Ameha Tefera Tessema and Kruger JW
The bank’s toxic or nonperforming asset or contagion and liquidity problems that can prone any time the banking business unsolved for last decades. To solve these problems banks were adopted several models even though each of banking business models was a catalyst for financial crises. However, these problems can be solved applying an interest rate commission agent banking system which is a system to be adopted by bank to be an agent for investors’ loan funding to entrepreneurs by getting the fund seller and buyer agreement to administer the loan after disbursement, by retaining reasonable interest rate commission from the agreed investor’s loan funding credit price. The bank as an agent administer investor’s loan funding to entrepreneur up to loan settlement by collecting an agreed interest rate commission. An interest rate commission agent banking system can directly increase profitability of the bank since no saving interest rate can be paid on the loan disbursed amount from an investor account. Since increasing deposit interest rate increases deposit mobilization. Applying discrete market interest rate incentive also expected to increases the deposit mobilization. In same manner increasing the credit price will increase the demand of the investors to provide loan funding which in turn increase the bank’s loan mobilization.
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