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The main purpose of this study is to assess the level of customer satisfaction at Construction and

Business Bank based on the perception of credit customers. Five dimensions in service quality (servqual), such as Tangibility, Reliability, Responsiveness, Empathy, and assurance, were considered as the basis for this study. A structured questionnaire with 5-point Likert scale has been used to collect the data by conducting survey. 140 credit customers were taken as sample size and chosen on a convenient basis from10 branches located in Addis Ababa City. Data has been analysed using SPSS software (version: 20) and Excel programme. The findings of the study revealed that the majority of customers (slightly above average customers) are satisfied with bank’s quality of credit service delivery; this implies that there is undeniable number of customers who are dissatisfied with the bank’s credit services delivery. Among those factors that caused customer dissatisfaction are loan documentation process, period for loan approval and disbursement, lack of modern technology, margin of finance and system of credit service delivery. Besides, among the five service quality dimensions, reliability and assurance are where thehighest gap observed. The bank should understand and respond to expectations of customers when judging the quality of its service offering. Hence, it should be conscious of the reliability of its current service delivery process, employ improved technology like internet and mobile banking, provide proper customer service training to employees, conduct regular research to find out expectation about the various service aspect, and review the current credit procedure and service delivery standards. Credit, service, Customer satisfaction, Customer-Expectation, and Perception


This chapter introduces the phenomenon understudy. It consists of the background of the study, problem statement, research questions, and objectives of the researcher in carrying out the study, as well as the importance of the study to the organisation  in which the study is conducted and to other researchers on the topic. Besides, it addresses scope and limitations. of the study and the definition of key terms. The chapter finally outlines the structure of the thesis.

1.1 Background of the Study

service is a form of product that consists of activities, benefits, or satisfactions offered for sales that are essentially intangible (Papasolomous & Vrontis, 2006).

service quality of the service industries globally remains a critical one as businesses strive to maintain a comparative advantage in the marketplace (Hossain & Leo, 2009) and service quality becomes a primary competitive weapon (Stafford et al., 1996). Bank industries should focus on service quality as a core competitive strategy (Chaoprasert & Elsey, 2004). Banking service provide financial service that accept deposits and channelET  those deposit into lending activities, either directly or through capital markets (Shelton et al., 1995).

In order to achieve customer satisfaction, a good service quality provided must fitG specifications, stage where consumer specifications are met, fair exchange of , value at a price and potential for utilisation to achieve customer satisfaction in service (Collier et al, 1994).

Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectations. Customer expectation could be revealed in terms of reasonable service price, delivering quality service per standard time, procedures of service delivery, the way employees handle them, etc. It is important for company to increase profitability and achieve the profit target margin.


Verhoef et al. (2002) emphasised that companies need to be heavily focused on customer relationship development and management. The development of effective customer relationships is acknowledged as an essential component of marketing strategies in service industries (Chaniotakis et al., 2006).

Customer dissatisfaction can affect an organisation in various ways. First, a customer who experiences an unsatisfactory service encounter may never revisit that particular service provider again. Second, the customer may not only want to have that incident rectified but may also request that the damage done to their interpersonal relationship with the provider be repaired (Krapfel, 1985; Patterson & Johnson, 1995), thereby incurring costs to the organisation.

According to Mitchell (1995), there are possibilities of increasing customer profitability three times over by extending the relationship with them over a period of five years. Murphy (1996) added that banks must wait an average of six years in order to recover the initial cost of acquiring individual customers. Finally, perhaps the most damaging to the organisation is the tendency for an unsatisfied customer to engage in negative word-of-mouth communication (Richins, 1983). At this point, the organisation must worry about losing potential customers as well as current ones. The organisation needs to be able to differentiate between the numerous variables that influence the consumer's selection of exact coping strategies, thereby enabling them to respond in the most appropriate fashion and being aware that specific coping strategies may influence what consumers perceive to be satisfactory service outcomes.

Construction and Business Bank S.C. (CBB) is a wholly government-owned public enterprise and successor of the Housing and Savings Bank (HSB), which was formed in 1975 through the merger of two financial institutions, namely, the Imperial Savings and Home Ownership Association and the Savings and Mortgage Corporation of Ethiopia, which were nationalised at the start of the socialist era in Ethiopia.

Pursuant to the market-based economic policy of the country initiated by the government in 1992, HSB was reconstituted as CBB in September 1994 by regulation No. 203/94 with an authorised capital of Birr 71.8 million.

The regulation gave CBB the mandate to provide universal banking services. In line with this, CBB has ventured into commercial banking operations stage by stage, maintaining construction financing as its core business.

In September 2000, CBB was converted to a share company in accordance with the Ethiopian Commercial Code, with a capital of Birr 79.0 million. Currently, the bank, with a vision “to be the best performing bank in Ethiopia by 2020,” has 108 branches throughout the country and provides all banking services (http://www.cbb.com and internal source).

The goal of this paper is to assess the level of customers’ satisfaction with CBB, identifying gaps, potentials, and constraints based on the information collected from credit customers of the ten Addis Ababa City branches. The SERVQUAL model was an effective methodology for measuring customers’ perceptions, expectations, and satisfaction in the banking industry. As quality service becomes the primary competitive weapon in today’s service industries, particularly the banking industry, customer satisfaction should be a measure of how services delivered by a company meet or surpass customer expectations.

Therefore, the result of the study would help to alarm CBB’s management about the bank’s current level of performance in relation to the quality of service and customer satisfaction so that they extend their efforts to retain existing customers’ as well as attract potential customers.

1.2 Statement of the Problem

Customers’ satisfaction with the service includes the core products along with supplementary services. In the case of a bank, the core services are the products and features (deposits and credits), but supplementary services are the procedure of getting the services, the speed of service provision, the physical environment, and also the attitude of personnel (Lovelock, 2001).

Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectations. Due to their centrality and importance, customers perceive that they have the power to demand high-quality service (MacDonald, 1995). Besides, customers are now aware of the products and the range of financial services available to them (Akan, 1995).

According to Padilla (1996), exemplary businesses treat customer satisfaction in order to determine how to increase their customer base, customer loyalty, revenue, profit, market share, and survival.

Banks now understand that delivering quality service to customers is essential for success and survival in today’s global and competitive banking environment (Wang et al., 2003). This is due to banking services providing financial services that accept deposits from customers and channel those deposits into lending activities, either directly or through capital markets (Shelton et al., 1995). The key to providing superior service (benefits) is to understand and respond to expectations when judging the quality of a firm's service offering (Parasursaman et al., 1988). The ability of banks to deliver these benefits on a continuous basis has a significant impact on the level of customer satisfaction.

CBB, a government-owned commercial bank, is delivering full-fledged commercial banking services to the public (http//www.cbb.com).Among those commercial banking services, credit service is one of the major banking services it provides to customers. In its pursuit to improve its services, retain customers, and attract customers, CBB has taken different measures, like extending its business hours, spreading branch networking throughout the country, integrating all branches with core banking technology, setting standard service delivery times, and providing training to employees and management members in relation to credit service, among others. Despite these efforts, which aim at bringing satisfaction to customers, customers’ preferences and expectations seem not to match up with the bank’s initiatives. There are ceaseless complaints in relation to the credit service delivery of the bank. Among others, this is reflected in the sooner the loan was approved and disbursed to credit customers; the majority of them have immediately transferred the disbursed loan amount to other competitors’ banks, and their intention to further transact the bulk of their business's sales transactions with CBB is not satisfactory. This highly affected the deposit performance of the bank, and the bank’s deposit performance declined by 40% (Internal Report, 2015). Besides, and to the best of my knowledge, customer satisfaction research has not been conducted in particular in the credit service area of the bank.

The emerging situation, therefore, calls for the assessment of the level of customer satisfaction in relation to the quality of credit service delivery and the coming up of findings from the study to recommend a possible solution for improving credit service quality.

Research question:

  1. To what extent are CBB’s credit customers satisfied with the quality of service?
  2. Which factors of service quality dimensions caused customer dissatisfaction in CBB?
  3. Which of the five dimensions of service quality does CBB lack to meet customers’ expectation?
  4. What are the mechanisms for improving service quality in CBB?

1.3 Objectives of the Study

1.3.1 General Objective

The aim of the study is to assess the level of customer satisfaction atCBB in credit service by identifying gaps, potentials and constraints for the improvement of credit service quality.

1.3.2. Specific Objectives of the Study
  • To assess the level of customer satisfaction with service quality in CBB
  • To identify the major factors in the service quality measurement dimensions that brought customer dissatisfaction in CBB


  • To identify the service quality measurement dimensions that CBB should work more on towards customers’ expectation
  • To identifythe mechanisms for the improvement of service quality in CBB& provide feedback

1.4. Significance of the Study

The result of the study could provide insight to the management of CBB to help them meet the needs and expectations of their customers and maintain their'loyalty. The study can also create awareness to the bank’s management regarding the current level of performance in meeting customers’ needs by helping the bank examine its service procedure. The study may serve as reference document for further studies in to the activities of banking industry and customer satisfaction.

1.5. Scope of the Study

The study focuses on the level of customer satisfaction based on the quality of services towards banking by selecting credit service as line of banking services, which includes overdraft facility, pre-shipment facility, and short- and medium-term business loans.

The bank has branches in all region of the country; however, the study focused on selected branches of CBB located in Addis Ababa City. Only private individuals and companies that had credit account during February 2015 (during the distribution of questionnaires) were considered in the study. SERVQUAL model is used to identify the quality of service delivery and level of customer satisfaction. Descriptive statistic like mean, frequency and percentage will be used as statistical tools to undertake data analysis

For finding out the satisfaction level of customers, the study limits itself to a modified service quality dimensions which includes Responsiveness, Reliability, Assurance, Tangibility and Empathy.



1.6. Limitation of the Study

This study has resource (like time & money) limitations, so a portion of the total population was taken and the sample size restricted to 140 (one hundred forty) external customers. The   study also  limited only in 10 Addis Ababa city branches, which means it did not consider separate geographical location, hence different people with different expectation and perceptions towards customer services offered by the bank due to differences in culture, level of education &other geographical factors. In such case, tolerance level of waiting to get service & familiarity for technology may differ.



This sub topic contains operational definition of key terms and phrases that are related to the research topic. It includes what is meant by SERVQUAL, Credit, satisfaction, customer satisfaction, customer expectation, and customer perception.


  • Credit is a “transaction between two parties which one (the creditor or lender) receives the future payment from the other (the debtor or borrower)” (Basel committee on banking supervision, 1999).
  • Satisfaction is a post-consumption experience which compares perceived quality with expected quality (parasuraman et al., 1985).
  • Customer satisfaction is the customer’s evaluation of a product or service in terms of whether that product or service has met their needs and expectations (Zeithaml and Bitner, 2003).
  • Customer Perception: is defined as customers’ judgement of how service or product fulfils their needs, wants, and desires (Cadotte et al., 1987).


  • Customer Expectation: This is what the customer feels the service provider should offer

rather than what consumers would offer, desire, or want.

  • SERVQUAL: is an abbreviation derived from the term service quality.

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