Abstract:
Information and communication technology has become the heart of banking industry, while the
banking industry is the heart of the economy. This study examine the effect of ICT on the
financial performance of Ethiopian banking industry using secondary data over the period 2010 –2022 published annual reports by the banks. Data analysis was carried out in panel
environment. The study was employed purposive sampling technique to select the required
sample of banks from commercial banks in Ethiopia. The result of the study was affirmed by co
integration regression analysis. Seven banks, out of the 21 commercial banks as of December
2022, were selected for the study. The dependent variables were used in this study in order to
measure the sample commercial banks performance is ROA whereas the explanatory variables
are ATM, POS, MB, IB, and NB. The study empirically analyzed the effect of information
communication technology in Ethiopian commercial banks financial performance by creating an
econometric model to study the effect of various factors such as M-Banking, Internet Banking,
and POS, ATM, and POS. Accordingly, the regression result revealed that
the R-squared of this model is 0.85404 which means that 85% of the total variation of Ethiopian
commercial banks return on asset is explained by the total variation of ATM, POS, MB, IB and
BRAN. It implies that these independent variables were statistically significant effect on return
on asset on commercial banks in Ethiopia. Based conclusions of the study, it is recommended for
commercial banks in Ethiopia, to increase the profitability impact of POS and ATMs, Ethiopian
Commercial Banks are strongly suggested to installing POS and ATMs, MB, and IB, more
comprehensively. Overall, Information and Communication Technology can have a significant
effect on financial performance. By leveraging technology, businesses can streamline their
operations, improve efficiency, and make more informed decisions. Thus, the study suggested
that integrating ICT into financial practices can enhance productivity and ultimately contribute to
improved financial performance of commercial banks of Ethiopia.
