Loan Customers Loyalty Switching Behavioural Determinants in Ethiopian Banks

Abstract

In this competitive global banking markets, customer switching is injurious to every bank. Banking sector reforms and emerging of foreign and domestic private banks with vast range of new banking products have changed the banking perspective. This diversity could make a positive or negative impact on banks customers’ loyalty and switching. This study investigates the seven factors namely Price, Reputation, Service Quality, Location, Promotion, Customer satisfaction and Switching cost which the loan customers may consider while switching to other banks. The study was undertaken between Jan 2017 – May 2017.A causal cross sectional survey was conducted among 450 purposively selected loan customers (who have taken loan more than 100000) of seven banks of Ethiopia in Addis Ababa. Factor analysis and multiple regression analysis were used to identify the predictors of switching behavioural determinants among customers. Based on the findings it can be concluded that Price, Service quality, Location, Customer satisfaction and switching cost variables significantly affects switching behavior of loan customers while Reputation and Promotion by the bank do not have significant effect on switching behavior of customers. Out of five significantly effecting factor Location (accessibility of the bank) is the most important factor followed by Price (loan interest rate) followed by service quality (consideration, personalized attention to the customer).

Keywords: Loyalty switching behavior, Loan customers, Price, Reputation, Service quality, Location, Promotion, Customer satisfaction, Switching cost