Factors Affecting Customer Choice to use Interest Free Banking in Ethiopia: The Case of Commercial Bank of Ethiopia

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The capacity of Interest Free Banks to increase extensive market share in a challenging financial environment, mainly in a dual-banking system use similar Ethiopia, will primarily hinge in the ability of interest free banking to formulate and implement effective marketing strategy. This requires a pure understanding of factors affecting the customer awareness on interest free banking practices. To address the stated problems, this research identifying factors affecting of customer choice to use interest free banking product and services the case of Commercial Bank of Ethiopia. An explanatory approach used to investigate the factors affecting customer’s choice to use Interest free banking by using variable; awareness of customer, perceived risk, perceived financial cost and religious belief. Both probability and non-probability sampling were used in the sampling technique. A total of 399 respondents from different branches in Addis Ababa districts are selected for the purposes of this study. Out of these 369 respondents properly respond the questioner. And the data analysed through descriptive and inferential statistics using linear regression. By the findings, out of the proposed four factors in affecting customer choice interest free banking the case of commercial bank of Ethiopia, the three factors namely; awareness of customer, perceived risk and religious belief were found to be statistically significant but perceived financial cost has insignificant impact on customer choice on interest free banking. Furthermore, on the basis of the research findings appropriate recommendations along with implications for further studies have been forwarded.



Interest free banking, awareness’ of customer, perceived risk, perceived financial cost