YOM POST GRADUATE COLLEGE
DETERMINANTSOFPROJECTFAILURE;
THE CASE OF PROJECTS FINANCED BY DEVELOPMENT
BANK OF ETHIOPIASOUTHWESTADDIS ABABADISTRICT
A RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF
MANAGEMENT IN
PARTIALFULFILMENTOFTHEREQUIREMENTFORTHEAWARDOFMAST
ERS OF BUSINESS ADMINISTRATION
BY
BY: BETELHAME ZEWDE:GSMEA/007/14A
ADVISOR:Dr. MESERET (Ass. professor)
January, 2023
ADDISABABA,ETHIOPIA
DECLARATION
I, the undersigned, declare that this thesis is my original work, prepared under the
guidance of Meseret (Dr). All sources of materials used for the thesis have been duly
acknowledged. I further confirm that the thesis has not been submitted either in part or in
full to any other higher learning institution for the purpose of earning any degree.
Betelhem Zewde
____ ___________________
Name
Signature
YOMPOSTGRADUATEDCOLLEGE,
Addis Ababa
January, 2023
YOM POSTGRADUATED COLLEGE
SCHOOL OF GRADUATE STUDIES
FACULTY OF BUSINESS
DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION (MBA)
DETERMINANTS OF FAILURE FOR PROJECTS FINANCED
BY DEVELOPMENT BANK OF ETHIOPIA; A CASE STUDY IN
SOUTH WEST ADDIS ABABA DISTRICT
Submitted by: Betelhem Zewde Signature _________________Date______________
Approved by:
Name of Advisor ________________________ Signature _________________Date________________
Name of Internal Examiner
_____________ Signature _________________Date________________
Name of External Examiner_________________ Signature _________________Date________________
Name of Head of Department _________________ Signature _________________Date_____________
ACKNOWLEDGEMENTS
I would like to express the deepest thankful to my Almighty God for finish this study. I would
like to express the deepest appreciation to my advisor, Meseret (Dr), who has the attitude of
genius for making this a meaningful learning process. Her guidance and encouragement
throughout the process of formulating my ideas was invaluable and their ability to view
things logically was serious to the success of this study and needs to be highly praised.
Without her guidance and persistent help this thesis would not have been possible. I am also
thankful to my friend Ashenafi Antenehe, who has helped me by sharing his idea for the
preparation of this thesis. Last least, I would like to thank my Husband HailuTadesse for his
encouragement and support throughout my life.
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TABLEOFCONTENTS
DECLARATION........................................................................................................................ 2
ACKNOWLEDGEMENTS ...................................................................................................... 1
TABLEOFCONTENTS ............................................................................................................. 2
ACRONYMS .............................................................................................................................. 5
Abstract ........................................................................................................................................ 6
CHAPTER ONE: INTRODUCTION ...................................................................................... 7
1.1.
Background of the Study ............................................................................................... 7
1.2.
Statement of the Problem .............................................................................................. 8
1.3.
Research Questions ....................................................................................................... 9
1.4.
Research Objective ...................................................................................................... 10
1.4.1.
Main/General Objective: ...................................................................................... 10
1.4.2.
Specific Objectives:.............................................................................................. 10
1.5.
Significance of the Study ............................................................................................ 10
1.6.
Scope of the Study ....................................................................................................... 10
1.7.
Limitations of the Study .............................................................................................. 11
1.8. Organization of the Paper ............................................................................................ 11
CHAPTER TWO: REVIEW OF RELATED LITERATURE ............................................ 12
2.1.
Introduction ................................................................................................................. 12
2.2.
Definition and Concepts of projects and project failure ............................................. 12
2.3.
Cause of Project Failure .............................................................................................. 15
2.4.
Empirical Results and Facts ........................................................................................ 18
2.5. Conceptual Framework ............................................................................................... 21
CHAPTER THREE: RESEARCH METHODOLOGY ...................................................... 23
3.1.
Introduction ................................................................................................................. 23
3.2.
Description of the organization ................................................................................... 23
3.3. Research Design and Approach ...................................................................................... 23
2
3.3.1. Research Design .......................................................................................................... 23
3.3.2. Research Approach ..................................................................................................... 24
3.3.1. Quantitative Approach ................................................................................................. 24
3.3.2. Qualitative Research Approach ................................................................................... 24
3.4.
Sources and Method of Data Collection ..................................................................... 24
3.4.1. Data Source and Collection ......................................................................................... 24
3.5.
Target Population and Sampling Design ..................................................................... 25
3.5.1. Population of the study................................................................................................ 25
3.5.2. Sample size.................................................................................................................. 25
3.5.3. Sampling Technique .................................................................................................... 26
3.6.
Method of Data Analysis............................................................................................. 27
3.6.1. Data Processing ........................................................................................................... 27
3.6.2. Data Analysis .............................................................................................................. 27
3.7.
Reliability Test Validity of Research Instrument ........................................................ 28
3.8. Ethical Consideration .................................................................................................. 28
CHAPTER FOUR: RESULT AND DISCUSSIONS ............................................................ 29
Introduction ............................................................................................................................ 29
5.1.
Summary of the Respondents ...................................................................................... 29
5.2. Ranking of Causes of Project Failure .......................................................................... 32
CHAPTER FIVE: .................................................................................................................... 41
CONCLUSION AND RECOMMENDATION ..................................................................... 41
5.2.
Conclusion ................................................................................................................... 41
5.1. Recommendation ......................................................................................................... 42
REFERENCE ........................................................................................................................... 47
3
LIST OF TABLES
Tables
page
Table 1: Sample Size Determination .......................................................................................................... 26
Table 2: Transformation matrix table. ........................................................................................................ 28
Table 3: Gender characteristics of respondents from bank side.................................................................. 29
Table 4: Project characteristics ................................................................................................................... 31
Table 5: RII of the factors affecting project failure: Bank side data ........................................................... 33
Table 6: RII of the factors affecting project failure: Borrowers side data .................................................. 33
4
ACRONYMS
DBE: Development Bank of Ethiopia
NPLs: Non Performing Loans
KYC; Knowing Your Customer
GDP – Growth domestic product
IT – Information technology
NBE - National Bank of Ethiopia
RII-Relative Importance Index
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Abstract
The general objective of this study is to assess determinants of project failure in the case of DBE
financed projects. The target population was projects financed by DBE through South West Addis
Ababa District out of which, 154 projects were determined to be the sample size achieved using a
formula. The sampling technique used was stratified sampling technique together with simple
random sampling technique. In addition to this, Judgmental sampling technique was employed to
select 58 respondents from DBE staff. The data collected from both the DBE staff and borrowers
was analysed using the Relative Importance Index level of effect assessment model. The findings
revealed that among the listed factors, “Inflation”, “Corruption”, and “Exchange rate” are the
most influential factors contributing to projects failure. It was recommended that DBE shall take
measures to mitigate inflation, manage exchange rate risks, and combat corruption together with a
due attention and also develop mitigation tools to factors such as GDP, interest rates, due diligence,
management problems, risk management, and supervision, as they also contribute to the overall
borrowers’ experience and projects performance. This study advances the theory of failure
behaviour and contributes to the foundation for future research aimed at improving understanding
of DBE and its employee’s about project failure factors.
Key words: Bank, Borrowers, Project failure Factors, Relative Importance Index (RII)
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CHAPTER ONE: INTRODUCTION
This chapter presents the background of the study, statement of the problem, research questions,
study objectives (both general and specific objectives), hypothesis, significance, scope, organization
of the study.
1.1. Background of the Study
By converting savings from individuals, businesses, and governments into loans or investments,
financial institutions serve as middlemen. They frequently serve as people's and businesses' main
source of funding. The most important financial institutions include pension funds, insurance
companies, security firms, mutual funds, and commercial banks (Peter and Keith, 2007).There is a
difference between deposit-taking institutions (DTIs) and non-deposit-taking institutions (NDTIs).
A few instances of institutions that accept deposits are banks. Most of their liabilities (assets to
lenders) consist of deposits. These can be swiftly withdrawn and are usually part of the country's
bmoney supply (Peter and Keith, 2007).A bank is a company that deals in currency and provides
further financial services. Banks take in deposits, give out loans, and generate revenue.
Development banks are state-backed financial institutions that concentrate on providing long-term
loans to projects that are both financially successful and socially beneficial, according to Hüseyin,
Derya, and Mehtap (2010).
To make effective use of its resources, Ethiopia, a developing nation, has created and carried out a
significant number of development projects involving both government and commercial
development organizations. restricted financial resources, primarily from loans and international aid
in addition to domestic savings. To guarantee the effective execution of these programmers, the
government has set up a number of offices at the ministerial and agency levels. These offices offer
technical support and project financing arrangements at lower interest rates because project finance
has a far higher risk than traditional loans.
The Ethiopia Development Bank was founded to further national development objectives as a
strategic development finance organization. Because of this, the bank's purpose is to further national
objectives by offering credit goods and services such warranty services, syndicated financing, new
loans, extended loans, loan transfers, and redemptions, among other things. DBE offers credit for
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loans that are short-, medium-, and long-term. The loan period will be determined based on the
particular needs and project requirements (DBE Annual Report 2021/2022).
The goal of the bank's lending procedure is to give consumers the finest possible service for the
least amount of money and time. Four separate loan processing divisions are formed by this
procedure, which combines the Credit, Project Appraisal, Loan Approval, and Restructuring teams
and processes. The bank has to thoroughly examine and assess all development projects that have
been submitted for funding in order to accomplish this goal. Furthermore, it guarantees the
allocation of resources to economically viable development projects and the appropriate
reinforcement of the procedures for repayment (DBE, 2008).
Project failure is the DBE's main problem, as it raises the quantity and proportion of nonperforming loans. The suspension of interest on non-performing loans results in a large decrease in
the bank's income and profitability, making this a double-edged sword that requires provision and
other administrative costs. This negative fact harms the bank's standing and makes it more difficult
for it to assist in the country's efforts to thrive. has an adverse effect on the bank's liquidity position,
locks up its capital, and weakens its competitiveness both locally and internationally. As a result, it
is incompatible with a development bank, which is expected to play a vital role in ensuring the
bank's sustainability (DBE, 2009).
1.2. Statement of the Problem
Carlos (2002) asserts that when a project fails to produce the desired results as anticipated, it is
deemed a failure. Thus, in order for a project to be successful, it must be completed at the lowest
feasible cost, with the desired quality, on schedule, and with the advantages outlined in the
business case. A project may be deemed successful even though it has everything outlined in the
comprehensive project plan if it is missing some essential components that are required by
important stakeholders.
According to Alex (2018) and Derartu (2020), in addition to the banks' credit management system,
project-specific problems, changes in sociopolitical conditions, and shifts in macroeconomic
variables could all contribute to the failure of bank-financed projects. Nonetheless, the empirical
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literature does not investigate the significance of these explanatory variables in the particular
scenario of the DBE South West District.
Regardless of the reason behind the project's failure, it will raise the nation's sunk costs because
fixed investments in the projects are made specifically for that purpose and are either difficult to
liquidate or require significant switching costs. It also uses up loanable funds that the Bank could
have used to support other projects that might be essential to the country's economic growth.
As per the researcher’s knowledge, three are three empirical gaps in the literature in on project
failure on DBE financed projects. Firstly, there is no empirical evidence on this topic with the
South-west district under consideration. Secondly, there is a lack of study that shows failure of
projects in accordance with the specific sector they are operating in which would have paved the
way for more specific analysis about what sector is experiencing more failure. Lastly, of the
research gaps is the lack of studies that indicate which factors are more influential in inducing
project failure; which factor is more influential in determining project failure in DBE financed
projects, so far as the researcher’s understanding.
Therefore, the current study was conducted with the aim of empirically identifying and analyzing
major factors that influence projects’ performance taking into account their sector and with the
purpose of ranking identified factors as per their relative level of importance in instigating project
failure.
1.3. Research Questions
Considering the above problem statement, this study will focus on investigating major determinants
of DBE South west Addis Ababa District financed project failures and support the Bank to meet its
vision by addressing the following research questions.
1.
What are the major socio political factors?
2.
What are the major macroeconomic factors?
3.
What are the major project specific factors?
4.
What are the major credit management factors?
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5.
Which sector of investment/projects experience more failure?
1.4. Research Objective
1.4.1. Main/General Objective:
The general objective of this study is to assess determinants of project failure in the case of
DBE financed projects.
1.4.2. Specific Objectives:
The study will have the following specific Objective
1. To examine the impact of macroeconomic factors.
2. To assess the impact of socio-political factors.
3. To examine the impact of project specific factors.
4. To assess the impact of the Bank’s credit management system.
5. To assess which sector of investment/project experience more project failure.
1.5.
Significance of the Study
The study acquired practical experience and more knowledge about the subject area and carrying
out research more meticulously. In addition to that, the finding of the study can be utilized by the
management of both the bank and the borrower so that the will be able to design appropriate
strategies to take corrective action on such factors and avoid project failure. Plus, the study can be
used as a reference for future researches. Overall, this research is useful input to the bank and the
borrower since project failure is costly for Development Bank of Ethiopia and for the project owner
as it takes their time, money, energy, and all resources spent on the project.
1.6.
Scope of the Study
The study you mentioned focuses on the factors that contribute to project failure in the
Development Bank of Ethiopia (DBE) and how to avoid it. The study is limited to the projects
financed by DBE, a development bank in Ethiopia, South West Addis Ababa District. The study
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covers four categories of factors that may affect project failure: macro-economic factors, sociopolitical factors, project specific factors, and credit management related factors of the bank. The
study does not consider other factors that may influence project performance and outcomes, such as
environmental, technological, legal, or ethical factors. The study also does not evaluate the impact
of project failure on the economic and social development of Ethiopia or on the financial
performance and reputation of DBE.
The study’s findings can be utilized by the management of both the bank and the borrower to design
appropriate strategies to take corrective action on such factors and avoid project failure. The study
can also be used as a reference for future research. Project failure is costly for DBE and for the
project owner as it takes their time, money, energy, and all resources spent on the project.
1.7.
Limitations of the Study
There were some common limitations faced including limited access to information, time and
budget constraints. In addition to that, the study is performed with only the selected South-west
district which might impact generalizability and interpretation. Additionally, the variables included
for analysis are not all-inclusive.
The validity of the study constrained to the perceptions of the respondents. Plus, the factors of
project failure is very crucial and need to be seen at country level, conducting the study as country
level on all sectors, data, time and budget will be considered as constraint.
1.8.
Organization of the Paper
Organization of the Study is to provide a map that may guide readers through the reading and
understanding of the thesis. This study has five chapters the first chapter introduces the background,
statement of the problem, the research objectives and questions, significance of the study and the
scope of the study. The second chapter focuses on both theoretical and empirical review of related
literature and the third chapter deals with the research methodology. Chapter four deals with the
data analysis and presentation and the fifth chapter contain the conclusion and recommendation of
the study including the direction for further study.
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CHAPTER TWO: REVIEW OF RELATED
LITERATURE
2.1.
Introduction
This part of the study focuses on, the literature written by different authors and researches conducted
by different scholars in project failure. The literature were acquired from books, various academic
journals and different publications, annual report of the Bank, websites and other dependable
sources that is relevant for these particular study. From the available materials, it can be point out
the critical issues on the major cause of project failure is discussed in detail by using the theoretical
and empirical perspectives.
2.2.
Definition and Concepts of projects and project failure
A project is fundamentally a brief endeavor started with the goal of producing a special good,
service, or outcome. Temporary implies that there is a distinct and definite beginning and end;
project management requires tailored activities to support these characteristics; as a result, how well
the project performs in relation to its schedule—that is, whether it begins and ends on time—is a key
metric of success. When something is unique, it means that it stands out from all other goods and
services in some way. Projects are the most common form of investment since they include the use
of financial resources to construct assets that would yield advantages over a long period of time;
according to Shyam (2002).Projects are the cutting edge of development, notwithstanding that. The
majority of developing nations implement their development strategies through projects. Project
completion on schedule makes a significant contribution to an organization's competitive edge
(Kariungi, 2014).
Project failure is an international phenomena that has an impact on both the parties involved in the
project and the entire economy of nations. When a project fails, there are a number of intricate
problems involved, all of which are very important to the parties involved—in this example, the
bank and its clients. These concerns relate to the right to collect expenses associated with delays or
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the need to extend the project, with the ensuing right to recover costs associated with schedule
revisions under the contract. In the instance of the Development Bank of Ethiopia, project failure
wastes resources by requiring the processing of additional loans due to cost overruns and the
rescheduling of loan repayments, and projects lose sizable market shares as a result of failure.
Application of knowledge, skills, tools, and procedures to project activities in order to achieve
project requirements is known as project management. It is achieved by using project cycle
processes like initiating, planning, executing, managing, and closing. The main reason for starting a
project is to achieve particular objectives. The purpose of structuring the assignment as a project is
to concentrate the authority and responsibility for achieving the objectives on a single person (the
project manager), a small group, or project team (Bakouros&Kelessidis; 2000).
The World Bank, a significant financier of infrastructure projects in poor nations, defines project
finance as the "use of non-recourse or limited-recourse financing" (2001, p. 3). In order to further
clarify these two concepts, it is said that "lenders are only reimbursed from the cash flow created by
the project, or, in the event of total failure, from the value of the project's assets, when a project is
financed in a non-recourse manner. Additionally, lenders may have some limited recourse to a
parent business that is funding a project's assets.
It is useful to state the entire list of traits and draw comparisons between project finance and
corporate finance in order to have a more complete understanding of project finance. Although not
every project financing will have every trait, Bodnar (1996) offers the following list of typical
features of project finance as a starting point.
Capital-intensive: Project financings are frequently big-budget initiatives that call for millions to
billions of dollars in debt and equity.
Long-term and highly leveraged: The transactions tend to be extremely leveraged, with debt often
making up 65% to 80% of capital in pretty typical situations. Project financing agreements often
have terms of 15 to 20 years.
Independent entity with a limited lifespan: Modern project financings typically rely on a newly
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created legal entity, known as the project company, that exists just to carry out the project and has a
limited lifespan to ensure that it does not serve any other purposes.
Non-recourse or limited recourse financing: Because these recently formed businesses lack their
own credit or operating records, lenders must concentrate on the cash flows of the particular project.
This is the reason why "the financing is not primarily dependent on the value of the physical assets
involved or collateral." In contrast to corporate funding, credit evaluation or investment decision
making is therefore based primarily on the project's feasibility study and sensitivity to the impact of
potential negative variables.
Controlled dividend policy: To support a borrower with no credit history in highly leveraged
projects, the income from the project is used to pay off the loan, cover operating costs, and return
investors' equity. Typically, this agreement is legally binding.
Numerous stakeholders playing important roles in the project's implementation are common. In this
circumstance, the project business and the other partners must develop contractual agreements like
turnkey agreements in order to allocate risk.
Costly: Compared to more traditional corporate finance methods, raising funds through project
finance is typically more expensive. The increased demand for data, oversight, and contractual
agreements raises transaction costs. Additionally, the unique characteristics of the financial
institutions have greater costs and may make the project's debt less liquid. Due to the fact that so
many of the projects are in nations with a high political risk, margins for project financing
frequently also contain premiums for these risks.
According to Yescombe (2002), project financing is a technique for obtaining long-term debt for
large projects and lending to them while relying solely on the cash flows produced by the project for
repayment.Because the magnitude of the project may frequently be greater than the size of the
balance sheets of the participating corporations, non-recourse or limited recourse financing is
sometimes used (Fight). Therefore, project financing is a technique to shield the firm balance sheet
from the additional costs of a failing project (Esty, 2004).
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This indicates that the financial health of the financing organisation is more significantly impacted
by project failure than that of the supporting businesses or promoters. Therefore, in order to decrease
project failure and increase project success, the financing institutions conduct market, technical,
financial, economic, and ecological analysis (Chandra, 2002).
2.3.
Cause of Project Failure
Researchers who focused on projects in general identified a number of reasons why projects fail.
The following eight common management issues that result in project failure were identified by the
Office of Government Commerce (OGC), a division of the Efficiency and Reform Group of the
Cabinet Office in England, in 2005.
• Lack of a clear line of responsibility between senior management, ownership, and leadership;
• Unclear and ineffective stakeholder engagement;
• Skills and knowledge gaps regarding project and risk management;
• Insufficient focus on breaking development and implementation into manageable steps;
• Appraisal of project proposals using current price rather than long-term money value;
Low project team integration, poor grasp of the supply chain, and strained relationships with the
sector.
In other cases, McConnell (2010) determined the top five market factors that contribute to
project failure by using IT projects as a case study.
• Excluding customers: McConnell cites this as the main cause of project failure. A project is
bound to failure when you complete it without the customer's input. When user or market needs are
not met, the development process becomes a mindlessly controlled procedure, your team becomes
"hostile" to project expectations, and you are unable to feel invested in the product without user
engagement.
• Unknowledgeable Requirements Set: When the project team delivers the product without
having a clear concept of what the customer wants and without having any genuine knowledge
of the requirements, the project will fail as a result of inadequate requirements management.
• Scope Creep: The next leading cause of project failure is when the project's scope does not
align with other restrictions like time and cost, which increases the likelihood that the project
will be delayed and overbudget.
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• Lack of a change control system: A change may result in the emergence of a novel
circumstance in your project. Your staff won't be able to adapt to the new situation if no
change controls mechanism is implemented. Your main goal is to establish a document flow
for change requests and put in place a system to exchange and handle change requests because
uncontrolled modifications would lead to project failure..
• Lack of Continuous Testing: When acceptance tests to determine whether the product satisfies
business requirements are not run, a project will typically be deemed undesirable due to a lack
of testers and their subpar abilities and knowledge. Poorly defined requirements, a lack of
change control, poorly trained people, and a lack of testing time can all contribute to poor
testing. The document "Why Do Projects Fail?" from the Mind Tools website summarised the
aforementioned causes of project failure. It is shown below.
• Addressing the incorrect business requirements will inevitably have a negative impact on how
your project is viewed if it fails to deliver what the organisation actually requires. This is why
it's crucial to undertake a thorough study of the company requirements.
• Poor Implementation: Competence alone is insufficient for effective implementation. You
must oversee the team, stakeholder communication, risks, issues, and scope. Inability to
control everything that is within your control may result in poor implementation.
• Poor governance: The project's governance bodies frequently back the project's proponents.
They offer guidance, direction, and a critical assessment of the project's development. These
governing bodies can also help by offering connections and information that facilitate your
progress. The project may encounter difficulties if the initiative's promoter lacks enthusiasm
for it or dislikes to refuse requests from organizations to broaden its scope.
• Losing sight of the advantages of the project: Projects will contain a list of advantages to be
delivered, and it is expected that these benefits would be precise, explicit, and measurable.
However, there are occasions when project teams concentrate on minute planning, creating a
new system, creating training materials, and outlining new processes, which do not offer the
required advantages.
• The surroundings alter: Business cases may become outdated in a dynamic environment
before a project is fully implemented. To determine how to proceed in such a scenario, it is
necessary to partially evaluate the initial needs and aims. This can lead to a change in the
project's scope or even its cancellation.
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Fabozzi and Nevitt (2000) provided a list of typical reasons for project failure in their book
"Project Financing" with regard to projects sponsored by banks. The majority of these reasons
for failure are comparable to the reasons described above. These are the reasons why bankfinanced project failure, in their opinion.
Implementation delays, technical issues, losses due to uninsured property damage, loss of market
competitive position, expropriation, poor management, inflation-related cost overruns, government
intervention, contractor failure, price increases or insufficient raw materials, technological
obsolescence, excessive collateral appraisals, and promoter financial insolvency are all factors that
contribute to interest expense accumulation.
Risks and reasons for failure for Bank-financed projects were divided into three primary categories
by Yescombe (2002).
• Macroeconomic causes – financial/economic factors outside the project's control;

Commercial causes – factors inherent in the project itself or the market it works in;

Political causes are those that are connected to governmental decisions or political influence.
He claims that the term "commercial risk" encompasses hazards related to the execution and
operation phases of various projects. The contractor could go out of business during the
implementation phase, which would increase expenses and delay the project's revenue stream. The
operation phase carries risk in the form of input shortages, decreased revenue, and managerial
incompetence to manage the operation.
The input shortage can happen because of price increase and low supply of the raw materials
(quantity). This again leads to production decrease and a higher price of the product, which in return
decreases the expected revenue. Revenue decrease can occurs as a result of a decrease in products
quantity, demand decline and lack of raw materials. Price can also decline as a result of competitors’
price cutting, government imposing of price controls, tariffs or royalties.
Due to rising prices and a lack of raw materials, there may be a shortage of inputs. Once more, this
causes output to decline and the product's price to rise, both of which reduce expected income. A
downturn in demand, a reduction in the number of products available, and a shortage of raw
materials can all affect revenue. The price may also decrease as a result of price reductions by rival
17
businesses, price regulations implemented by the government, tariffs, or royalties.
Financial risks that have not been effectively accounted for in the project formulation, such as
changes in inflation, interest rates, and currency rates, can impair the project's viability, according to
Yescombe's classification in 2002.
Quasi-political risk, according to Yescombe (2002), is the danger that lower levels of government
officials will interfere with projects, the government won't uphold its commitments, or the court
system won't be impartial. The various hazards that were all mentioned above can result in a project
failing.
All studies' failure factors are essentially the same, with the exception of the occurrence of
dimension variation. Yescombe (2002) moved the project risk/cause of project failure originating
from the credit management of the financiers to other components when he divided the main Bank
sponsored project risks/cause of project failure into three categories.
2.4. Empirical Results and Facts
A related article by Mubila et al. (2002) about the African Development Bank has so far been
discovered by the researcher. Due to the lack of research on the causes of failure of bank-financed
projects, the researcher is forced to take into account studies conducted in the same way but on
different projects, claiming that the cause of failure of projects can be very tight. related. Based on
this knowledge, a review of IT project failure studies by two organizations – The Bull Survey (1998)
and The Chaos Report (1995) – was conducted. In order to identify the main causes of the failure of
projects in the banking sector, French computer and system integrator manufacturer Bull
commissioned Spikes Cavell, an independent research firm, to carry out the project. conducted a
survey in the United Kingdom in 1998. According to a project survey, deadlines were detected in
75% of cases. Project failure was attributed to over budget (55%) and failure to meet project
requirements (37%). According to the main results of the survey, communication problems (57% of
failed projects), lack of planning (39% of failed projects) and poor quality control (35% of failed
projects) are top three reasons. Why did the project fail?
The sample size and methodology for this landmark study included 365 IT leaders from
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organizations of all sizes and across all industries. Cost overruns, overtime, and content omissions
were all included in the project's evaluation criteria.
Key findings from the opinion survey showed unmet requirements Unrealistic expectations, 12.4%,
lack of user interaction, 13.1%, and lack of resources 9.9%, inadequate management support 9.3%,
change of standards and criteria 8.7%, lack of preparation 8.1%. , don't need it anymore. Barriers to
the project include lack of IT management (7.5%), technology illiteracy (4.3%), and other factors
(9.9%).
Mubila et al (2000) have done more or less similar research on the African Development Bank.
They measure the success or failure of a particular project using project size, implementation lag,
cost overruns, project economic rate of return, and human development metrics. people in their
study. Project-specific explanatory variables were used in this model, including total project cost
(used as an indicator of project size), percentage cost overrun, percentage overtime time and
industry dummy variables. In addition, they take into account the country's macroeconomic
performance, including the development of GDP, inflation rate and internal and regional policies, as
well as macroeconomic indicators. variables that measure the state of the country's economy –
population size, average economic growth and dummy variables for the distribution of customers by
region have been added over the implementation period since 1974 until 1994 to see if these factors
were related to project performance. As a result of their investigation into project underlying causes,
large projects are less likely to fail, and cost and schedule overruns negatively impact project
success. Projects in the transport, industrial, and agricultural sectors all have a higher success rate
than projects in the social sector, which have a higher failure rate.
All regions except North Africa have negative project success coefficients, indicating that the
Northern region has a significantly higher probability of project success. In addition, they provided
evidence to support their claim that the success of this initiative would benefit from an increase in
the GDP of the host country. Population size is also comparable. Negative coefficients for the
intercept and positive coefficients for the economic rate of return at the time of valuation are also
obtained from simple ordinary least squares (OLS) estimates. (AERR), shows that economic return
on completion (CERR) is generally lower than TREA, and economic return on completion is
strongly related to economic return on appraisal. Furthermore, the regression results show that there
19
is no association between the economic rate of return at completion and the cost and time of excess
as the explanatory variables of the level of economic profit at completion. This model was then
extended by the researchers to explain the differences in project performance across economic
sectors, and the parameter estimates for the industry variable showed no significant significance.
To summarize the empirical evidence, in addition to the study of Mabila et al. (2000) conducted for
the African Development Bank, other studies use survey methods and descriptive statistics
respectively, suitable for qualitative data collection and analysis. Because Mubila et al. Considering
that the projects had completed the project cycle for their study, they used the OLS regression model
to correlate the economic rate of return on appraisal (AERR) with the economic rate of return on
investment. economic to completion (CERR) in the scatter plot. They used probit models with live
data and proxies to quantify the determinants in order to determine how closely each component
relates to the probability of success or failure of projects funded by theAfrica Development Bank.
According to an empirical literature analysis, the topic of bank-financed project failure is not a study
priority, and it is challenging to find research that is comparable to this researcher's understanding in
the case of the Development Bank of Ethiopia in particular. Despite this, the special nature of
projects necessitates research into the factors that contribute to project failure in relation to the
DBE's credit processing system, the particulars of the project, and the macroeconomic and
sociopolitical situation of Ethiopia.
Even still, Mubila et al.'s investigations on the Development Bank of Africa are not thorough in their
list of explanatory factors for project failure. Due to a data issue, it is completely devoid of the
factors from the Bank's credit processing system.
Furthermore, because they only used projects that have previously been phased out as their data
source, the observations used in their analysis are insufficient to explain the present causes of project
This study, which also acts as an introductory study for DBE, will thereby close the research study
gap in the area of cause for Bank-financed project failure in general. This study, in contrast to
Mubila et al.'s study, has concentrated on operating projects in order to emphasize the present
factors that contribute to project failure. Additionally, a lot of new explanatory variables are
introduced to this study based on their significance.
20
2.5.
Conceptual Framework
A conceptual framework is very important in any research study being undertaken. It shows the
relationship between the dependent variables and the independent variable (Kotter, 1995). This
study addressed many extrinsic factors that influence investment projects failure. Conceptual
framework has been drawn to show the link between the dependent and the independent variables
Figure 1: Conceptual Framework
Dependent Variable
Independent Variables
Macro-economic Factors
 Inflation,
 Interest rates,
 Exchange rates,
 GDP
Socio-political factors

Project Failure
Corruption
Project specific Factors

Management
problem
Bank’s credit
management system
 Risk Management
 Due Diligence
 Supervision
Figure 2.1 Research Model
(Adopted from Odhiambo, Charles, & Okello, 2020 and Muthoni, Mwangi, & Stephen, 2020)
Macro-economic Factors: have to do with issues like inflation, money supply, growth in GDP,
currency rates, interest rates among others, whose change might negatively affect investment
projects. In addition, these include issues influencing the economic feasibility of the project
including the changes in domestic economic conditions of the recipient country or inaccurate
21
project development plan due to unpredictable economic conditions. This may be caused by
increased competition, decreased consumption, and regulatory changes requiring changes in selling
price of the product or renegotiating concessions awarded to the project and would reduce the profit
margin (Scandizzo, P.L. , 2021).
Socio Political Factors as conceptualized in this study means the interference that may come
from political offices and politicians that may have a negative influence on a project. These could
be issues at the national level and regional level including inconsistency in policies, laws and
regulations, and political instability. From development project’s perspective, these factors
contribute to an environment of uncertainty on return of capital investment (Kwak et al.,
2002).Good governance by those who assume political offices is presumed to have low
corruption.
Project specific Factor:-Within this category, management problem is expected to be the dominant
factor and so is included alone. The concept of management problem here,even though this has a
broad scope in interpretation, attempts to capture issues primarily concerning employees in terms of
their self- direction, initiative, performance, know-how, quality, etc. this literally indicates the fact
that the projects under consideration are expected to have competent manpower since the quality of
employees is going to influence the effective use and implementation of other resources these
projects possess.
Credit Management System of DBE; Among major project failure determinants that emanate
from credit management system of the Bank, over appraisals of collateral and appraisal of project
proposals using current pricera ther than long-term money value are not considered for
thisstudybecauseDBEprojectfinancingisnotcollateralbasedandtheBankusesdiscounted project worth
assessment methods. Credit management system of the Bank, therefore, represented by project
planning capacities, providing technical advice and over estimation of returns from the
project.(Project Financing.https://www.dbe.com.et/index.php/services/project-financing)
22
CHAPTER THREE: RESEARCH METHODOLOGY
3.1.Introduction
This chapter gives the details of the research approach. The research design is explained and
illustrated. The target population is described as well as data collection instruments. Also included
in the chapter is data collection procedures, methods of data analysis, operationalization of variables
and ethical issues observed in the research.
3.2. Description of the organization
Development Bank of Ethiopia is one of the state owned financial institutions engaged in providing
short, medium and long-term credits over the last 107 years. Project financed by the Bank are
carefully selected and prepared through appraised, closely supervised and systematically evaluated
(Development Bank of Ethiopia website). The Bank finances SMEs up to Megaprojects, and its
internal structuring is determined based on the size of the financing. The Bank has 22 districts & 99
branches and above 2400 permanent employee among from these, half of in head office.
Mission: The Development Bank of Ethiopia is a specialized financial institution established to
promote the national development agenda through development finance and close technical support
to viable projects from the priority areas of the government by mobilizing fund from domestic and
foreign sources while ensuring its sustainability. The Bank earnestly believes that these highly
valued objectives can best be served through continuous capacity building, customer focus and
concern to the wider environment.
Vision: To be world class development bank that help to achieve Ethiopians economic
transformation vision by 2030
3.3. Research Design and Approach
3.3.1. Research Design
This study examined the factors that contribute to DBE-financed projects in the southwest Addis
Ababa District by doing both descriptive and explanatory analyses. The data were described using
descriptive statistics like tables and percentages, and the Relative Importance Index (RII) rank
23
approach was employed for explanatory analysis. The most significant factors affecting project
failure were identified using this method
3.3.2. Research Approach
3.3.1. Quantitative Approach
The quantitative component of this proposed study is to gather generalizable data regarding the
reasons behind project failures funded by DBE. A standardized self-administered questionnaire will
be used in the study's survey design, along with organized records evaluations.
3.3.2. Qualitative Research Approach
With the aim of obtaining additional insight in addition to the information gained through the
questionnaire, a qualitative approach was used. Using this approach an in-depth interview was
conducted on respondents who have better experience in the bank, specifically managers.
3.4. Sources and Method of Data Collection
3.4.1. Data Source and Collection
For successful completion of this study, both primary and secondary data were used as a source of
obtaining required information.
Accordingly, the primary data was acquired from sample respondents selected from both the bank
and borrowers. Subsequently, self-administered, structured questionnaires were distributed to the
bank employees after receiving permission from the bank to carry out the study. And same was
done in distributing questionnaires to managers of the projects. In addition to that, as a primary
source and method of data collection, interview was made with selected bank management staff
including team manager, division manager, and district manager.
The secondary data was obtained from projects’ files, recorded documents by the bank and different
documents such as Credit Performance reports, annual reports, journals, articles, reference
materials, different researches, various books, websites, and other published and unpublished
records.
24
3.5. Target Population and Sampling Design
3.5.1. Population of the study
DBE finances projects through the head office, districts, and branches. All branches of the bank are
not on the same level in all aspects of the bank operation. On the bases volume of loan limitation,
type of bank services and number of employees from higher level to lower level, the bank has
classified as head office (corporate level), Districts and under each districts there are different
branches of the bank which are graded as A, B.
Since the bank has multiple districts that virtually operate independently to some extent as per their
grade level, researching the entire districts and branches might not have been technically feasible or
practical due to logistical challenges, geographical dispersion, operational differences, or similar
issues. Plus, conducting the research on the entire bank would be resource-intensive in terms of
time, budget, and data collection, the researcher focused on this specific district in order to be able
to allocate resources more efficiently and effectively. So, focusing on South-West district only
allowed for more manageable research scope.
Hence, the target population of this study was projects under the operating unit South-West Addis
Ababa District totaling 250 projects.
3.5.2. Sample size
There were 250 projects in South-West Addis Ababa District by the time data was collected. Out of
this, 154 projects were chosen as representative of the study population determined
usingYamane’s(1967) formula as below. This is used to determine the sample size for this
particular study with the assumption 95% confidence level, ,ande=0.05. The following formula is:-n
= N/(1+N(e) ^2)
n=
N
1 + N(e)2
where ‘n’ is the required sample size,
N is the population size and
E is the level of percision
Applying the above formula,
25
Using this formula, the total sample size needed is is achieved to be 153.846 which approximately
is 154. Then, the following formula was used to determine the sample size for each stratum:
nh = (Nh / N) * n
whereNh is the size of stratum h, N is the total population size, and n is the total sample size.
Using this formula, respondents from the projects were selected as follows, showing sample sizes
for each stratum are:
Table 1: Sample Size Determination
Sr.no
Sectors
1 Manufacture
2 Agriculture
3 Agro processing
Total
Total population
Proportion
Sample size
120
48.00
74.00
76
30.40
47.00
54
21.60
33.00
250
100.00
154.00
The determined sample size was inclusive of respondents from three different sectors namely
manufacturing, agriculture, and agro-processing. All of these 154 projects were then represented by
154 managers from each project i.e. the study subjects randomly chosen for inclusion are all
managers. The borrower side analysis was therefore made with the data obtained from these
mangers.
On the other hand, while determining respondents from the bank side, a total of 58 respondents,
who areall managers at different levels of position as well, were included as a sample out of a total
of 95 employees.
3.5.3. Sampling Technique
The researcher used stratified sampling technique and then applied simple random sampling to
select respondents randomly from each stratum(agro processing, Agriculture and manufacturing)
for the purpose of collecting data from the borrower side using the 154 managers.
Concenrining selecton of the 58 participants in the collection of data from the bank side, the
sampling technique used was judgmental as the respondents were purposively selected so that those
who are knowledgeable about these projects and the loaning environment could be included.
26
3.6. Method of Data Analysis
3.6.1. Data Processing
After collecting data from primary sources it was appropriately checked. In addition to that in-house
editing was made by the researcher to detect errors committed by respondents during completing
the questionnaires and interviews. The data analysis methods and tools are performed using
Microsoft Excel and SPSS software.
3.6.2. Data Analysis
The Relative Importance Index (RII) rank algorithm was applied for analytical purposes. This
approach was chosen because, by giving various elements weights and figuring out their RII scores,
it is possible to identify and rank the factors that contribute to project failure according to their
relative importance. Furthermore, percentages and frequency of analysis were employed. Excel and
SPSS statistical applications were utilized for this.
The statistical method used to analyze the data is relative importance index (RII). RII is a weighted
average of the ratings given to each element by respondents that is used to measure and rank the
significance and effect of the factors determining project failure and success. The RII has a value
between 0 and 1, with higher values indicating greater significance or effect of the components. The
following formula is used to compute the RII:
RII = (5n5 + 4n4 + 3n3 + 2n2 + n1) / (5N)
where n5 represents the number of respondents who rated a factor as extremely influential (5), n4
represents the number of respondents who rated a factor as influential (4), n3 represents the number
of respondents who rated a factor as moderately influential (3), n2 represents the number of
respondents who rated a factor as slightly influential (2), n1 represents the number of respondents
who rated a factor as not influential (1), and N represents the total number of respondents. The RII
is then used to rank the components in terms of importance and impact on project failure.
The variables ranked in table 4 and table 5 above have different importance as to the influence on
project failure. It is the result of analysis for the data obtained from DBE staff and borrower
respondents. The comparison of RII to identify which factors are most influential is determined
using the transformation matrix proposed by Chen et al. (2010) which categorizes RII result as
27
high (H) for results between 0.8 and 1.0, high (H-M) for results between 0.6 and 0.8 high to
medium (M) for results between 0.4 and 0.6 to medium (M-L) for results between 0.2 and 0.4 to
medium (L) for results between 0.0 and 0.2 to Low (see below table).
Table 2: transformation matrix table.
High (H)
High-Medium (H-M)
Medium (M)
Medium-Low (M-L)
Low (L)
0.8 < RII < 1.0
0.6 < RII < 0.8
0.4 < RII < 0.6
0.2 < RII < 0.4
0.0 < RII < 0.2
Source: Chen (2010).
3.7. Reliability Test Validity of Research Instrument
Following data collection, the relevant test statistics were used to assess the data's validity and
reliability. For this investigation, a construct composite reliability co-efficient (Cronbach alpha) of
0.7 or higher was deemed sufficient for all the constructs. Reliability coefficients of 0.7 and higher
are considered acceptable (Rousson, Gasser, and Seifer, 2002). The study instrument's
dependability was assessed using Cronbach Alpha. The study's Cronbach alpha value comes out to
be 0.78, which means that the outcome is highly suitable to proceed with the regression.
Authenticity
Carefully crafted, straightforward questions that make it simple for respondents to answer every
question will be used to establish the validity of the self-administered questionnaires and
interviews.
3.8. Ethical Consideration
The respondents in the study were assured of confidentiality of the information they provided. The
respondents were not required to write their names in the questionnaires or interview schedules. No
respondent was forced to participate except those that voluntary agreed to participate in the study.
The researcher maintained humility and conducted the research with utmost honesty avoiding
distortions and misleading data manipulation. The researcher also endeavored to arrive at
conclusions based on objective inferences that are purely and blindly.
28
CHAPTER FOUR: RESULT AND DISCUSSIONS
Introduction
This chapter focuses on presentation and discussion of data collected using questionnaire, document
analysis and interview. First, data that deals with respondent’s profile, including their current
position in the bank and project, their experience in the banking and project area, and their
educational qualifications will be presented. Next, document analysis and semi structured interview
result upon macro-economic factors, socio-political factors, failure associated to project specific
factors and credit management related factors discussed in detail
5.1.
Summary of the Respondents
There are two categories of respondents in this thesis bank staff and project staff. The total number
of bank staff is 58while the total number of projects is154.The researcher has classified the bank
staff by gender, education, marital status, age, work experience, and work experience with credit
area; and classified the project staff by sector, region, size, project life, total investment amount,
and status. Results are tabulated in a manner that shows the total number, sample size, sample
percentage, responsive number, and responsive percentage for each classification.
General characteristics of respondents from the bank side is summarized and presented in the
following tables.
Table 3: Gender characteristics of respondents from bank side
Population
Classification
1. Gender
Male
Female
Total
Number
2. Education
Diploma
Degree
29
Percentage
44
14
58
75.86%
24.14%
100.00%
1
17
1.72%
29.31%
Masters
Total
40
58
68.97%
100.00%
3. Marital Status
Married
Single
Widowed
Total
30
27
1
58
51.72%
46.55%
4. Age
25 years or less
Between 26-30 Years
Between 31- 40
Between 41- 50 Year
51 and above year
Total
2
17
22
13
4
58
5. Work experience
5 years or less
From 6-10years
From 10-16 Years
above 16 Years
Total
Source: Own survey
1.72%
100.00%
3.45%
29.31%
37.93%
22.41%
6.90%
100.00%
12
24
15
7
58
20.69%
41.38%
25.86%
12.07%
100.00%
Respondents of the study were asked to indicate their gender. As per the findings, majority of them
44 (75.86%) of them were male, while 14 (24.14%) were female.
Concerning educational background, out of the 58 samples 40 (68.97%) of the employees hold
master’s degree, 17(29.31%) of them BA degree, while the rest 1(1.72%) of employee holds
diploma indicating the fact that most of the employees are educated.
Understanding the number of respondents who got married or not, it is found out that out of the 58
samples 30 (51.72%) of them are married, 27 (46.55%) of them single, and 1(1.72%) is widowed.
Regarding age, 2 (3.45%)of the respondent fall within the age range of 25 years or less, and 27
(19.31%) of the respondent are between 26-30 years, 22 (37.93%) of them are between 31 -40, 13
(22.41%) of the respondent are between 41-50 years and also 4 (6.90%) of them are 51 and above.
This indicates that the age distribution of workers is not concentrated in just younger or adult age.
30
According to the data, worker’s year of experience shows that 12 (20.69%) of the respondent have a
work experience 5 or less than a year, and 24 (41.38%) of the respondent within 6-10 years,
and15(25.86%) of the respondent have work experience of within 10-16years,and lastly 7(12.07%)
of the respondent have work experience of above 16 years. This shows that most of the respondent
is experienced.
Again, the figures tabulated next show project staff respondents representing the total number of
projects/subjects numbering 250. The projects’ sector of engagement, location of establishment,
size, and periods of existence, total investment amount, and status is presented with the following
tables.
Table 4: Project characteristics
Characteristics
1. Sector
Agriculture
Manufacture
Agro- processing
Total
2. Region
Addis Ababa
Oromia
Total
3. Size
Small
Medium
Large
Total
4. Project life
3 Years
3-5 Years
5-10 Years
10-20 Years
Total
5. Total investment
less than 10 million birr
Number Percentage
31
95
28
154
20.13%
61.69%
18.18%
100.00%
51
99
154
34.42%
65.58%
100.00%
37
83
34
154
24.03%
53.90%
22.08%
100.00%
18
45
58
33
154
11.69%
29.22%
37.66%
21.43%
100.00%
16
10.39%
31
10-50 million birr
more than 50 million birr
Total
6. Status
New
Expansion
Total
Source: Own survey
104
34
154
67.53%
22.08%
100.00%
81
73
154
52.60%
47.40%
100.00%
According to the tabulated data above, the worker’s 95 (61.69%) of projects selected as a sample
are in the manufacturing sector, 31 (20.13%) of them in the agricultural sector, and 28 (18.18%) in
the agro-processing sector. This indicates that most of the projects financed by the bank are in the
manufacturing sector followed by agriculture and agro-processing. And most of these financed
projects, 99 (65.58), are located in Oromiya region whereas the rest 51 (34.42%) are located in the
capital Addis Ababa. Concerning the size of them, most of the projects numbering 83 (53.90%) are
medium sized, 37 (24.03%) are small sized, and the rest of the sample 34 (22.08%) are large sized
projects.
Projects, according to the data, have different period since their existence. 58 (37.66%) of the
samples are within five to ten years, 45 (29.22%) of them within three to five years, 33 (21.43%) of
them within ten to twenty years, and the rest 18 (11.69%) are three years. This indicates that most
of the projects’ life is longer. Regarding the total investment these projects are worth, it’s been put
in three different ranges, the largest majority i.e. 104 (67.53%) being a project worth of ten to fifty
million birr, 34 (22.08%) being worth of more than fifty million birr, and the rest 16 (10.39%) being
less than ten million birr indicating that most projects valued at high investment amount calling for
the utmost care to be given to prevent failure. Of these sampled projects, more than half of the
project financed are new numbering 81 (52.60%) out of 154 while the rest 73 (47.40%) are
expansion.
5.2.
Ranking of Causes of Project Failure
Based on Development bank of Ethiopia staff the survey data, the RII of the factors
affecting project failure are shown in Table 1. The table shows the factors, their ratings,
32
and their RII values in descending order.
Table 5: RII of the factors affecting project failure: Bank side data
Factors
RII
Inflation
0.893103
Corruption
0.872414
Exchange rate
0.851724
Due diligence
0.789655
Risk management
0.727586
Supervision
0.705263
Management problem
0.686207
GDP
0.651724
Interest Rate
0.627586
Rank
1
2
3
4
5
6
7
8
9
Source: Own survey, 2023
Table 6: RII of the factors affecting project failure: Borrowers side data
Factors
RII
Rank
Inflation
0.811350
1
Exchange rate
Corruption
0.809245
0.800697
2
3
GDP
0.746099
4
Interest Rate
0.686667
5
Due diligence
0.605333
6
Management problem
0.592278
7
Risk management
Supervision
0.565333
0.550667
8
9
Source: Own survey,2023
33
The two tables above show the Relative Importance Index (RII) of the factors affecting project
failure from the bank side and borrower side, respectively. The RII is a measure of the relative
importance of each factor in contributing to project failure. The RII values range from 0 to 1,
with higher values indicating greater importance. The tables also show the rank of each factor
based on its RII value.
In interpreting the RII values, the researcher used the transformation matrix table by Chen
(2010). The transformation matrix maps the RII values to a scale of High (H), High-Medium (HM), Medium (M), Medium-Low (M-L), and Low (L) based on the following ranges: High (H):
0.8 < RII < 1.0; High-Medium (H-M): 0.6 < RII < 0.8; Medium (M): 0.4 < RII < 0.6; MediumLow (M-L): 0.2 < RII < 0.4; and Low (L): 0.0 < RII < 0.2.
Consequently, inflation, corruption, and exchange rate factors are classified as High (H) on the
bank side. On the borrower side, inflation, exchange rate and corruption factors are classified as
High (H).This suggests that these three factors are the most important in contributing to project
failure from both the bank and borrower side.
Factors that are classified as Medium (M) on the bank side include due diligence, risk
management, supervision, management problem, GDP, and interest Rate whereas on the
borrower side, GDP and interest rate factors are classified as Medium (M). This suggests that
these factors are moderately important in contributing to project failure.
Factors that are classified as Medium-Low (M-L) on the borrower side include due diligence,
management problem, risk management, and supervision. This suggests that these factors are less
important in contributing to project failure from the borrower side.
Inflation is consistently ranked first demonstrating being the most influential factor on both the
bank side and borrowers’ side having an RII of 0.893103 and 0.811350, respectively. Both
values, according to Chen’s (2010) categorization, have a high level of influence indicating the
fact that inflation is the top dominant factor greatly impacting projects’ performance. Consistent
with this finding, Adamu (2013) and Daglas (2020) also identified inflation as the most critical
34
variable in defining projects’ performance. This is true because inflation increases the cost of
materials/services above estimated cost by the appraisal unit of the bank. This indicates that high
inflation rates can lead to increased costs of materials, labor, and financing, which can negatively
impact project viability and profitability. Inflation is considered highly important in the
organizational setting, indicating that it is a significant factor that DBE should closely monitor
and manage inflationary trends to mitigate its impact on financed projects’ financial performance.
This, on the other hand, means that the higher inflation will make borrowers struggle with rising
costs as a result of it narrowing their profit margin. This will eventually make them unable to
repay their loan properly. Inflation, in addition to the bank and the borrower, reduces consumer
purchasing power because since the financed project’s product will cost more than it did in the
past. This will lead a drop in consumer spending which again leads to lower demand to their
products and so lower sales revenues for the projects.
.
Corruption, the next most influential factor ranked second from the bank side and third from the
borrower’s side with RII value of 0.872414 and 0.800697, respectively, is "corruption”. The
values, despite having varying ranking, are both labeled as High project performance influencing
factor, based on the transformation matrix. Corruption is ranked within the top three on both
sides showing its significant impact. The study carried out by Derartu (2020), Alex (2018) and
Daglas (2020) also revealed similar finding concluding that DBE financed projects are highly
triggered to failure by corruption. This finding shows dishonest or unethical practices that
involve the misuse of power or authority for personal gain. Corruption can undermine project
implementation, hinder decision-making processes, and lead to misallocation of resources,
ultimately contributing to project failure. Corruption increases costs incurred in the
implementation of projects and their operation once implemented as it includes cost of the bribe
and the inflated unfair contract price. Projects DBE finances are influenced and fail as a result of
corruption because it, as several references indicate, leads to cost overruns, uncertainty
introduced by it, its eroding effect on purchasing power, its effect on contractual obligations, and
overall economic activities, all increasing the likelihood of projects failure.
Exchange rate is another important factor in affecting project failure, as it is ranked third in the
bank side and second in the borrowers’ side resulting in 0.851724 and 0.800697 RII values.Here
again, both are levelled as highly influential factors as per Chen’s categorization. The high level
35
of influence this factor has on project performance was also found to have similar result with the
study by Adamu (2013). The finding indicates the fact that projects financed by DBE use majorly
capital goods purchased from abroad. For this reason, exchange rate is highly influential factor in
project failure. This is another crucial factor that DBE needs to consider, as it can have a
significant impact on its financial performance and international transactions. It is an indicator
that exchange rate fluctuations can significantly impact on its operation. Exchange rate
fluctuations can have adverse effects on projects, especially those involving international
transactions. Unfavorable exchange rate movements can increase project costs, affect cash flows,
and create financial uncertainties, making it challenging to manage projects effectively.In
addition to this, owing to exchange rate increases, a project that seemed more economic and
feasible at the time of feasibility analysis or appraisal changes would change the entire
profitability of projects leading to failure.
These findings also mean that these projects’
competitive position was significantly affected.
Due diligence is reasonably important as indicated by the RII values 0.789655 from the bank
side and 0.605333 from the borrower’s side. What the finding tells is that both factors have high
to medium influence level, as per Chen (2010). However, despite having the same range in range
of influence categorization, due diligence is ranked fourth in the bank side analysis and sixth in
borrowers. This shows that due diligence assessment carried out by the bank does not
meticulously and thoroughly address all aspects about the borrowers. This can mislead the bank
and create the opportunity to advance a loan to a borrower who otherwise would not have been
eligible to take a loan. Such inaccuracies lead to have a client with non-creditworthy characters
and thus the project the bank financed is deemed to fail. Insufficient due diligence can result in
inadequate risk assessment, poor decision-making, and inadequate project planning, increasing
the likelihood of project failure. The study carried out by Adamu (2013) also revealed similar
finding concluding that DBE financed projects are triggered to failure by improper Due
Diligence assessment.
Risk management resulted with RII value of 0.727586 and 0.565333 from the bank side and
borrowers side responses. The first RII indicated that risk management has high to medium level
of influence whereas the borrower’s side RII value indicates a medium level of influence on
36
project failure, taking Chen’s (2010) classification into consideration. The study by Derartu
(2020)had shown related finding that poor risk management practices of the bank is influential in
affecting projects’ performance. This suggests that DBE is having less effective strategies that
involve borrowers to identify, assess, and mitigate risks that may affect their operations. This
factor is also related to the fact that DBE has failed to identify and analyze all potential risk areas
and their impact on financed projects. A problem associated with risk management is a factor that
causes problems in projects performance. Effective risk management is crucial for project
success. Inadequate risk identification, assessment, and mitigation strategies can expose projects
to various uncertainties and threats, leading to cost overruns, delays, and ultimately project
failure.
Supervision has a medium influence in project failure as per the RII result 0.705263 from the
bank side whereas the borrower’s side has RII of 0.550667. Chen (2010) identified the values to
be in a high to medium and a medium influence, respectively. This indicates that the supervision
activity of the bank is weak highlighting how lack of supervision by DBE will also weaken the
efficiency and productivity of financed projects, sooner or later ensuing errors and gaps in
handling budget and equity releases and schedule overruns. It is found out that proper
supervision and monitoring mechanisms are necessary for ensuring compliance, performance,
and accountability within the bank. This indicates that there is lack of guidance and direction,
poor decision-making, inadequate monitoring and control, lack of support to borrowers, poor
communication and collaboration all with the ability to impede progress, hinder decision-making,
and ultimately lead to project failure. Adequate supervision and monitoring of project activities
are essential to ensure compliance with plans, specifications, and quality standards. Inadequate
supervision can result in poor workmanship, deviations from project requirements, and
compromised project outcomes. Supervision was also found to be moderately influential (Daglas,
2020).
Management problems are considered to have high to medium level of influence on project
performance as the RII 0.686207from the bank side and 0.592278 from the borrower’s side
indicate, using Chen’s 2010 transformation. This indicates that DBE should address and resolve
any issues related to its management practices to ensure smooth operations. Addressing and
resolving management problems are crucial for the bank’s effectiveness. These management
37
problems, which were also supported via the finding by Adamu (2013), encompass a range of
issues, including ineffective leadership, poor decision-making, inadequate communication, and
lack of coordination. These problems can disrupt project progress, hinder problem-solving, and
negatively impact project outcomes.
Gross Domestic Product/GDP/ which represents the overall economic performance of the
country, is considered to have high to medium level of influence on project performance as the
RII 0.651724 from the bank side and High level of influence from the borrower’s side with RII of
0.746099 indicate, using Chen’s 2010 transformation. This suggests that DBE should consider
economic indicators when making strategic decisions. This indicates the fact that monitoring and
considering the overall economic performance, as represented by GDP, is important for the bank
to make informed strategic decisions. This maybe indicated by reduced demand for the projects’
products during periods of low GDP growth, market instability, funding constraints, and the like
affecting projects’ performance negatively. A weak or declining GDP can indicate an
unfavorable business environment, reduced investment opportunities, and limited financial
resources, which can contribute to project failure.
Interest Rate, having RII 0.627586 from the bank side and RII 0.686667 from the borrowers
side is obtained which, as per Chen, indicate that interest rate of the bank has a high to medium
influence on projects’ failure as it can impact borrowing costs and investment returns,
influencing borrowers’ financial health which finally prompts project failure. Here again, Adamu
in his 2013 study indicated that interest rates influence the cost of borrowing and financing for
projects. Higher interest rates can increase project costs, affect cash flow, and make it more
challenging to secure funding, potentially leading to project failure. The study carried out by
Adamu (2013), also revealed similar finding concluding that DBE financed projects are highly
triggered to failure by Interest Rate.
Overall, the results suggest that inflation, corruption, and exchange rate are the most important
factors contributing to project failure from both the bank and borrower side. This information can
be used to inform policies and practices aimed at reducing project failure rates in the future.
38
On the other hand, the secondary data analysis made about which sector of investment is
experiencing more failure taking into account three years of data from 2021 to 2023revealed that
the year 2021 and 2022 were dominated by project failure incident from primarily agricultural
sector followed by the manufacturing and agro-processing, sequentially.
The year 2023, up until this data had been collected, also exhibited occurrences of project failure
with agricultural sector still being ahead, the agro-processing sector coming forward leading the
manufacturing sector. Agro-processing was better than the manufacturing sector in the previous
two years but fall off in its credit performance in 2013.The manufacturing sector, same with the
year 2021 but contrary to the year 2022,came at three in suffering from project failure.
It is quite clear that agricultural sector has particularly been experiencing the greater project
failure in the entire span of years considered. The other two sectors were also in distresses, the
manufacturing sector with relatively better performance in 2023 and the agro-processing sector
with a relatively worse performance in the latest year 2023.
The presentation and discussion of findings made so far is the result of the survey made through
standard questionnaires. The next discussion is made out of the interview with the DBE staff.
The interview result is presented in a collective form since several of the responses were
essentially alike and in brief to make the discussion more concise and comprehensible for
readers.
Several of the interviewees indicated that macro-economic factors, such as, in addition to the
factors responded via the questionnaire,the existence of rivalry; market problem, and economic
growthhave put influence on projects’ performance, the first two having a negative impact and
eventually leading projects to failure.
Of the socio-political factors prompting projects’ failure, political instability, low productivity of
labors, unfulfilled of infrastructure and utility, government interference, running of projects below
the required number of manpower, and educational background are important influences.
39
Project specific factors thought to be influencers in projects performance and critical in causing
failure, according to the interviewees, include existence of missed items, and longtime taken in
implementation, management failure, shortage of raw material, diversion of fund into unintended
purpose, lack of well-though out business plan, conflict between shareholders in case of PLC and
SC and spouse in sole proprietorship, under estimation of complexity of projects, cash flow over
estimation and the occurrence of losses due to failure to buy insurance.
As per the interview data collected and transcribed for analysis, credit management related factors
that influence performance of a project are several. Weak project performance eventually leading to
default, according to the data with regard to credit management, usually happens as a result of poor
supervision, follow-up, and inspection by the bank, improper due diligence assessment report or
KYC, delay in disbursement of loan and equity by the bank, changing the bank policy and
procedure from time to time.
40
CHAPTER FIVE:
CONCLUSION AND RECOMMENDATION
5.2.
Conclusion
This study focused on identifying and analysing factors that influence projects performance
financed by Development Bank of Ethiopia, taking South West Addis Ababa district as a case.
The study sought to examine the influences of macro-economic factors, socio-political factors,
project specific factors and credit management related factors on the relative importance of the
factors for failure of projects financed by the Development Bank of Ethiopia. In order to carry out
the study, 154 sample subjects were determined using a formula from which respondents were
selected through stratified and simple random sampling. Data was collected using a standardized
questionnaire and interview for selected management level respondents from the bank. The
collected data was analysed using Relative Importance Index. As per the findings:
Inflation is consistently ranked as the most influential factor on both the bank side and borrowers’
side, indicating its significant impact on project failure. Inflation, one of the macro-economic
factors, has been found to be the most and the first factors influencing projects’ performance
typically instigating projects failure because the selling price of machineries and raw materials
increase as the prices of goods and services inflate in the world, including Ethiopia.
Exchange rate is another important factor affecting project failure, as it is ranked within the top
three on both sides. Exchange rate, the other macro-economic factor is also found to be most
influential in shaping projects’ performance in that projects’ depend on the country’s exchange rate
for its import demand for manufacturing items and raw materials.
Corruption is also consistently ranked high on both sides, suggesting that it is a critical factor
contributing to project failure. Corruption is a critical concern for DBE and so implementing robust
anti-corruption measures and promoting ethical practices are essential to maintain integrity and
trust. Corruption is the other most influential variable that is found to be a factor in influencing
41
DBE financed projects’ failure. It is understood that as the corruption level increases, as it is
typically the case, the more likely that projects are expected to fail. This has got to do with several
stakeholders involved in the line of projects implementation and operation.
The rest of the factors including due diligence, risk management, and supervision are factors that
are consistently ranked lower on both sides, relative to the top three, indicating their relatively
lesser impact on project failure. However, they are still found to be significantly influential as well
but to a lesser extent than the three mentioned above. This doesn’t mean they are worth less
attention than the three. It is about prioritization on which factor needs an urgent resolution and
which can follow.
On the other hand, other than the findings through the questionnaire, the interview result relived
that in addition to the three most influential factors namely inflation, exchange rate, and corruption,
shortage of working capital, marketing problem, political instability, shortage of raw material, poor
supervision follow-up and inspection by the bank, improper due diligence assessment or KYC,
delay in disbursement of loan and equity by the bank to be significant are influential factors leading
to project failure.
5.1.
Recommendation
The recommendation the researcher provides is based on the findings taking into account the factors
impact not just over project’s failure itself but on the bank’s mandate to handle the issue as well.
So, in order to improve the situation whereby the three factors i.e. inflation, exchange rate and
corruption are major and influential reasons, it is recommended that DBE addresses these factors in
its lending practices.
Specially, immediate measures should be taken to mitigate inflation, manage exchange rate risks,
and combat corruption. Moreover, attention should be given to factors such as GDP, interest rates,
due diligence, management problems, risk management, and supervision, as they also contribute to
the overall borrowers’ experience and projects performance. By addressing these factors, DBE can
enhance its lending processes and better meet the needs of borrowers while lowering the probability
of projects’ failure.
42
Regarding inflation, the bank together with concerned organs for that matter, should mitigate the
impact of inflation by implementing strategies such as inflation hedging or cost control measures
to minimize its negative effects on project outcomes.
The bank should also strengthen anti-corruption measures and promote transparency in project
operations to reduce the risk of corruption-related failures.
Concerning exchange rate, the bank should be monitoring and managing exchange rate
fluctuations effectively to minimize their adverse effects on project viability and maintaining
competitiveness and financial stability. DBE should prioritize efforts to prevent and address
corruption within its operations.
While due diligence, risk management, supervision and the rest are ranked lower than the three, it
is still important to maintain their standards and ensure they are adequately addressed to mitigate
potential risks.
The bank should enhance its due diligence practice by digitizing and automating the due
diligence processes, for instance, by creating a comprehensive digital strategy for regulatory
compliance and reporting. This assessment shall also be performed with all possible means to
accurately know the customer and its background in borrowing and business background.
Effective risk management should be planned and carried out with adequate risk identification,
assessment, and mitigation strategies incorporated. The bank should make sure that the risk
management process is designed and capable of disclosing all uncertainties and threats in detail.
Regarding supervision, it is recommended that the make sure that its employees engaged in the
supervision work of financed projects are capable of establishing and maintaining honest and
close relationship with the staff of the borrower as the relationship, once developed to a good
mutual understanding, can encourage the borrower and its staff reveal the existence of threat or
any other difficulties. In addition to that, the bank should adequately supervise and monitor
activities of financed projects to make sure that the everything is as per the contract agreement
entered between the two parties there by ensuring that plans, specifications, and quality standards
43
are in compliance.
With respect to management problems, it is recommended that the bank make sure the project is
run and administered by leaders with effective decision-making and coordination skills. The bank
shall also ensure that the preject management aspects of financial activities after the project is
financed, project planning, leading, and controlling activities are managed by advanced system,
competent managers, and professionals.
The bank shall be aware of the timings where weak or declining GDP is occurring and manage its
lending practice. Managing lending practices during times of declining GDP requires, among
others, a combination of prudent risk management, portfolio diversification, flexibility in loan
restructuring, tightened credit standards, cost control and efficiency improvement, and proactive
adaptation to changing circumstances. By implementing these strategies, the bank can navigate
challenging economic conditions more effectively.
Regarding interest rates, the bank should work with borrowers to closely understand their unique
needs and financial circumstances, conduct a thorough risk assessment of the project before
offering financing, monitor and support the progress of the financed projects, and offer borrowers
ongoing support, such as regular financial reviews, performance evaluations, and help putting
risk management strategies into practice. Banks can assist in identifying and quickly resolving
any concerns connected to interest rate swings by being active throughout the project lifecycle.
Aligned with the above recommendation, the following additional recommendation shall be
considered by the concerned in order to reduce project failure.

DBE, apart from strategies that may be exercised by the government/ National Bank of
Ethiopia/ such as monetary and fiscal policies, can enhance supply-side of the economy by
enhancing productivity and reducing bottlenecks in the production process which will
finally reduce inflationary pressures.

The bank can also employ strategies to promote export oriented projects to benefit from the
44
increasing exchange rate. This is because, contrary to the fact that projects will definitely get
hurt from the increased import prices as a result of increased exchange rate as there is no
stronger domestic currency, the weaker currency can boost exports and economic
competitiveness in the international market.

It is important to create awareness about the negative impact of corruption on project failure.
This can be done by educating stakeholders about the risks of corruption and how to prevent
it. It is also important to establish effective anti-corruption measures and to enforce them
rigorously. By doing so, we can help ensure that projects are completed successfully and
that resources are used efficiently.

DBE shall be actively working on promoting research and development to find solutions for
inflationary impacts, exchange rate variation drives, and corruption related hindrances to
effective implementation and operation of projects.

Upon the intervention of political leaders on projects, the bank as well the project promoter
should create awareness upon the contributions of the project to the community.

DBE has to incorporate in its appraisal study which shows the amount of foreign currency
required for a project and pre-plan the source of foreign currency required annually. The
total foreign currency requirement should be planned along with the Bank’s annual
operational plan.

Regarding marketing, banks must participate in search Target the market for project
products by further consulting the developer by appointing people to carry out the credit
process who are well-trained and experienced in marketing or form a marketing advisory
group.

The bank can solve the shortage of raw material. It would be better if the bank entered into a
contract with the suppliers to supply them with raw materials.
45

The Bank’s follow up reports should also clearly show any cost and schedule variances.

The Bank should design appropriate mechanism to check that clients coming to the Bank in
request for project loans have the required equity contribution at hand so that they will
contribute the equity immediately after loan contract signing and get into projects
implementation.

The fact that project failure is highly observed to occur in projects engaged in agricultural
sector triggers the question of why? In addition to this sector, the other two sectors
considered in the analysis, manufacturing and agro-processing, also are questionably
performing as they have also encompass failed projects, specifically the agro-processing
sector, taking our current context into account. Therefore, it is recommended that more
scientific and rigorous research with project management and risk assessment issues being
the focal point be carried out in the future.
46
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Daglas Teferi (2020).Investment Projects Failure by DBE. Thesis submitted to Saint Mary
University School of Graduate Studies
Muthoni, M. I., Mwangi, L. W., & S. M. (2020), Credit management practices and loan
performance. International Journal of Current Aspects in Finance, Banking and Accounting,
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49
Appendix-1
YOM POSTGRADUATED COLLEGE
DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION
Dear Valued Respondent
Questionnaire to be filled by the Bank Clients
First thanks for your time and voluntariness to fill questionnaire for the purpose of academic
research on Determinants of failure for projects financed by Development Bank of
Ethiopia; a case study in South West Addis Ababa district, Since your responses are
crucial effect on the research result to be reliable, please try to reply carefully as per the
intention of each question and be sure that your responses are keeping confidentially. Thus, be
confident and fill the questions according to the instructions. You can choose more than one
for each of the question.
Directions
• No need to write your name,
• If you have any question, please contact me on 0912185654.
BORROWER'S CHARACTERISTICS
1. What is the sector of your project?
agriculture
Manufacture
mining
Agro- processing
construction
sector of your project
2. What is the region of your project?
Addis Ababa
Oromia
region of your
project
3. What is the size of your project?
small
medium
large
size of your
project
4. What is the life cycle time of your project? (re-payment period)
3 Years
3-5 Years
5-10 Years
life cycle time of
your project
5. What is the total investment of your project?
less than 10 million birr
10-50 million
birr
total investment
6. What is the status of your project?
New
Expansion
Status of your
project
50
more than 50
million birr
10-20 Years
2: project failure related questions
1. To what extent do you think the following factors influenced the failure or success of your project?
(Please rate each factor on a five-point Likert scale ranging from 1 (not influential)2 (slightly
influential) 3(moderately influential) 4 (influential) and 5 (very influential))
not
slightly
moderately
influential
influential
influential
1
2
3
Macro-economic Factors
Inflation
Exchange rate
Interest rate
GDP growth
Socio-political factors
Corruption
Project specific Factors
Regulation
Due diligence assessment
report or KYC
Bank’s credit management system
Supervision
Risk management
51
influential
very influential
4
5
Appendix-1
YOM POSTGRADUATED COLLEGE
DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION
Dear Valued Respondent
Questionnaire to be filled by the Banks managers and other expertise
First of all let me thank you for sharing your time and information with me. Currently, I am
pursuing my Masters (MA) program at the department of business administration, my research is
entitled Determinants of failure for projects financed by Development Bank of Ethiopia. Your kind
cooperation in giving me and/or my research assistants an interview is highly appreciated. I want to
assure you that the information you give me will be completely confidential and will be used
exclusively for our study, and I will not be taking down your name so your answers will be
anonymous.
Directions
• No need to write your name,
• If you have any question, please contact me on 0912185654
I: Demographic Information
PART I: Demographic Information
1. Sex:
Male
2. Age: 25 years or less
Female
Between 26-30 Years
Between 41- 50 Year
51 and above year
3. Marital status : Married
4. Education Level :
Between 31- 40
Single
Diploma
5. Work Experience : 5 years or less
Divorced
Degree
Masters
From 6-10years
16 above Years
52
Widowed
From11-15 year
Work Experience with Credit Area:-2 years
from 2-5 Years
more than 5 years
2: project failure related questions
1. To what extent do you think the following factors influenced the failure of project? (Please rate
each factor on a five-point Likert scale ranging from 1 (not influential)2 (slightly influential)
3(moderately influential) 4 (influential) and 5 (very influential))
not
slightly
moderately
influential
influential
influential
1
2
3
Macro-economic Factors
Inflation
Exchange rate
Interest rate
GDP growth
Socio-political factors
Corruption
Project specific Factors
Regulation
Due diligence assessment
report or KYC
Bank’s credit management system
Supervision
Risk management
53
influential
very influential
4
5
PART 3 : Interview on Determinants of failure for projects financed by Development Bank of
Ethiopia South West Addis Ababa District;(For The District managers )
 Would you Please tell me determinants of failure for projects financed by DBE projects South
West Addis Ababa Districts?
 From your point of view, which of the ones you mentioned would mainly or predominantly
determines the failure of the project;
 Would you please tell me the impact of project failure in the case of projects financed by DBE
projects South West Addis Ababa Districts?
 According to your observation, which sector is the most likely to face project failure? Please
list out in descending order.
54
 What is your contribution or what kind of support do you provide before the projects are
failed?
 What are the possible solutions or Recommendations do you think would prevent project
failures?
55
Frequency Table for client
Inflation
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
83
32
0
22
13
5
4
3
2
1
Rate*Frequ
ency(a)
415
128
0
44
13
600
Sample
size*Highes
t rate(b)
c=a/b=R
II
750
0.8
Sample
size*Highes
t rate(b)
c=a/b=RII
750
0.792
exchange rate
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
75
34
13
16
12
5
4
3
2
1
Rate*Frequ
ency(a)
375
136
39
32
12
594
Interest Rate
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
62
19
12
36
21
56
5
4
3
2
1
Sample
Rate*Frequ size*Highes
ency(a)
t rate(b)
c=a/b=RII
310
76
36
72
21
515
750
0.68667
GDP
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
54
26
40
11
10
5
4
3
2
1
Rate*Frequ
ency(a)
270
104
120
22
10
526
Sample
size*Highes
t rate(b)
c=a/b=RII
750
0.70133
Corruption
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
69
34
13
13
19
5
4
3
2
1
Sample
Rate*Frequ size*Highes
ency(a)
t rate(b)
c=a/b=RII
345
136
39
26
19
565
750
0.75333
Regulation
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
9
49
43
25
24
Sample
size*Highes
t rate(b)
c=a/b=RII
750
0.592
Sample
Rate*Frequ size*Highes
ency(a)
t rate(b)
5
150
c=a/b=RII
5
4
3
2
1
Rate*Frequ
ency(a)
45
196
129
50
24
444
Due diligence
Valid
Very influence
Frequency Rate
30
57
Influence
moderately Influence
slightly influence
not influence
Total
40
16
32
32
4
3
2
1
160
48
64
32
454
750
0.60533
Sample
size*Highes
t rate(b)
c=a/b=RII
750
0.55067
Supervision
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
20
32
29
29
40
5
4
3
2
1
Rate*Frequ
ency(a)
100
128
87
58
40
413
Risk management
Valid
Very influence
Influence
moderately Influence
slightly influence
not influence
Total
Frequency Rate
20
40
21
32
37
58
5
4
3
2
1
Sample
Rate*Frequ size*Highes
ency(a)
t rate(b)
c=a/b=RII
100
160
63
64
37
424
750
0.56533
Frequency Table for Staff
Inflation
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
36
5
180
16
4
64
4
1
1
3
2
1
12
2
1
259
c=a/b=RII
750 0.345333333
Exchange rate
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
30
5
150
18
4
72
6
3
1
3
2
1
18
6
1
247
c=a/b=RII
750 0.329333333
Interest rate
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
8
5
40
18
4
72
9
20
3
3
2
1
59
27
40
3
c=a/b=RII
Total
182
750 0.242666667
GDP
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
10
5
50
17
4
68
15
10
6
3
2
1
45
20
6
189
750
c=a/b=RII
0.252
Corruption
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
30
5
150
24
4
96
0
3
1
3
2
1
0
6
1
253
c=a/b=RII
750 0.337333333
Regulation
Valid
Very influence
Influence
moderately
Influence
slightly influence
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
9
5
45
29
4
116
7
4
3
2
60
21
8
c=a/b=RII
not influence
Total
9
1
9
199
750 0.265333333
Due diligence
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
23
5
115
17
4
68
13
2
3
3
2
1
39
4
3
229
c=a/b=RII
750 0.305333333
Supervision
Valid
Very influence
Influence
moderately
Influence
slightly influence
not influence
Total
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
9
5
45
33
4
132
3
3
9
3
2
1
9
6
9
201
750
c=a/b=RII
0.268
Risk management
Valid
Very influence
Influence
moderately
Influence
slightly influence
Sample
size*Highest
Frequency Rate
Rate*Frequency(a) rate(b)
10
5
50
34
4
136
5
1
3
2
61
15
2
c=a/b=RII
not influence
Total
8
1
62
8
211
750 0.281333333