Abstract:
This study assesses the effects of Islamic banking on financial deepening amongst Muslims case study Addis Ababa City. To do so, descriptive research design and simple random sampling technique were employed to examine a total sample of 414 interested population in the Islamic field was visited from the population of 212,972 and questionnaires were used as primary data collection instrument. The research study indicates that the most popular financial service in the study area was murabah while musharak has complexity regulation in Islamic banking operation. The study identified that government policies and regulations affect the financial service provided by Islamic banking. The customers encounter problems of raising capital, accessing finance and accessing credit. The study recommends that there should be amendment of banking regulation to facilitate loan for government employee, increased support for learning visits to improve the information flow, the government should come up with policies on training of business owners and managers especially on directing, staffing, deployment of finance resources and controlling activities, the government should seek to address the significant issues like regulation of financial service that has impeded economic development Islamic banking system in the country
