The Effect Of Customer Relationship Management On The Performance Of Commercial Banks: The Case Of Oromia Banks Ambo Town

Abstract

This study investigates effect of Customer Relationship Management on bank performance in Oromia Bank, Ambo town. To gain a comprehensive understanding, this research employs descriptive and explanatory research design to examine the effect of customer relationship management on Oromia bank performance in Ambo town. The regression analysis reveals that factors such as customer satisfaction, complaint resolution, accessibility of service, customer feedback, communication effectiveness, personalization of services, and customer engagement have a statistically significant and positive effect on bank performance. These findings indicate that enhancing customer relationship management practices can lead to substantial improvements in bank performance. Additionally, insights from Focus Group Discussions highlight several internal and external challenges faced by Oromia Bank in Ambo, including poor capital allocation, difficulties in customer retention, high operating costs, regulatory compliance burdens, and challenges with non-performing loans. These issues are exacerbated by external factors such as rising inflation, deteriorating infrastructure, and security concerns, which further impact the bank’s operations by reducing transaction volumes, deposit inflows, and increasing loan defaults. Based on these findings, the study recommends improving capital allocation, optimizing resource utilization, reducing operational costs, and addressing regulatory compliance challenges. Additionally, strengthening risk management, enhancing customer retention strategies, and security are essential for improving bank performance in a challenging environment. These measures are critical for ensuring the long-term sustainability and growth of Oromia Bank in Ambo town