Abstract Foreign exchange mobilization is a critical challenge facing the Ethiopian economy, with persistent shortages constraining industrial production, international trade, and private sector growth. Despite the expansion of the banking sector and ongoing macroeconomic reforms, commercial banks have not been able to mobilize sufficient foreign currency to meet growing demand. This study was conducted to assess foreign exchange mobilization in Ethiopian commercial banks and to identify the key challenges and opportunities influencing its effectiveness, with the aim of generating bank-level evidence that can inform policy and managerial interventions. To achieve the objectives of the study, a mixed research approach was employed, integrating quantitative and qualitative methods. Primary quantitative data were collected through structured questionnaires administered to 116 employees working in the foreign exchange departments of seventeen Ethiopian commercial banks that have been in operation for more than ten years. These respondents were selected purposively due to their direct involvement in foreign exchange transactions and regulatory compliance. In addition, qualitative data were gathered through semi-structured interviews with foreign exchange directors and division managers to obtain in-depth insights into institutional practices, regulatory constraints, and strategic issues. Secondary data were sourced from academic literature, banking sector reports, and regulatory documents to support and contextualize the primary findings. Quantitative data were analyzed using descriptive statistical techniques, including means and standard deviations, while qualitative data were analyzed thematically. The findings of the study indicate that foreign exchange mobilization in Ethiopian banks is moderately effective but remains insufficient to meet customer and trade finance demand. Banks mobilize foreign exchange mainly from exports and remittances; however, the volume of inflows is constrained by a limited and undiversified export base. Major challenges identified include weak implementation of National Bank of Ethiopia directives, unfair competition and pricing practices among banks, client benefit-seeking behavior, limited correspondent banking relationships, and declining external inflows from non-governmental organizations. These factors collectively undermine the effectiveness of formal foreign exchange mobilization channels. At the same time, the study identifies significant opportunities for improving foreign exchange mobilization. Diaspora banking potential, expansion of digital banking and remittance platforms, agricultural export development, and Ethiopia’s strategic geopolitical position were highlighted as key areas with strong potential to enhance foreign currency inflows. Interview findings further emphasize that competitive pricing, trust-building measures, and innovative foreign exchange products are essential for capturing these opportunities effectively. The study concludes that foreign exchange mobilization in Ethiopian commercial banks is shaped by structural, regulatory, and institutional factors. While banks actively participate in mobilizing foreign currency, their efforts are constrained by systemic challenges that require coordinated policy responses. The findings are important for bank management and regulators by identifying actionable areas for improving foreign exchange products, regulatory enforcement, and export diversification. Academically, the study contributes to the limited literature on bank-level foreign exchange mobilization in Ethiopia and underscores the importance of strengthening bank-centered foreign exchange mobilization for economic stability and sustainable growth. The evidence generated is particularly relevant during Ethiopia’s ongoing financial sector reforms and macroeconomic adjustment efforts aimed at improving competitiveness, resilience, and economic development outcomes.
Eskinder Daba (Mon,) studied this question.