COLLAEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
ASSESSMENT OF FACTORS AFFECTING CUSTOMER PREFERENCE
AMONG BANKS (CASE STUDY ON METTU TOWN)
A PROPOSAL PAPER SUBMITTED TO SEKETA (PHD)
REPARED BY : KEYRU IBRAHIM
ID NO:
JANUARY, 2024
METTU, ETHIOPIA
Table of contents
Contents
CHAPTER ONE........................................................................................................................1
1. Introduction............................................................................................................................1
1.1 Back ground of the study..................................................................................................1
1.2 Statement of the problem..................................................................................................2
1.3 Research Questions..........................................................................................................2
1.4 Objective of the study.......................................................................................................2
1.4.1 General Objectives.....................................................................................................2
1.4.2 Specific Objectives....................................................................................................2
1.5 Significant of the Study....................................................................................................3
1.7 Scope of the Study............................................................................................................3
1.8 . Organization of the study...............................................................................................3
CHAPTER TWO.......................................................................................................................4
LITERATURE REVIEW...........................................................................................................4
2.1 Concepts and Definitions of bank....................................................................................5
2.2 Emergence and development of banking institutions.......................................................5
2.3 Types of Banks.................................................................................................................6
2.4 Function of commercial Banks.........................................................................................7
2.5. Payments systems and electronic banking......................................................................8
2.5.1Automatic teller machine (ATM)...................................................................................8
2.5.2The intelligent auto teller and net wares management...............................................8
CHAPTER THREE....................................................................................................................9
3. Methodology for the Study....................................................................................................9
3.1 Research design................................................................................................................9
3.2 Target population..............................................................................................................9
Table 3.1 The No of customers from each bank and the proposed sample............................9
3.3 Source of data.................................................................................................................10
3.4 Data collection Instrument.............................................................................................10
3.5 Sampling Technique.......................................................................................................10
3.6Sample size......................................................................................................................11
3.7.Data processing and Analysis.........................................................................................11
3.8 TIME SCHEDULE........................................................................................................12
3.10 REFERENCE................................................................................................................12
CHAPTER ONE: Introduction
1.1 Back ground of the study
The banking industry will be characterize by increasing competition since the early 1980s
( Blankson 2007 ). This will be the result of a number of interrelated factors such as
competition and deregulation that have revolutionize the distribution of money financial
services. In other words, an increase competition resulting from a decade of deregulation of
financial services industry is meant that banks find themselves face with the task of
differentiating their organization and their offering as a means of attracting customers
( Blankson 2007 )
Modern banking Ethiopia introduced in 1905.at the time an agreement is reach in between
Emperor Minelik and representative of the British owned national bank of Egypt to open a
bank which leads to bank of Abyssinia launched in Feb, 1906 by the emperor (Abraha 2005)
this event marke the introduction of banking in the country. The bank of Abysinia is givea 50
year pleasure and is engagein issuing note, collecting deposits and granting loans, but its
client were mostly foreign business men and wealthy Ethiopians ( Mauri,2003)
Ethiopian banking is flourishing. Financial result for the 2011 fiscal year prove an industry
enjoying high growth, high profits, and high dividends. Even the middle of challenging
situation, all key areas of banking operation :collecting deposits, providing loans and foreign
exchange dealing, showedzzrhsrda growth more than 20 percent. Even though sharing strong
expiation, there are of course prominent variation a long with banks in term of their aggregate
size, revenue source customer focus loan concentration, and operational efficiency. Presently
there are 19 banks in Ethiopia of which 16 are private banks And the rest are government
owned banks. Moreover looking ahead, banks will surely by confronted by the entry some
new banks, Abay, Enat, Debub global bank, and other financial institution. with growing
competitiveness in the banking industry ( Grady and Spencer, 1990) and similarity of service
offered by the bank ( Holstius and Kaynak ,1997), it has became increasingly important that
bank identify the factors that determine the basis up on which customer preference between
providers of financial services in this regard, the researcher is motivate to understand the
customer preference among selected banks in mettu town.
1.2 Statement of The Problem
Banking sector plays a role in the economic development of a country through mobilization
of funds from outside the country and channeling such funds to various sectors of the
economy. Banks are financial institutions that promotes and help the activities of customers
by rendering different services. In order to get the quality services and benefits from banks
users were select based on the services and fees which the bank rendered to the customers.
(Therefore customers were selecting the best bank to obtain the quality services by
considering these factors as a base for selecting to use deferent services that banks render.
These factors may be, proximity, good customer services, personal relationship ,interest rate,
diversified number of branches and other Factors.( p.cotler, 2007)
To the best knowledge of the researcher there is no exist previous research conducted in
Ethiopia concerning the banking selection of customer preference. Therefore, this study is
particularly intend to examine the assessment of factors that affect customer preference
among bank in Mattu town such study is hope fully expect to fill the gap in literature by
scrutinizing the determinants of customer bank selection in Mattu town.
1.3 Research Questions
1. What are the factors that affect the customer’s preference for bank?
2. What are the different services that customer obtained from banks?
3. Does the customer have enough information about the services given by the bank?
1.4 Objective of the study
The Study under Consideration is incorporating the following basic objectives.
1.4.1 General Objectives
The general objective of this study is the investigation of the factors that affect customers
preference among banks exist in mettu town
1.4.2 Specific Objectives
In addition to the general objective the study will be include the following Specific
Objectives.
To identify the factors that affect the customer preference
To assess the different services that customers obtain from banks.
To evaluate whether customers have enough information about the service
given by the Bank.
1.5 Significant of the Study
This study gives a basic understanding and information to the bank on how attract customers
and service delivery system among the banks and initiate the concerned bodies to give more
emphases in the field. It also adds some necessary information about factors that affect
customer preference among banks and finally it became reference for those researcher who
study related finding.
1.6 Scope of the Study.
The study will conduct in western part of Ethiopia, in mettu town, to study about the factor
that affect customer preference among banks at the Ethiopia level is very important.
However, due to time, financial and other constraints, the study is geographically delimited to
mettu town is concerned five banks
1.8. Organization of the study
The paper will be organized in to five chapter .The first chapter deals with introduction of the
paper including background of the study, scope of the study limitations of the study and
organization of the study. chapter two deal with literature reviews, chapter three deal with
methodology of the study, chapter four deal with data presentation, analysis and
interpretation and chapter five deal with conclusion and recommendations.
CHAPTER TWO: LITERATURE REVIEW
2.1 Concepts and Definitions of bank.
Chambers twenty country dictionary defines a bank as an institution for the keeping, lending
and exchanging of money, economists have also defined a bank high lighting its various
functions. A similar definition has been given by Kent who defines a bank as “an
organization whose principle operations are concerned with the accumulation of temporally
money of the general public for the purpose of advancing to others for expenditures “Thus
ordinary banking business consists of changing cash for bank and bank deposits for cash
transferring bank deposits from one person or cooperation to another, giving bank deposits in
exchange for bill of exchange, government bonds, the secured and un secured primaries of
business men to repay, thus a bank do an institution which accept deposits from the public
and intern advances loan by creating. Banks are financial institutions that accept deposits and
make loans. Included under the term banks are firms such as commercial banks, savings,
and loan associations, mutual savings banks and credit unions. Bank are the finical
intermediaries that the average person interact with most frequently.
Bank is a business establishment that safe gards people’s money and uses to make loans and
investments. Banking is as old as vivid organization. The ancient Roman developed and
advancing banking system to serve their vast trade network, which extended through out
Europe, Asia and much of Africa.
Bank is a commercial institution concerned mainly with making and receiving payments on
the behalf of its customers, accepting depots and making short term loans to private
individuals, Companies and other organizations. In the United Kingdom, the banking system
comprises the bank of England (the central bank) the commercial banks, merchant’s banks,
branches of foreign and common wealth banks.
Banking is defined as the acceptance of deposits of money from the public for the purpose of
lending or investment, such deposits may be repayable in demand or other wise and with
draw able by draft, order on other wise. Thus a bank must perform two essential functions.
i. Acceptance of deposits
ii. Lending or investment of such deposits.
The purpose of deposit and loan products normally distinguishes banks from other types of
financial firms. Deposit products pay out money on demand or after some notice. Deposits
are liabilities for bank, which most be managed if the bank is to maximize.
(The economics of money, banking and financial markets, 5 th edition, Frederic 5. mishkin,
1992, p.34)
2.2 Emergence and development of banking institutions
It may be said that banking in its most simple form is as old as authentic history. As early as
3000 Bc. Bobay content had developed a system of banks. In ancient Greece and Rome, the
practice of granting credit was widely prevalent. Traces of credit by compensation and Egypt
before the system attained full development in Greece and Rome. The book of the old
Sanskrit are full of re regulations governing credit, he speaks of judicial proceedings in to
bankers, users and even of the renewal of commercial papers.
In Rome the bank were called Argentorioe. Some of the banks carried business on their own
account and others were appointed by the government to receive the taxes. They used to
transact their business of similar lines as those of modern banks. people seed to settle or draft
on the bank. If the creditor had also on account of the same bank, the account was settled by
an order to make the transfer of such money from one name to another. To pay money by a
draft was known as prescribe and the draft was known as attribute.
During the early periods, although banking either for the purpose of facilitating commerce of
to serve the government. The bank of Venice, established in the modern sense, simply on
office for the transfer of the public debt. These written orders, in course of time, come to be
used in the same manner as modern cheques. It is interesting to note that most of the
European banks existence formed on the model of the Bank of Amsterdam.
The beginning of English banking may correctly be attributed to the London gold sixtieths.
They used to receive their customers valuables and funds for sattecase to day and issues
receipts acknowledging the same .In fact, the Gold smiths not may be considered as the
precursor of the bank not. The Gold smiths not may be considered as the precursor of the
bank not. The business the gold smiths, who then carried upon attiring scale what we should
now call banking used to depots third reserve of treasure in the exchanges. The gold smiths,
who then carried upon attiring scale what we should now call banking used to deposit third
reserve of treasure in the exchanges with the sanction and under the large of the government.
However, the rain of gold smiths marks turning point in the growth of private banking and
the establishment of the “Banking of England in 1694”
This is true not only in the case of India but also of other countries. Although the business of
banking as old as thematic history, banking institutions have since then changed in character
and content very much. They have developed from a few single operations involving
satisfaction of a few individual wants to the community by securing speedy application of
capital the very life blood of commerce.
The early sixties show the birth of a dynamic private bank, which arise the latest competitive
sprit in the banking system. It was called Addis abeba bank was established and had
contributed a lot during its ten years existence until 1974 to wards the creation of
competitive banking sector- The Italian banks choose to stay where they were and the
cooption comes to force in 1960s and early 1970s.
2.3 Types of Banks
Banks are of various types which are explained as under:
1. Commercial Banks: Commercial banks are those banks which perform all kind of
banking functions such as accepting deposits advancing loans, credit creation and
agency factions. They are also allied joint stock banks because they are organized in
the same manner as joint stock companies. They usually advance short term loans to
customers. Of late, they have shorted giving medium term and long term loans. In
India 20 major commercial banks have been nationalized, were as in developed
counties they are run like joint-stack companies in the private sector. Some of the
commercial banks in India are Andhra Bank, India bank, Punjab National bank. Etc.
2. Exchange Banks:-Exchange banks are those banks which deal in foreign exchange
and sterilize in foreign trade. They are called foreign exchange banks. in India, these
banks have their head office located out side India, the chartered bank and the tined
lays bank have their head in England, where as the American express Bank, and city
bank have third head offices in the USA –these banks also render other services such
as collecting and supplying information about the foreign customers, providing
remittance facilities.
3. Industrial Banks: Industrial banks are these banks which provide medium term and
long term finance to industries for the purchase of land, machinery etc they under
write the debentures and shares of industries and also subscribe to them. In India,
there are a number of financial institutions which perform the function of industrial
banks. Such as Industrial development bank of India, Industrial finance of India,
Industrial credit Investment Corporation of India etc these Institutions are also known
a development Bank.
4. Agricultural bank: are those banks which provide credit to farmers for short term,
medium term and agricultural cooperative banks provide short terms loans to farms on
the mortgage of their land. The National bank of Agricultural and rural development
provides refinance facility to finances to an types of banks which give loans to
agriculturalist.
5. Cooperative Banks: are those financial institutions which are organized on the
principle of cooperation. In rural area, there are agricultural cooperative banks which
accept deposits and give loans to agriculturalist, rural artisans, in eareas. There are
also cooperative banks which perform the functions of ordinary commercial banks but
give loans to their members only.
6. Saving Banks: saving banks help promote small savings and mobilize them, They
have been very successful in Japan and Germany. In India, post offices acts saving
Banks.
7. Central Bank:- The central Bank is the aper bank in a country which controls its
monitory and banking structure. It is owned by the government of the country and
operates in national interest. it regulates and issues currency, performs banking and
operates in national interest, and agency service for the state, keeps cash reserves of
commercial and banks keeps and manager international currency act as the lender of
the last resort, act as charring house and controls credit.
2.4 Function of commercial Banks
Commercial banks perform quality of factions which can be divided as:
1. Accepting deposits
2. Advancing loan
3. credit creation
4. Financing foreign trade
5. Agency services and
6. Miscellaneous services to customers. This functions are discussed as follows;
2.5. Payments systems and electronic banking
The major routing processing in day to day banking operations originates at the cash counter
or teller countries in the banks. Essentially, the idea behind the electronic payment system is
that one or activities related to the payment should be done with the help of computer.
2.5.1Automatic teller machine (ATM)
The growth of technology has changed the payment systems world over during past decades.
The introduction of ATMS has given facility to the bank customers for banking beyond the
banking hours. ATM is a device located on the banks premises to receive and deposes cash
around the clock. Payment of card bills and for transferring funds from one account to
another. A customer who wishes to vitalize the service of ATM will have access to it only
with an ATM card. The ATM card consist of personal identification number which’s knows
as only to the customer. A customer who wishes to transact through the ATM will have to
place the ATM card in the lobefin starting his operation and he will be able to transact his
business through interactive usual display. Their are two types of ATMS (1) Exterior ATMS
(2) Interior ATMS
Exterior ATMS are located in various place like shipping centers, air port, rail way stations
which or with of dories in facility- while the interior ATMS are located within the bank
premises- ATMS which are directly interactive with the banks computers are known as on
one ATMS and the others are known as office ATMS.
2.5.2 The intelligent auto teller and net wares management
Intelligent auto teller system are a special broad of Auto teller machines cable of thinking for
them selves that means they are test, improve less demand on your banking systems and serve
the costumers more like personal banker than less sophisticated auto teller system, intelligent
auto teller provides as superposed service even with out benefit of available communication
net work.
Benefit of intelligent auto teller:
- Customer satisfaction
- High availability
- On line and offline auto recovery
- Any time full banking service
- Low cost, shorter quest and less teller with ease of use
- Quick and early implementation
CHAPTER THREE: Methodology for the Study
3.1 Research design
The type of research that researcher will use in this study is descriptive type of research.
Because, the researcher has no control over the variables, can only report what is happening.
The main purpose of the descriptive research is description of the state nature or affairs, as it
exist at present, so the aim of this study is to describe the actual assessment of factors that
affects customer preference among bank in case of mettu town.
3.2 Target population
The Target population of the study is the customers of 5 banks which will be operate in Mattu
town.i.e. Brihan bank, Awash international bank, Dashen bank, Commercial bank of Ethiopia
and oromia international bank. In Mattu town, other banks are also found but since some of
them are recently opened branches and others are sub-branches of the above bank, so they are
not include in the target population. Thus, the target population is the customers of the above
mentioned five banks. Total customer 75400 the total customers from each bank can be
shown as follows.
Table 3.1 The No of customers from each bank and the proposed sample
N a m e o f b a n k s No of customers N o o f s a m p l e
A w a s h b a n k 1 1 5 0 0 1 5
Oromia international ban k 1 8 4 5 0 2 5
Commercial bank of Ethiopia 2 4 1 5 0 3 2
D a s h e n b a n k 1 5 4 0 0 2 0
B r i h a n b a n k 5 9 0 0 8
T o t a l 7 5 4 0 0 1 0 0
Source: from survey data, 2017
3.3 Source of data
While conducting this study, both primary source and secondary data will be used. The
primary source of data is collected from in individual, business men, and other customers of
bank. And the secondary data is documents, internet and other researches.
3.4 Data collection Instrument
The data will be collected from customers by the researcher using questionnaires method of
data collection involves both unstructured and structured questionnaires had been prepared.
Regarding those customers who cannot read and write an interview will be the appropriate
method. And the secondary data will be collected from different published materials and
documents of the banks.
3.5 Sampling Technique
Stratified sampling method will be used. Because, the population under study area is
Heterogeneous. For this reason stratified sampling method make Homogenous by dividing in
to different strata in order to present true population.
3.6 Sample size
Use of sample can save time and money (Economical) and to obtain detail information and
structure of population. The researcher take sample size 100 customer will take by using
following formula of proportional
To determine
n=N/1+N(e)^2 (source from business statistics 2nd edition)
n=where n-sample
N=Total population
e= Error
N=N1+N2+N3+N4+N5
N1-Awash=11500 n= = 75400/1+75400(0.01) =99.87 ≈ 100
N2_oromia international= 18450
N3-C.B.E=24150
N4-Dashen=15400
N5-Brihan bank=5900
3.7. Data processing and Analysis
After all the necessary data will be collected, data processing and data analysis have been
carried out. Data processing to make the raw data suitable for analysis and classification were
made. Finally, the raw data were organized in groups on the basis of common characteristics.
Descriptive analysis method of data is used because the collected data is more of qualitative
type. In order to interpret the data the researcher had use tables, graphs, percentage and
charts.
CHAPTER FOUR: TIME AND BUDGET BREAKDOWN
4.1. TIME SCHEDULE
No Activities Dec Jan Feb Mar Ap May June July
1 Proposal preparation
Finalizing and submission
2 of proposal
3 Data collection
Data organization and
3 submission of first draft
4 Writing final draft
5 Submitting final draft
6 Defense
4.2 Budget Break Down
No Stationeries Unit price Quantity Total price
birr cent Birr Cent
1 Paper - 1pac 500 -
2 Pen 10 - 1pac 200 -
Other
1 Type write 5 - 35 page 105 -
2 Duplication 2 - 35page 70 -
Total 805.00
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Laroche,M.,J.Rosenblatt and T.Manning,(2001) service used and factors considered
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