ASSESSMENT OF FOREIGN DIRECT INVESTMENT FINANCING PRACTICE OF PRIVATE COMMERCIALBANKS OF ETHIOPIA

Abstract

Banks play a very important role in the economic life of a nation though offering various types of financial services for local and foreign investors particularly, This study assessed the involvement of private banks of Ethiopia in financing FDI practice with problem arising to conduct the research of low saving habit of the society and loan disbursement of loan with collateral issue. With objective of knowing the involvement level of private banks in financing FDI practice specifically government support to attaché investment request, the capacity of private banks, their risk appetite and factors that affects to have high/low involvement. The study cover all private banks FDI financing activity from 2006/7-2016/17 time period. The research use both primary and secondary data with mixed of descriptive data analysis. In order to reach to the final finding, primary data were collected through questionnaire with purposive sampling techniques of selecting 64 sample employees and secondary data is collected from report of different organization. The data obtained from questionnaire and secondary data were analyzed both in qualitative and quantitative ways using percentage, tabulation. With regard to this data the research reach on the final conclusion of low involvement of private banks in financing FDI because of factors like collateral issue, government policy and financial capacity of private banks. Though to minimize this overall effect in private bank participation on investing in FDI practice the government should fully support private banks and banks also develop strategy to develop their capacity through better saving mobilization .