| Abstract: | This study examines practices and Challenges of Interest free banking services in ZamZam
Bank with particular reference to Addis Ababa Branches and Head office. The study has
employed descriptive research based on questionnaire and interveiw. Of the total sample
murabaha financing customers (only customers who get murabaha) and staffs of the bank
constitutes 326 and 22 respectively. The data was analysed using descriptive statistics of
mean, frequency and percentage. The study focuses that General Practices, Murabaha
Application Process, Murabaha financing Eligibility, Murabaha Contract Nature,
Challenges and customers perception. The Objective of the Study was to assess the practices
and challenges of Murabaha interest free financing in ZamZam bank specifically in selected
Branches and Headquarters. Based on the analysis of the obtained data, Key findings
showed a strong consensus on the binding nature of Murabaha contracts but confusion
regarding asset ownership transfer. Operational challenges included regulatory constraints
and staff competency deficits. Notably, some respondents viewed Murabaha as similar to
conventional loans, highlighting a disconnect between theoretical Shariah compliance and
practical implementation. To attain the objectives of the study respondents were drawn
through simple Random sampling were applied. The study concludes that ZamZam Bank’s
Murabaha operations exhibit structural strengths in contractual enforceability and equitable
service delivery but face systemic challenges in three domains: Customer Understanding:
Persistent confusion about ownership transfer mechanics and contract terms highlights
insufficient client education, risking misinterpretations that undermine trust in Islamic
finance principles. Operational Consistency: Inconsistent application processing timelines
and uneven documentation practices reflect procedural ambiguities requiring
standardization. Regulatory and Market Environment: Restrictive frameworks constrain
market penetration, perpetuating perceptions of Murabaha as a niche product rather than a
mainstream alternative to interest-based financing. |
