Determinants Of Financial Performance Of Interest Free Banking Business Of Ethiopian Commercial Banks

Interest free banking is among the emerging trends in the global economy and the fastestrngrowing industry worldwide. It is a banking system which is in consonance with the spirit,rnethos and value system of Islam and governed by the principles laid down by IslamicrnShari'ah. It is started in Ethiopia on 2013. This study examines the determinants ofrnfinancial performance of interest free banking business by commercial Banks in Ethiopiarnconsidering three internal(bank size, liquidity management and operating efficiency) andrntwo external (Inflation and GDP) factors. Return on average asset as a proxy of profit willrnbe used to measure financial performance. To achieve this objective, quantitative researchrnapproach and descriptive research design was used. The data obtained was fromrnsecondary source using annual financial reports. Five years panel datafrom 2015/16-rn2019/20 of four purposively sampled commercial banksthat are pioneer in starting thernbusiness and with a well organized data were examined by running regression analysisrnusing E.Views software 9.0 from total population of eleven banks. Based on the findings ofrnthe study, liquidity management has positive and significant impact on the financialrnperformance of Ethiopian Banks operating Interest free Banking business, while the restrnvariables have insignificant impact on financial performance of these banks

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