Information communication technology and bank profitability: evidence from Ethiopia

Abstract

In recent years banks in Ethiopia are increasingly using ICT goods and services in their day-to-day operations. However, their impact on bank profitability is still unknown. This study examined the impact of ICT expenditure on profitability in Ethiopia for the period of 2011-2015 using system GMM on an unbalanced panel data of 17 banks. Results showed that ICT expenditure has not produced a positive return. This finding seems to confirm Solow’s “Productivity Paradox.” The insignificant impact may be due to the moderate competition that exists among the banks, underutilization of the technology, and mismatch between organizational structure and banking technology.

Keywords: Bank Profitability; Commercial Banks; ICT Expenditure; System Generalized Method of Moments (GMM).