An interest rate commission agent banking system

Abstract

An interest rate commission agent banking business model was developed. It is defined as a system adopted by the bank to be an agent for investors’ loan funding to entrepreneurs getting the fund seller and buyer agreement to administer the loan after disbursement by retaining a reasonable interest rate commission from the agreed investors’ loan funding credit price. The research sought to investigate the effect of investor loan funding, credit risk and liquidity crunch, on AIRCABS sustainability and profitability. To test the viability of an interest rate commission agent banking system the researcher collected primary data using structured survey questionnaires from a sample population of 300 bank’s professionals and secondary data using twenty three years’ financial statements, which were published in the period from 1 July 1993 to June 2016, of one government bank and 15 private commercial banks in Ethiopia. To test the research hypotheses, coefficient of variation, canonical correlation and multinomial logistic regression statistical tools were employed and to analyze the survey questionnaires the Cronbach alpha, kuder-Richardson, coefficient of variation and factor analysis were used. The statistical results showed that AIRCABS was not affected by credit risk and the liquidity crunch and the increase of investor loan funding increased AIRCABS’ sustainability and profitability. Calculating the discrete market deposit interest incentive taking into account the depositor who later shifted to an investor position to get a proportionate credit price instead of a deposit interest rate on the fund already invested by the bank which later shifted to an agent position found increasing stability of money deposited by depositors.