Abstract:
Banking sector and its performance play an important role in an economy. The banking
industry in Ethiopia is now booming due to the financial liberalization and restructuring
of financial institutions. Currently, there are a total of 30 licensed banks that are giving
financial services consisting of 8,250 branches, serving the country’s population of
nearly 115 million. The current scenario of Ethiopian banking sector is very dynamic
and competitive. To maintain market share it is necessary for banking institutions to
acquire large customer base by differentiating their service quality provision through
implementing different strategies. Customers today are very much aware about various
financial services and institutions; they can only be retained by providing good quality
services. Therefore, this study aimed to assess and compare the similarities and
differences of private and public banks service quality provision as perceived by
customers in terms of the tangibility, reliability, responsiveness, assurance and empathy
service quality dimensions. Cross sectional data were collected through close ended
questionnaires which incorporate demographic and service quality measurement
dimensions adopted from SERQUAL model. The researcher was used descriptive
research design and a sample of 383 respondents was taken by following Krejcie and
Morgan formula. Five commercial banks (Commercial Bank of Ethiopia, Cooperative
Bank of Oromia, Awash Bank, OromiaBank and Dashen Bank) that found in Holeta town
were selected purposively based on their higher number of customers they hold. The
collected data were analyzed using descriptive and inferential statistical tools like
frequency, mean, one sample t-test with the help of SPSS version 20. Cronbach’s alpha
test is used to analyze reliability of the variables. Pearson correlation was applied to
determine the relationship between service quality dimensions and customer satisfaction.
To measure the gap between the customers’ expectations and their perceptions,
Parasuraman SERVQUAL Model was used. The results of the study revealed that service
gap is higher in private sector banks than public sector bank which indicates that the
public sectors bank customer were highly satisfied when compared with private sectors
bank customers. In all the SERVQUAL dimensions the customers’ perceptions are lower
than their expectations. Therefore, both the type of banks must increase their quality
service to minimize the existing service gaps and improve their customers’ satisfaction.
Specifically, the private banks should have a strong customer relationship management
and be able to understand the customers’ needs while interacting with them
