Determinants of Customers’ Intention to Use Interest Free Banking Products and Factors Affecting Employees’ Product Knowledge: the Case of Commercial Bank of Ethiopia
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Date
2017-06
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Addis Ababa University
Abstract
The capacity of Interest Free Banks to gain substantial market share in a challenging financial
environment, particularly in a dual-banking system like Ethiopia, will primarily hinge on the ability of
IFB’s to formulate and implement successful marketing strategies. This will require a clear
understanding of the attitudes of the potential consumers. On the other hand, in coping with
customers need, it is always questionable whether the employees of the bank are having adequate
training and knowledge on Islamic banking practices. In addressing the stated problems, this thesis,
therefore, examines the determinants of customers’ intention to use interest free banking products and
factors affecting employees’ product knowledge, in the context of Commercial Bank of Ethiopia. A
survey approach was used to investigate intention to use and products knowledge of IFB customers
and employees respectively. Unstructured questionnaire was used to collect qualitative data on
customers’ use intention. In general, eight and three hypotheses were developed and tested on
customers’ intention and employees’ product knowledge of the CBE with a sample size of 369 and 77
individuals respectively. Both descriptive and inferential analytical techniques were used. To analyze
the relationships among the variables, on the other hand, multiple regression and structural equation
modeling (SEM) were employed. The findings of the study on customers’ intention showed that, except
for Knowledge, all the other variables: Attitude, Social Influence, Perceived Financial Cost and
Religious Belief have significant effect on IFB use intention. Moreover, except for Underlying Arabic
Terminology, the other two variables: Underlying Sharia’ Principles and Training have significant
effect on Product Knowledge of employees. Furthermore, chi-square test was used to analyze the
association between selected demographic factors and IFB usage intention. The findings of this study
have shown that, except for educational level, all other demographic factors found to have an
insignificant effect on IFB adoption intention. To sum up, the study on customers’ intention contributes
towards a better understanding of the customers’ expectation. The management of the bank can now
comprehend better the factors that influence customers’ decision in adopting IFB in order to devise
effective marketing strategies to attract customers. Not to mention, the findings of this study should be of
value to IFBs in terms of expanding customer base. On the other hand, the study on employees’ product
knowledge suggests that the bank should train well its employees in order to cope with the current
dynamics of the banking industry.
Keywords: Intention to Use, Product Knowledge, Commercial Bank of Ethiopia, Interest Free
Banking
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Keywords
Intention to use, Product knowledge, Commercial bank of ethiopia, Interest free banking