THE EFFECT OF INTEREST FREE BANKING SERVICE QUALITY ON CUSTOMERS’ SATISFACTION: A CASE STUDY ON AWASH BANK OF HWASSA CITY BRANCHET

Abstract

The success and endurance of banking industry nowadays depend on the quality services to customers and Interest free bank are not exception to this. Although the banking industry is starting and offering various types of IFB financial services to the public, their existence does not do any good unless they deliver a quality service. The purpose of this study is to determine the effect of service quality of non­interest bank on customers’ satisfaction using Awash bank as a case study. The study adopted modified SERVQUAL measurement dimensions comprising of six dimensions such as: assurance, reliability, tangibles, empathy, and responsiveness and compliance dimension signifies the ability of the organization to comply with Islamic law and principles in their operation. The research design used explanatory research design that shows the relationships and the effect of independent variables on dependent variables (in this case assurance, reliability, Compliance Islamic Law, tangibles, empathy and responsiveness on Awash bank IFB customers). The study utilized stratifying sampling techniques to select 326 customers who served as respondents in the study. Correlation and multiple regression analysis were employed as analytical techniques. The results show that Assurance is highly correlated with customer satisfaction which was followed respectively by compliance, empathy, reliability, responsiveness and tangibility dimensions. The results of this study indicate that, four the service quality dimensions (compliance, reliability, empathy and assurance) have positive and significant relationship with customer satisfaction but responsiveness and tangibility dimensions was not. Based on regression result it is observed compliance with Islamic law, empathy, assurance, and reliability dimensions have positive and significant impact on customer satisfaction. The other dimension that is responsiveness and tangibility dimensions has no significant effect on satisfaction. The study recommends that management of the bank should exploit and maneuver the service quality dimensions as a survival strategy for improving customers’ satisfaction in an industry characterized by intense competition and environmental dynamism