The Opportunities and Challenges Facing Islamic Banking in Ethiopia, Particularly in Dire Dawa City

The study was examines the opportunities and challenges of Islamic banking in Ethiopia, particularly in Dire Dawa City. A descriptive research design was adopted in this study. A mixed method approach was used to achieve the research goal. Both primary and secondary data were used to acquire a full view of the situation and the best potential result from the research process. Four commercial banks that offer interest-free banking services, as well as three full-fledged Islamic banks, were intentionally chosen for 185 line staff and management professionals. A questionnaire and an interview were used to collect data for the study. The acquired data was analyzed using descriptive statistics such as mean, frequency, and percentage using SPSS version 26 software. According to the data analysis, one of the most difficult aspects of Islamic banking is the lack of human resources in training, as well as a lack of awareness and grasp of Islamic banking services and the legal and regulatory structure, which were revealed as the investigation advanced. Islamic banks, according to the data, have a stronger chance of expanding in Ethiopia, particularly in Dire Dawa. The main reason for Islamic banking expansion is that there is a high demand in the market, Ethiopia’s banking system is still developing, and Islamic banks can mobilize more extra deposits to fulfill the rising demand for interest-free banking services. Because of existing government assistance, Ethiopia enjoys a competitive advantage in developing the Islamic banking sector. Islamic banks can mobilize previously unavailable to the banking system deposits from the Muslim community, helping the Muslim community and the country to save and invest more. With hard work and government assistance, Ethiopia’s budding Islamic banks will have a bright future and a healthy outlook, according to this report. In light of this, Islamic banking in Ethiopia, notably in Dire Dawa, is a viable option. As a result, the researcher suggests that staff be well-trained in order to attract more Islamic banking customers, and they should be well-known experts in order to study the Islamic banking system.