The Effect of Loan Service Quality on Customer Satisfaction at Zemen Bank Share Company in Addis Ababa

Abstract

The main purpose of this study is to assess the effect of loan service quality on customer satisfaction, specifically at Zemen Bank. To achieve the objective of the study an explanatory, descriptive, quantitative survey method was used based on SERVQUAL model measurements such as reliability, tangibility, responsiveness, assurance, and empathy. The population of the study mainly focuses on Zemen Bank customers who have an experience with the bank loan service. The sample size was drawn using non-probability sampling techniques, and 287 loan customers were taken as a sample size from ten selected branches located in Addis Ababa city. The study used both primary and secondary data. The primary data were collected by structured questionnaires filled out by borrower customers, and a 96% response rate is obtained. The data were tabulated, coded, captured, and presented by using SPSS statistical software. The study was used both descriptive and inferential statistical analysis methods to interpret the data. The descriptive assessment analysis revealed that the bank got the highest score for empathy followed by reliability and assurance dimensions. On the other hand, responsiveness and tangibility have gotten relatively lower scores. The Pearson correlation analysis result showed that the dimension of loan service quality has a positive relationship with customer satisfaction at the 0.00 significance level, assurance and empathy have the highest positive relationship with customer satisfaction, whereas tangibility and reliability shows a weak relationship with the borrower’s satisfaction. The regression analysis result shows that reliability, responsiveness, assurance, and empathy are statistically significant for customer satisfaction. Assurance has the strongest positive effect and is statistically significant on customer satisfaction, followed by empathy and responsiveness. However, tangibility has no positive impact on borrower satisfaction and is statistically insignificant. Finally, the study suggested some recommendations based on the findings; the bank should set up regular staff training focused on loan service and intelligence-building courses and create standard operating procedures for lending service. The bank should offer a contemporary internet and mobile application that allows borrowers to access full information about their loan-related service.