Comparative Study Of Service Quality Provision Of Public And Private Banks From Customers’ Perspectives: The Case Of Banks In Holeta Town

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