Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.5, 2016 36 Assessment of Branch Performance in Commercial Bank of Ethiopia: The Case of Gida Ayana Branch Fikadu Goshu (MBA, MSc.) Entrepreneurship Development Center- Ethiopia Lead Business Development Service Advisor, P-O-Box 675 Kefiyalew Gudu (MBA) Commercial Bank of Ethiopia Abstract The study tries to asses branch performance in commercial bank of Ethiopia by mixed research method using documentary analysis for the period of 2009/10 to 2014/15 fiscal year and collecting primary data from operational staff operating of Gida Ayana branch. The result of documentary analysis shows that the performance of the branch is high in deposit mobilization relative to loan disbursement. The performance analysis of the branch shows that the ratio of liquid asset to total asset is 4.3 percent. The loan to deposit ratio of the branch is less than one percent. The return on asset shows a declining trend indicating the branch is better in the financial soundness on the bank risk bearing capacity and in the ability to perform liquidity transformation. The amount of non-performing loans analysis shows a declining trend indicating the branch is efficient in the performance of nonperforming loan collection. The study from the survey result shows that internal management system, external business environment and bank rules and regulation affect the performance of branch. The employee knowledge about bank management system, information sharing system, training, electric power interruption, electronic payment system are also among other factors that affect branch performance. The correlation between rapid expansion of electronic payment system and owing of sound knowledge about bank management and that of internal organizational management factors and regularly informing on new systems affects positively branch performance at statistical significance p < 0.01. Correlation of rapid expansion of electronic payment system with internal organizational management factors and with regularly informing on new systems, and internal organizational management factors and possession of sound knowledge about bank management shows positively affect branch performance at statistical significance p < 0.05. Managements and decision makers has to make any adjustment in the areas of loan disbursement, in the development of uniform information sharing mechanism and provision of refreshment training in the areas of customer management. Keywords: bank, performance, liquidity, loan growth, capital adequacy, Gida Ayana 1. INTRODUCTION 1.1. Background of the Study As the prime movers of economic life, banks occupy a significant place in the economy of every nation (Olugbenga & Olakunle, 1998). Commercial banks are quite important in an economy as intermediaries as they channel funds from depositors to investors continuously (Lukorito, Muturi, Nyang’au, & Nyamasege, 2014). Commercial banks provides information services, liquidity services, transaction cost services, maturity intermediation services, money supply transmission, credit allocation services, and payment services to the economy (Cornett & Tehranian, 2004). Failure to provide these services provision can be costly to both the ultimate sources (households) and users (firms) of savings, as well as to the overall economy. The affect of a disruption in the provision of the various services on firms, households, and the overall economy when something goes wrong in the banking sector makes a case for the need to investigate factors that affect these performance are important (Cornett & Tehranian, 2004). Performance measurement systems in commercial banks are considered to be important for evaluating the accomplishments of firm goals, constructing strategies for growth and development, making decisions for investments and compensating employees. Studies have investigated that banks’ performance is measured by using variety of approaches. It can be used balanced scorecard method to measure business performance. The balanced scorecard method includes both financial and nonfinancial measures such as institutional learning process, growth, internal business processes, customer employee satisfaction etc (Teker, Teker, & Kent, 2011). Despite, banks have vital role in economic development through engaging in an intermediary role that enhances investment and growth (Tesfaye, 2014) in the economic growing trends of Ethiopia, the share of banking sector (financial intermediary) to Gross Domestic Product of Ethiopia is about 2.7 percent in the fiscal year 2008/0 (NBE, 2009). Since 2007/2008 fiscal year, commercial banks have reduced their loan disbursement due to loan disbursement restriction. However, loan disbursement have significant impact on the overall performances of a given bank as lending contribution to asset and income portfolio is very high in the banking industry. Policy that affects lending through loan restricting is likely to have great impact on the performance of banks (Seyum, 2010). Restriction on bank lending affects banks performance through reducing bank operating income which is generated brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals