Abstract:
This study aims to assess the Challenges of Interest Free Banking Services: The Case of Commercial Bank of Ethiopia. A descriptive research design was employed to investigate operational challenges related to the study objectives. Primary data was collected through questionnaires designed to address the research questions. Respondents were drawn from one commercial bank of Ethiopia at head office (Main branch), where IFB financing and savings services have been provided. Data was gathered from a population of 25 IFB staff in which all respondents properly complete and return the questionnaires. The data was analyzed using SPSS version 20, applying statistical tools such as percentages and frequencies for analysis. The study reveals significant challenges in implementing Interest-Free Banking (IFB) in Ethiopia, including operational difficulties, limited financial products, and manpower shortages. The absence of independent Sharia supervisory boards and restrictions on financing products hinder IFB growth. The limited range of financial products and liquidity problems due to short-term investment securities also pose challenges. Manpower shortages and educational curricula that do not focus on IFB principles further hinder IFB's growth. Additionally, a clear gap in understanding IFB concepts among bank employees and customers is evident. The study recommends Ethiopian interest-free banking (IFB) services to improve efficiency and align with Islamic principles. It suggests clear regulations, a Sharia-compliant central banking system, and investment in Sharia-compliant financial products, internal R&D unit, and technological adaptability
