Abstract:
The main purpose of this study is to examine the challenges of commercial banks in financing a
foreign project in Ethiopia. In recent time, a number of foreigners are visiting Ethiopia for
investment, Ethiopia is one of the biggest countries in Africa by taking foreign investors and
fulfilling infrastructure as per there sector of investment, but every investment needs a financial
sector for any transaction that needs to run their business. One of the primary financial
institutions for this service is a bank, so in this study, the process of financing foreign project
and factors that affect the banks to finance a foreign project were studied in detail and common
projects that are financed by private commercial banks were identified and analyzed on selected
six private commercial banks in Ethiopia that have a financial power on the banking industries.
Descriptive and Explanatory research design was used for the study. The target population was
300 staffs that are directly participating in the project financing and foreign investment (Foreign
Direct Investment) out of which Judgmental sampling technique was used to select a sample size
of 105, from this 101 respondent has filled and returned back to the researcher. Data was
collected by using questionnaire and the data collected was analyzed using Statistical Package
for Social Sciences. The study found that national bank of Ethiopia regulation and directive
have a negative impact on foreign project financing, and foreign currency shortage is also a
challenge to make a foreign project transaction by commercial private banks. To minimize the
gap of processing foreign project, private commercial bank needs to push the financial sector
reforms by bringing huge capital and foreign project know how to the business and National
bank of Ethiopia needs to decrease the number of intervention on the private commercial banks
operation on foreign project financing
