Background of the Study

Commercial banks serve as crucial entities in the economic resource allocation of countries by
facilitating the transfer of funds from depositors to investors. According to Gangal (2013), these
financial institutions gather surplus funds from depositors and provide loans to those in need of
financial resources. Access to banking services, as noted by Uremadu (2002), not only enhances
the quality of life within a society but also contributes to the overall economic development
agenda of a country.

The African Development Bank's 2013 report revealed that only 23% of Africans held bank
accounts, in stark contrast to the 89% in high-income countries. This discrepancy underscores
the necessity of bolstering financial inclusion among unbanked populations. Consequently, the
National Bank of Ethiopia has formulated a strategy to encourage all commercial banks to
expand their branch networks, aiming to reach these underserved segments of society. In today's
rapidly evolving and fiercely competitive landscape, the success of the banking industry hinges
not only on the expansion of physical branches but also on the adept utilization of suitable
technology.

Technological innovations, as confirmed by Gardachew (2010), play a pivotal role in the

banking industry by delivering value to both banks and customers. These innovations enable
customers to conduct banking transactions without the need to visit a physical branch. A notable
example of such innovation is mobile banking, which has transformed banking operations
through the use of mobile devices. According to Huili and Chunfang (2011), mobile banking is
essential for attracting modern customers, reducing transaction costs, generating revenue from
service fees, introducing new service channels, and catering to future customer needs. It provides
customers with time flexibility, convenience, promptness, and cost savings.

However, despite these advantages, the utilization of mobile banking services remains lower than
anticipated in both developed and developing economies (Agwu, 2012). Agwu also highlighted
that mobile phones and their applications are still underutilized and lag behind other electronic
banking alternatives such as ATMs and internet banking. The widespread adoption and extensive
use of mobile telephones have not been proportional to the adoption and usage of mobile
banking. Consequently, the use of mobile banking is influenced by a multitude of factors, as
indicated by studies from Solomon et al. (2014), Oluoch (2012), and Abebe (2016). These
factors include perceived usefulness, perceived ease of use, perceived risk, limited computer and
technological skills, as well as environmental and organizational factors. Additionally, as
identified by Kalkidan (2016), factors such as relative advantage, compatibility, perceived trust,
perceived usefulness, and perceived risk significantly influence the adoption of mobile banking
in Ethiopia.

Mobile money services (MMS) have experienced rapid growth in developing countries, allowing
for greater financial inclusion through the use of mobile phones for banking services. This
expansion has been facilitated by the integration of mobile money services into the offerings of
commercial banks. Such integration aims to provide banking services to unbanked and
underbanked populations by leveraging the widespread use of mobile phones.

Mobile money services address the need for greater financial inclusion, particularly in regions
with limited access to traditional banking infrastructure. The adoption of MMS has transformed
the financial landscape, offering unprecedented convenience and accessibility, especially in
emerging markets. These services enable users to perform various financial transactions via
mobile phones, including money transfers, bill payments, and purchasing goods and services.
Integrating mobile money services into the banking sector has the potential to enhance financial
inclusion, reduce transaction costs, and improve the efficiency of financial services delivery.

The adoption and usage of these services are influenced by various determinants, which vary
across different contexts and regions. Challenges to mobile money services adoption include
improving service quality, attracting and retaining more customers, and reducing reliance on
cash. Several factors, such as technological, individual, organizational, and environmental
factors, influence the adoption of mobile money services in commercial banks.

The rise of digital technologies has modernized the financial sector, with mobile money banking
service systems becoming essential for up-to-date banking processes. Commercial banks are
progressively embracing these systems to offer convenient, 24/7 access to a wide range of
financial services. This shift has been driven by factors such as customer demand, competition,
technological advancements, and the regulatory landscape.

E-banking, also known as electronic banking or online banking, has become a vital part of the
modern banking system, allowing customers to conduct various banking transactions over the
internet. The extensive implementation of e-banking has altered the way clients interact with
banks, offering accessibility and convenience, but also presenting challenges and opportunities
for commercial banks.

Recent studies have explored various aspects of mobile money service adoption in commercial
banks, highlighting the influence of security concerns, perceived risk, digital literacy, and
financial education. Additionally, the COVID-19 pandemic has accelerated the adoption of
digital financial services, including mobile money, as people seek contactless and convenient
banking solutions.

The adoption of mobile money services at the Cooperative Bank of Oromia S.C. (COOP) in
Ethiopia reflects the broader trend of increasing mobile financial services in the region. COOP
has integrated mobile money services through its platform, COOPay-Ebirr, in collaboration with
a fintech company, providing convenience and accessibility, especially for customers in rural
areas. The bank also launched the Coopay App, an omni-channel platform that enhances the user
experience by integrating web portals and mobile applications, aiming to increase financial
inclusion, particularly among underserved populations.

Understanding the determinants of mobile money service adoption in commercial banks is

crucial for designing effective strategies to promote their usage. By addressing the technological,
individual, organizational, and environmental factors, banks can enhance the adoption and
utilization of mobile money services, contributing to greater financial inclusion and improved
financial service delivery. Therefore, the researcher will explore various determinants that
influence the adoption of mobile money services at COOP Bank in Harar Administration.

Statement of the Problem

The widespread adoption of mobile money services has emerged as a catalyst for advancing
financial inclusion, particularly in emerging markets (Zhang & Wang, 2022). However, the
utilization of mobile money services varies significantly across regions and demographics,
resulting in unequal access to financial resources and economic empowerment.

Numerous studies have delved into the factors that affect the adoption of mobile money services.
These include issues such as lack of trust and security concerns (Zhang & Wang, 2022; Mhlanga
& Mpofu, 2023), limited digital literacy (Bon & Akkermans, 2023; Kintu & Muwonge, 2022),
infrastructure constraints (Aker & Mbiti, 2023; Olabisi & Alabi, 2023), as well as regulatory and
policy barriers (Evans & Pirzada, 2022; Suri & Jack, 2022). Furthermore, socioeconomic factors
(Demirgüç-Kunt & Klapper, 2022; Asongu & Nwachukwu, 2023) and the accessibility and
usability of services (Tarhini & Hone, 2022; Nkwe, 2023) have also been identified as influential
in the adoption of mobile money services. Ultimately, these studies have established that the
subsequent adoption of mobile money services can significantly impact the performance of
various industries.

Thise study aims to address the varying adoption rates of mobile money services within the
scope of commercial banking in Ethiopia. Despite the transformative potential of mobile money
services in enhancing financial inclusion, significant disparities exist in adoption rates across
different regions and demographic groups, leading to discrepancies in financial accessibility and
economic empowerment. The identified factors contributing to the adoption of mobile money
services include trust and security concerns, limited digital literacy, infrastructure constraints,
regulatory and policy barriers, as well as socioeconomic factors and service accessibility and
usability. The study identified these factors as being critical in influencing mobile banking
adoption in Ethiopia, emphasizing the significance of perceived usefulness, perceived ease of
use, attitude towards technology, and security/privacy as particularly essential.

Previous research has largely focused on individual aspects of mobile money adoption, such as
trust, perceived usefulness, ease of use, and awareness. Limited comprehensive studies have
examined the combined influence of technological, individual, organizational, and environmental
factors on the adoption of mobile money services in the context of commercial banking,
particularly within the Cooperative Bank of Oromia in Harar.
The study aims to provide a comprehensive understanding of the various factors influencing the
adoption of mobile money services among customers of the Cooperative Bank of Oromia in
Harar City. By addressing these research questions and objectives, the study will offer valuable
insights for the bank to develop effective strategies to promote the usage of mobile money
services, thereby enhancing financial inclusion and service delivery.

In conjunction with this aim, the study will bridge the gap in current research by undertaking an
examination of the adoption of mobile money services within the context of the Cooperative
Bank of Oromia in Harar City. By analyzing the crucial determinants of mobile money adoption
within this specific commercial banking setting, the study will shed light on the factors affecting
adoption rates and contribute to the development of effective strategies to promote the usage of
mobile money services.

Research questions

The primary focus of this research is to investigate the determinants affecting the adoption of
mobile banking (Coopay) in the Cooperative Bank of Oromia in Harar Branch’s. In pursuit of this
primary goal, the study will explore the following specific questions:

1. To what extent does the perceived risk of mobile banking influence its adoption at the
Cooperative Bank of Oromia?
2. How do organizational factors impact the adoption of mobile banking within the
Cooperative Bank of Oromia?
3. In what ways does the external environment influence the adoption of mobile banking at
the Cooperative Bank of Oromia?
4. Is the perceived ease of use of mobile banking a significant determinant for its adoption
within the Cooperative Bank of Oromia?
5. Does the perceived usefulness of mobile banking act as a determinant for its adoption at
the Cooperative Bank of Oromia?
6. What are the primary challenges that hinder the adoption of mobile banking within the
Cooperative Bank of Oromia?
Objectives of the Study

General Objective

The primary aim of this study is to identify the determinants for the adoption of mobile banking
within the context of the Cooperative Bank of Oromia.

Specific Objectives

The specific objectives of the study are as follows:

 To establish the relationship between perceived risk and the adoption of mobile banking.
 To investigate the potential correlation between organizational factors and the adoption
of mobile banking.
 To determine the link between environmental factors and the adoption of mobile banking.
 To assess the association between perceived ease of use and the adoption of mobile
banking.
 To examine the relationship between perceived usefulness and the adoption of mobile
banking.
 To evaluate the obstacles that have an impact on the adoption of mobile banking in the
Cooperative Bank of Oromia.

Research Hypothesis

The study will test the following research hypotheses:

1. H0: Perceived risk has no negative effect on the adoption of mobile banking.

H1: Perceived risk has a negative effect on the adoption of mobile banking.

2. H0: Organizational factors have no positive effect on the adoption of mobile banking.
 H1: Organizational factors have a positive effect on the adoption of mobile banking.

3. H0: Environmental factors have no positive effect on the adoption of mobile banking.

H1: Environmental factors have a positive effect on the adoption of mobile banking.

4. H0: Perceived ease of use has no positive effect on the adoption of mobile banking.

H1: Perceived ease of use has a positive effect on the adoption of mobile banking.

5. H0: Perceived usefulness has no positive effect on the adoption of mobile banking.

H1: Perceived usefulness has a positive effect on the adoption of mobile banking.

Significance of the Study

The outcomes of this research are valuable for multiple stakeholders. They can assist the
Cooperative Bank of Oromia in recognizing the determinants of Coopay mobile banking services
and in formulating effective strategies for delivering banking services through Coopay mobile
banking. Additionally, the findings can benefit the National Bank of Ethiopia by providing
insights into the key factors influencing mobile banking adoption, thus aiding in the development
of appropriate policy tools. This study contributes to the expansion of knowledge in the banking
industry and serves as a key source of information.

Scope of the Study

While there are various electronic banking channels such as ATMs, POS, internet banking,
mobile banking, and agent banking, this study specifically focuses on the determinants of
Coopay mobile banking at the Cooperative Bank of Oromia, specifically within Diredawa city.
Geographically, the study is limited to customers of the Cooperative Bank of Oromia within
Diredawa city. Conceptually, the study is confined to identifying the determinants of Coopay
mobile banking within this specific context.

Organization of the Study

The content of this research will be organized into three chapters. The first chapter includes the
introduction, comprising the background of the study, statement of the problem, research
questions, study objectives, significance of the study, scope of the study, and definition of terms.
This is followed by the literature review (chapter two), which analyzes existing literature in the
field to develop new concepts to be tested in this research. Chapter three outlines the research
methodology used to achieve the research objectives within the context of Harar city.
CHAPTER TWO

LITERATURE REVIEW

This chapter reviews the literature on mobile banking and determinants of mobile banking
adoption factors. Specifically, the chapter addresses the theoretical framework, definition of
terms, empirical literature and conceptual framework guiding the study.

2.1. Theoretical Literature on Mobile Banking

2.1.1. Concept and Definition about Mobile Banking

Adoption: Adoption in the context of mobile banking means acceptance, being able to accept a
new technology as it is introduced and by accepting the service means a customer willing to use
the service. If a customer chooses to adopt mobile banking service, Mallat et al (2004) explained
that they will be able to obtain and interact with mobile services anytime and anywhere which in
turn initiate great value for them. Cruz et al (2010) and Dasgupta et al (2011) also suggested that
if one adopted this service it had great potential to provide reliable services to anyone in any
location even those limited by facilities.

Customer A customer is an individual who uses a service whereas in this context it means an
individual that uses mobile banking services.

Mobile Banking: is defined as “The availability of bank-related financial services via mobile
devices. It comprises services in the field of accounting, brokerage and financial information
(Tiwariet al., 2006). Mobile banking is an electronic banking system which allows customers to
get access to their bank accounts via telecommunication networks, website of the bank (internet)
and smart phone applications. The service offered when using mobile banking is such as
withdrawal, deposits and bill payments. The offered services may include transaction facilities as
well as other related services that cater primarily to informational needs revolving around
financial activities. Mobile banking can offer specific services such as, account information, mini
statements, checking of account history, alerts on account activity, access to loan statements,
access to card statements, mutual funds (equity statements, stop payment on cheque, ordering
cheque books, balance checking in the account.

2.1.2. Mobile Banking Benefits

Mobile banking has transformed the way people in the developing world transfer money and
now it is poised to offer more sophisticated banking services which could make a real difference
to people's lives. bank statements and other crucial banking tasks, all in real time over their
mobile phones. Mobile banking brings significant benefits to customers and banks in this regards
the following Mobile banking benefits:

Time saving: Instead of allocating time to walk into a bank, you can check account balances,
schedule and receive payments, transfer money and organize your accounts when you‟re on the
go.

Convenient: The ability to access bank accounts, make payments, and even track investments
regardless of where you are can be a big advantage Do your banking at a time and place that suits
you, instead of waiting in queues.

Secure: Generally, good mobile banking applications have a security guarantee or send you a
SMS verification code you need to input to authorize a payment for added security. Mobile
banking is said to be even more secure than online/internet banking.

Easy access to your finances: with the introduction of mobile banking, you are able to access
your financial information even beyond the working hours. It helps to avail banking services
even by making a call to the bank.

Increased efficiency: mobile banking functions are functional, efficient and competitive. It also
helps in decongesting the banking halls and reduces the amount of paperwork for both the banker
and the customer
Fraud reduction: one very real advantage to implementing mobile banking. “Customers are
being deputized in real time to watch their accounts.

It utilizes the mobile connectivity of telecom operators and therefore does not require an internet
connection. You can check your account balance, review recent transaction, transfer funds, pay
bills, locate ATMs, deposit cheques, manage investments, etc. Mobile banking is available round
the clock 24/7/365, it is easy and convenient and an ideal choice for accessing financial services
for most mobile phone owners in the rural areas.

2.1.3. Theoretical Models of Mobile banking

Branchless banking represents a new distribution channel that allows commercial banks and
other financial institutions to offer financial services outside traditional bank premises. Theories
of branchless banking can be classified into three broad categories:

Bank-focused theory, Bank-led and Nonbank-led theory.

2.1.3.1. Bank-Focused Theory

The bank-focused theory emerges when a traditional bank uses non-traditional low-cost delivery
channels to provide banking services to its existing customers. For example range from use of
automatic teller machines (ATMs) to internet banking or mobile phone banking to provide
certain limited banking services to bank’s customers. This model is additive in nature and may
be seen as a modest extension of conventional branch-based banking. Although the bank-focused
model offers advantages such as more control and branding visibility to the financial institutions
concerned, it is not without its challenges.

Customers‟ primary concerns are to do with the quality of experience, security of identity and
transactions, reliability and accessibility of service and extent of personalization allowed. Banks
address these issues by providing a branchless banking service with an easy to use interface,
made secure with the help of multi-factor authentication and other technology, capable of
running uninterrupted for 365 days in a year (Kapoor 2010).
2.1.3.2. Bank Led Theory
In the most basic version of the bank-led theory of branchless banking, a licensed financial
institution (typically a bank) delivers financial services through a retail agent. That is, the bank
develops financial products and services, but distributes them through retail agents who handle
all or most customer interaction, Lyman et al. (2006). This model is composed of a sequence of
three main entities; the bank, the retail agent, and the Customer. This sequence starts when banks
develop their financial products and services that are delivered to clients through retail agents
that interact directly with clients‟ on behalf of the banks. Basically, the bank is mainly
responsible for opening and holding the account (cash in cash out transactions). The retail agents
is responsible for verifying customer‟s ID, performing face to face transactions, processing
applications, forming groups, disbursing small values to the bank, collecting customers deposits,
vending insurance products, and dealing with small remittances. Customers are able to access the
mix of financial and non-financial service available. To enable retail agents to facilitate the
communication between the customer and the bank, the bank is responsible for installing
electronic technology. Whatever the establishment, each retail agent is outfitted to communicate
electronically with the bank for which it is working. The equipment may be a mobile phone or an
electronic point-of-sale (POS) terminal that reads cards.

2.1.3.3. Non-bank Lead Theory

This model is composed of the mobile network operator (nonbank), the bank who holds a reserve
of the equivalent e-value, the retail agent who acts as the third entity in this chain and deals with
the customer. Banks are not a main player on this practice and the nonbank manages customer e-
money accounts. The retail agent checks customer’s id and transact on behalf of the nonbank
using either mobile phone or smartcard reader. Whereas the customer request financial services
using again either the cell phone or the smart card. Customers can use their e-money to buy
products or services, save or exchange their balance for cash at the retail agent. The uniqueness
about this model is that customers can enjoy a mix of financial services without having a typical
traditional bank account. They can exchange their cash for a value stored on a card or their
mobile phone (Anyasi, 2009).
The mobile phone network operator has already a pre-established relationship with both the retail
agents and customers through its mobile phone services. One of the most successful applications
of the nonbank model is the Hello cash agent and mobile banking in Ethiopia. The model is also
being adopted around the world for example in Tanzania, Kenya, Afghanistan, South Africa,
Philippines and Sudan among others. Hello cash agent and mobile banking is a mobile payments
system that enables customers to keep money in an e-float value on their account maintained in a
server by the Ethiopian telecom and Belcash technology solution provider and operated by users
through their mobile phone.

2.1.4. Mobile Banking Technology Adoption Models

Technology adoption is thus the process of beginning to use new technology or different
technology by customers, organizations etc. As result of the dynamism of the information and
communications technology innovative technological products are released. And the growth of
nations, organizations and individuals is highly dependent on how best they adopt the technology
in their operations. In order to understand how people can accept or adopt technology various
models are developed and used. In the following paragraphs some technology acceptance models
are briefly discussed which include:

• The Theory of Reasoned Action (TRA)

• Theory of planned Behavior (TPB)

• Innovations Diffusion Theory

• Technology Acceptance Model (TAM)

2.1.4.1. The Theory of Reasoned Action (TRA)

According to The Theory of Reasoned Action (TRA), beliefs influence attitude and social norms
which in turn shape a behavioral intention guiding or even dictating an individual’s behavior
(Ajzen and Fishbein 1980). Intention is the cognitive representation of a person's readiness to
perform a given behavior, and it is considered to be the immediate antecedent of behavior. TRA
has two core constructs: (1) attitude toward behavior (ATB) and (2) subjective norm (SN)
associated with that behavior. The attitude toward the behavior (ATB) is the previous attitude of
a person toward performing that behavior. It suggests that people think about their decisions and
the possible outcomes of their actions before making any decision to be involved or not involved
in a given behavior. This theory views the intention of an individual whether to perform a given
behavior or not as the immediate determinant of action, and attitude is determined by the
person’s beliefs and evaluation of behavioral outcomes. So, an individual, who strongly believes
that positive outcomes will result from performing a particular behavior, will have positive
attitudes towards that behavior. On the other hand, if a person strongly believes that a particular
behavior will have a negative outcome, then there will be negative attitudes towards that
behavior. Subjective norm (SN) is the social pressure exerted on the person or the decision
maker to perform the behavior. SN refers to an individual‟s perception about what other people
think of his or her behavior in question (Leach et. Al., 1994).

Figure 1: TRA Conceptual Model

Belief and Attitude toward

Evaluation behavior
Behavior Actual Behavior
intention

Normative belief
and motivation Subjective norm
to comply

2.1.4.2. Theory of Planned Behavior (TPB)

The Theory of Planned Behavior (TPB) is proposed as an extension of the Theory of Reasoned
Action (which was related to voluntary behavior), because of the limitations of TRA in dealing
with behaviors over which people have incomplete Volitional/autonomous control. The TPB
introduced a third independent determinant of intention, perceived behavior control (PBC). For
this reason, TPB was introduced by Ajzen in 1985 The theory was called the theory of planned
behavior (TPB) since it evolved from the Theory of Reasoned Action, with an additional
construct (PBC). According to Ajzen (1991), TPB incorporates an additional construct in order
to account for situations where an individual lacks the control or resources necessary for carrying
out the targeted behavior freely. TPB is a theory that predicts deliberate behavior, because
behavior can be deliberative and planned, and TPB is considered to be more general than TRA
because of PBC Chau and Hu 2002).

2.1.4.3. Innovations Diffusions Theory

The Innovation Diffusion Theory has been used to study a variety of innovations. Rogers
identifies five attributes of an innovation that influence the adoption and acceptance behavior:
relative advantage, complexity, compatibility, trial ability, and observe-ability. In the
Information Systems field, Moore and Benbasat (1991) expand this attribute set to study
information technology acceptance. The set includes:
Relative Advantage: “the degree to which an innovation is perceived as being better than its
precursor”.
Ease of use: “the degree to which an innovation is perceived as being difficult to use”. Image:
“The degree to which use of an innovation is perceived to enhance one's image or status in one's
social system”.
Visibility: The degree to which one can see others using the system in the organization.

Compatibility: “the degree to which an innovation is perceived as being consistent with the
existing values, needs, and past experiences of potential adopters” Results Demonstrability:
“the tangibility of the results of using the innovation, including their observe- ability and
communicability”.
Voluntariness of Use: “the degree to which use of the innovation is perceived as being
voluntary or of free will”.

Innovation diffusion research regards individuals‟ perceptions about these characteristics of an

information technology as important factors in influencing an individual’s acceptance behavior
(Agarwal and Prasad, 1997, 1998; Karahanna et al., 1999; Plouffe et al., 2001).

2.1.4.4. Technology Acceptance Model (TAM)

The Technology Acceptance Model (TAM) was developed from TRA by Davis (Davis 1985).
He proposed that systems use is a response that can be explained or predicted by users‟
motivation which in turn is directly influenced by an external stimulus consisting of the actual
systems features and capabilities.

Figure 2: Conceptual Model for Technology Acceptance Model

System features and User’s motivation to

Actual use system
capability use system

Davis further developed his conceptual model to propose Technology Acceptance Model (TAM)
as follows:

In his conceptual model Davis suggest that users‟ motivation can be explained by three factors:
perceived ease of use, Perceived Usefulness, and Attitude toward Using the
System. According to the model a potential user’s overall attitude towards using a given system
is hypothesized to be a major determinant of whether or not he actually uses it. Attitude towards
using, in turn, is a function of two major beliefs: perceived usefulness and perceived ease of use
perceived ease of use has causal effect on perceived usefulness. Design Features directly
influence perceived usefulness and perceived ease of use and design features is an external
variable hence it affects the attitude and behavior indirectly through perceived usefulness and
perceived ease of use.

Figure 3: Developed Technology Acceptance Model – TAM

 X1 Perceived
Usefulness

X2
Attitude Actual
Perceived
toward system use
X3 ease of use

Behavioral
Design Cognitive Affective
response
response

According to Davis (1985);

Use: refers to an individual’s actual direct usage of the given system in the context of his or her
job.

Attitude: refers to the degree of evaluative affect that an individual associates with using the
target system in his or her job

Perceived usefulness: is defined as the degree to which an individual believes that using a
particular system would enhance his or her job performance.

Perceived ease of use: is defined as the degree to which an individual believes that using a
particular system would be free of physical and mental effort. Perceived ease of use is
hypothesized to have a significant direct effect on perceived usefulness, since all else being equal
a system which is easier to use will result in increased job performance (i.e., greater usefulness)
for the user.

2.1.4.5. Technology-organization-Environment Framework (TOE)

It is developed by Tornatzky and Fleischer (1990) which identifies three basic factors for the
adoption of technological innovation, i.e, technological factors, organizational and environmental
factors. This framework is a comprehensive and well received framework in the context of
innovation adoption by organizations and has been used in many studies (Salwani, et al,; Zhu &
Kraemer 2006).
 Figure 4: Technology-Organization-Environment Framework

Environmental factors Organizational factors

Legal framework Financial and human resources
National ICT infrastructure
Competitive pressure
Government support

E - Banking Adoption

Technological factors
Perceived risks (relative disadvantage)
Perceived benefits (relative advantage)
Source: Tornatzky and Fleischer (1990)

2.2. Empirical Literature

The research finding of Oluoch (2012) showed that perceived usefulness is the most important
significant factor affecting the adoption of M-banking technology and perceived risk hinders
majority of bank customers from adopting mobile banking in Kenya in the case of Nakuru
Municipality.

A similar study conducted in Tanzania by A.R. Ishengoma (2011), adoption of mobile banking
technology by customers is highly influenced by perceived value of the technology to the
customers “the intention to use M-Banking service was brought forward by the perceived value
of the M-Banking services, most were registered because of the belief in M-Banking that enabled
them to access financial services in an easy way. Mattila (2003) focused on the drivers and
inhibitors of mobile banking services. The author found that complexity, compatibility, relative
advantage, observability, and confidentiality are the significant factors influencing customer
decision making in mobile banking adoption. Also, security and confidentiality of information
are fundamental pre requisites for any mobile banking services to be successful.
Laforet and Li (2005) carried out research to examine the online/mobile banking in China.
Analysis of the finding indicated that lack of understanding and awareness of mobile banking
benefits are the main factors hindering the adoption of mobile banking usage in China. Luarn and
Lin (2005) conducted a survey in Taiwan in order to understand user’s behavioral intention to
use mobile banking service based on the extension of technology acceptance model (TAM). In
this finding, it was also observed that credibility was a major issue, which has a stronger
influence on user’s behavioral intention than the technology acceptance model (TAM) of
perceived ease of use and perceived usefulness.

Cruz et al. (2010) studied the factors inhibiting the adoption of mobile banking among internet
users in Brazil. They identified risk, cost, complexity, and lack of understanding about the
relative advantages of these services as the main determining factors of using mobile banking
services. Laukkanen and Kiviniemi (2010) tested the factors affecting the adoption of mobile
banking in their study. The findings of this study indicated that providing information and
guidance on the part of the bank have significant effect on reducing the barriers of use, image,
value, and risk in mobile banking, but do not reduce the barriers of tradition.

Wessels and Drennan (2010) conducted a study to identify and test the key factors stimulating
and hindering the adoption of mobile banking, as well as the effect of user’s attitude on the
intention of use. They found out that perceived usefulness, perceived risk, cost, and compatibility
have significant effect on the adoption of mobile banking. Mohammad Rokibul Kabir (2013)
the researchers investigated on the factors that influence the, use of mobile banking in
Bangladesh. The data was analyzed using multiple regressions and the outcome of the research
was that, variables such as ability, integrity, benevolence, perceived usefulness, perceived ease of
use relative cost and time advantages were found to influence the adoption of mobile banking.

Sripalawat et al. (2011) examined positive and negative factors affecting mobile banking
acceptance in Thailand. Perceived usefulness, perceived ease of use, were considered as the
positive factors, and device barrier, perceived risk, lack of information, and perceived financial
cost as the negative factors. They found that the positive factors have more influence than
negative factors towards the acceptance of mobile banking.
Dineshwar and Steven (2013), the researchers investigated the complex factors that prevent
customers from adopting and using mobile banking services in Mauritius. The study revealed
that age, gender and salary had no influence on adoption but rather, Convenience, compatibility
and banking needs influenced banking adoption. On the other hand, perceived security risk and
reliability were found to be the only obstacles to mobile banking usage but also that mobile
banking usage is not associated with age, gender and salary.

Cheah et al (2011), this was an empirical study that was conducted with the aim of investigation
on the factors that affect the Malaysian customers from adopting mobile banking services. From
the study, variables such as perceived ease of use, Perceived usefulness and relative advantage
were found to be positively and significantly related to the intention to adopt mobile banking
services while a constructs such as perceived risk was found to be negatively correlated with the
adoption of mobile banking.

Wondwossen and Tsegai (2005) also studied on the challenges and opportunities of E- payments
in Ethiopia; their objective was studying of E-payment practices in developing countries, Africa
and Ethiopia. The authors employs interview and on site observation to investigate challenges to
E-payment in Ethiopia and found that, the main obstacles to the development of E-payments are,
lack of customers trust in the initiatives, Unavailability of payment laws and regulations
particularly for E-payment, Lack of skilled manpower and Frequent power disruption.

The study conducted by Daghfous and Toufaily (2007) on the success and critical factors in
adoption of E-banking by Lebanese banks. The results of their study shows that the
organizational variables (bank size, functional divisions, technical staff, technical infrastructure,
perceived risks, decision makers` international experience) are variables which exert significant
impact on the adoption of E-banking, among the structural characteristics, the result revealed that
internal technological environment of the bank is a very important factor in determining the
adoption of E banking.

According to Ayana (2010), unfamiliarity with the service provided through ATM, Internet
banking, telephone and mobile phone by customers, Lack of technical and managerial skills on
the use of technological innovation and Lack of skills to implement E-banking system are
considered as barriers for the adoption of E-banking system of Ethiopia. Kuan (2001) financial
resources are also an important factor in facilitating innovation adoption for any organization and
they are often correlated with the firm size.

Kalkidan (2016) conducted a study on the factors influencing the usage of mobile banking in
Ethiopia. A research model uses the TAM model and IDT model. The research results found
relative advantage, compatibility, perceived trust, perceived usefulness, and perceived risk as
major influencing factors for mobile banking adoption whereas perceived ease of use and
awareness were found to have insignificant effect on mobile banking usage for bank customers
located in Addis Ababa, Ethiopia.

Worku (2015) this research paper aimed to understand the factors that affect the adoption of
mobile banking technology in the case of Commercial Bank of Ethiopia Addis Ababa city
customers using technology acceptance model developed by Davis with additional variable
namely perceived risk. Understanding the factors that will affect customers‟ adoption behavior
of mobile banking will help the commercial Bank of Ethiopia’s Effort to increase the penetration
and growth of mobile banking service.

Abebe (2016) this research conducted to investigate opportunities and challenges within the
context of Dashen Bank’s E-banking services. Based on the statistical analysis, perceived
usefulness was found to have significant effect on adoption of E-banking services in Dashen
Bank. Moreover, perceived risk and environmental factors were found to have significant
influence in adoption of E-banking services

2.3. Conceptual Framework

To achieve the research objective, the study is applied a combination of both TOE and TAM
framework with some modifications to benefit from both models and to have a more precise
understanding on the determinant factors in the adoption of mobile banking service at Lion
International Bank. The reason of using this framework is just to see the determinant factors
from both the customer, technological, organizational and environmental side. Therefore, the
conceptual framework is given as follows following the theoretical and empirical literature:

Figure 5: Research Conceptual Framework

Independent Variables Dependent Variable

Perceived Usefulness

Pe rceived Easy of Use

Customer’s
Mobile Banking
Adoption
Perceived Risk

Organizational factors

Environmental factors
3.1 Research Design
The study aimed to measure correlations between independent and dependent variables as it
examined factors influencing the adoption of coopay-ebirr services. An explanatory research
design was utilized to identify the determinants of coopay-ebirr adoption. The explanatory
research was chosen as it was instrumental in examining the cause and effect of independent
variables (perceived usefulness, ease of use, perceived cost, perceived trust, and perceived risk)
on the dependent variable (adoption of coopay-ebirr service).

According to Kothari (2008), research design was defined as a general blueprint for the
collection, measurement, and analysis of data, with the central goal of solving the research
problem. The main objective of this study was to investigate the determinants of coopay-ebirr
mobile money adoption in Cooperative Bank of Oromia. Therefore, an explanatory research
design was applied as it aimed to examine the association between the determinants of coopay-
ebirr adoption. As pointed out by Creswell (2005), explanatory (cause and effect) research
proved useful in identifying the type of association, explaining complex relationships of multiple
factors that explained an outcome, and predicting an outcome from one or more predictors.

3.2 Research Approach

The study used a deductive research approach and examined the validity of assumptions
(theories/hypotheses) at hand, drawn from various sources, and structured to test this theory. The
main characteristics of deductive research approaches were the explanation of the interrelation of
concepts and variables and it also enabled the measurement of facts quantitatively (Reed 2012).
In this study, a quantitative research approach was used. Quantitative research helped to analyze
the cause-and-effect relationship of the variable numerically. The study aimed to determine the
extent to which the independent variable influenced the dependent one. The purpose of the study
was to examine the determinants of coopay-ebirr adoption and the hypothesis was tested. In the
quantitative research process, the researcher tested a theory by rejecting or accepting hypotheses
(Neuman, 2011).

3.3 Population of the Study

Population refers to the complete group of individuals or entities to which study findings are
intended to be applied or generalized (Schutt, 2011). In a similar vein, Kothari (2004) defines
population as the total aggregation of respondents that meet specific criteria. To facilitate
efficient and cost-effective data collection, the researcher opted to select a sample from the
population. This approach minimizes the time gap between recognizing the need for information
and its availability while reducing the overall cost of conducting the study compared to
gathering data from the entire population. Additionally, sampling allows for the proper selection
and approach of eligible respondents. Therefore, the researcher selected a sample from the target
population.

3.4 Sampling Techniques and Sample Size of the Study

According to Catherine Dawson (2009), the right sample size in a study is dependent on the
nature of the population and the purpose of the study. In addition to the purpose of the study and
population size, three criteria usually are needed to determine the appropriate sample size: the
level of precision, the level of confidence or risk, and the degree of variability in the attributes
being measured (Miaoulis & Michener, 1976), Even though there are no general rules, the
sample size usually relies on the population to be sampled.
Since the total population of this research is finite (known) Kothari (2004) used to arrive at a
sample size (total population) of 205,974 customers who use coopay at Harar city of with a 95
percent confidence level and 5 percent level of precision since it is relevant to studies.
The equation is as below:

2
Z ∗p∗q∗N
n= 2 2
e ( N−1 ) + Z ∗p∗q
Where,
n = sample size
N = Population Size = 205,974
Z = the value of standard value at a given confidence level = 1.96 For 95 % Confidence Level
e = the level of precision or sampling error = 5 %
p = sample proportion = 50 % = 0.5
q = 1-p = 1- 0.5 = 0.5
This equates to a sample size of 383
Based on the above formula, the researcher will distribute total of 421 questionnaires which
include 383 sample size and 10 % of total sample size (38) considered as non-returning
questionnaires
3.5 Data Source and Collection Instrument
For the study, the researcher will collect the primary source of data from respondents who were
living in Harar city through a structured questionnaire directly by the researcher. A secondary
source will also be considered from related literature. According to (Biggam 2018), primary data
is the information that the researcher finds out by him/herself regarding a specific topic. The
main advantage of this type of data collection is that it can be collected with the researcher’s
purpose in mind and the information is more consistent with the research questions and purpose.

The secondary data will be consulted through document analysis from books, journals, and
articles on mobile banking services and other related studies that had been reviewed. The close-
ended questionnaire will be administered to coopay users and non-users simultaneously since it
will less costly and less time-consuming than other measuring instruments.

The primary data will be collected through questionnaires with close-ended questions having
binary (dichotomy or YES/No) answers and also five Likert-scale. where; Strongly Agree = 5,
Agree = 4, Neutral= 3, Disagree = 2 and Strongly Disagree = 1. The use of dichotomies
questions is These types of questions are useful for gathering basic information or opinions on a
particular topic (like technological adoption) and he use of the Likert scale is to make it easier
for respondents to answer the question simply.

The questionnaire will have three sections. Section 1 of the questionnaire consisted of
Biography data about cooperative bank customers or respondents and sections 2 & 3 consisted
of information about independent variables like; perceived usefulness, perceived cost, ease of
use, perceived trust and perceived risk and the dependent variable that is the adoption of tele birr
service.

3.6 Data Analysis Technique

Both descriptive statistics and inferential statistics will be used to analyze the data. As a part of
the inferential analysis, the study will apply mean, standard deviations, Spearman correlation,
and binary logistic regression analysis using the SPSS software application. Binary logistic
regression analysis will allow the researcher to investigate the significant determinants of mobile
banking adoption, while correlation will used to identify the direction and strength of the
independent variables. Frequencies and percentages will be used to analyze respondents'
demographic data.

3.7 Validity and Reliability of Research Instrument

According to Mugenda and Mugenda (1999), validity refers to the extent to which a
measurement accurately represents the intended variable. Similarly, Saunders (2000) argues that
research is valid only if it effectively investigates its intended subject and if the findings can be
verified. In this study, the researcher aims to enhance validity through various means. The study
gathered evidence from multiple sources and seek input from key informants to ensure clarity
and avoid misunderstandings. Validity also strengthened by reviewing existing literature to
identify relevant conceptual dimensions. Additionally, a panel of research experts, including
researcher adviser, appraise the research instrument for further validation. Cronbach's
coefficient alpha utilized to assess internal consistency among the items within each scale.
Higher alpha coefficients indicate greater scale reliability, with Zikmund et al. (2010)
suggesting that coefficients of 0.70 and above are considered acceptable.