Practice and Challenges of International Banking Services in Ethiopia

International trade exposes the trading partners to various difficulties and risks due to the physical distance between parties, different time zones and currencies different legal rules applicable to the transaction as well as the fact that the parties may not generally know each other. Banks facilitate international commerce through a variety of products which include managing their international payments, mitigating the risks, and providing working capital. The research, a descriptive study using the survey method, assesses the trade service practices of selected Ethiopian private commercial banks in order to identify problems, expose any malpractices, indicate instances of non-compliance with international standard banking practices, shed light on risk areas, and identify knowledge gaps among the bank staff. From the research it has been found that, most of the banks do not automatically affect payment to the remitting bank after releasing the shipping documents sent on documentary collection basis. In addition, it can be concluded that most banks do not make a rigorous assessment of the creditworthiness of the importer and the marketability of the consignment.