Assessment of Perception, Practice and Challenges of Interest Free Banking in Commercial Bank of Ethiopia (The Case of Dire Dawa District)

The purpose of this paper was to assess perception, practice and challenges of interest free banking in commercial bank of Ethiopia. The study used both primary and secondary data source to collect data from 208 and 24 customer and employee respectively, through questioner and semi structured interview. As a technique multistage sampling was employed for this study. To achieve the objective of the study both descriptive and econometric analysis were used. To assess how IFB practiced in commercial bank of Ethiopia and to assess challenges faced in operating interest free banking descriptive data analysis were used and to investigate which factor extents affect usage of interest free banking multiple regression were used. Descriptive Results indicates CBE benefited from IFB both in terms of deposit and customer base still it is not free from lack of legal support , lack of managerial commitment ,lack of segregation of fund, lack of training, noncompliance with shariaha ,window model IFB, lack of trust and quality of service as major challenges. Moreover the finding from multiple regression indicate except availability of service all the other variables: Awareness, Religious belief, social influence and confidence in bank have positive impact on the dependent variable. Accordingly, the study recommends the need of training, adequate human resource, till number and fixing T24 System, work with Sharia supervisory board and government amendments laws and regulations.