the financial performance of banks. These variables are a number of ATM Machines and the number of POS Terminals. Considering these findings, the researcher recommends those commercial banks exert more efforts on the establishment of ATM across the country, to expand POS terminals, create awareness about financial innovation services, and keep up on introducing and implementing financial innovations across the country
Keywords
Financial innovation, financial performance, ATM, POS, NIM
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