Service Quality and Customer Satisfaction in Interest-Free Banking: An Empirical Study of Commercial Bank of Ethiopia in Yabello Town

Tibebu Timotewos and Dilgasa Bedada Gonfa
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Tibebu Timotewos: Bule Hora University, P.O Box: 144, Bule Hora, Ethiopia.
Dilgasa Bedada Gonfa: Department of Accounting and Finance, Bule Hora University, P.O Box: 144, Bule Hora, Ethiopia.

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Abstract: Interest-free banking has expanded rapidly in Ethiopia, yet limited empirical evidence exists regarding service quality and customer satisfaction in underserved markets. This study examines how service quality dimensions affect customer satisfaction with Interest-free banking services at Commercial Bank of Ethiopia branches in Yabello town, employing a cross-sectional survey design with descriptive and explanatory approaches. Primary data collected through a structured questionnaire from 379 Interest-free banking customers selected via convenience sampling from 7,346 active account holders across three branches were analyzed using descriptive statistics, Spearman's rank correlation, and ordinal logistic regression after establishing instrument reliability through Cronbach's alpha testing. The majority of respondents expressed dissatisfaction with current Interest-free banking service quality, though six dimensions reliability, assurance, Sharia compliance, responsiveness, empathy, and accessibility demonstrated statistically significant positive associations with customer satisfaction; accessibility emerged as the strongest predictor, reliability showed the weakest significant effect, and tangibility did not significantly influence satisfaction, suggesting customers prioritize functional service attributes over physical facilities in this context. These findings indicate that Commercial Bank of Ethiopia should prioritize service accessibility and Sharia compliance to enhance customer retention, implementing regular feedback mechanisms and structured quality control systems to align service delivery with customer expectations, thereby contributing context-specific evidence on Interest-free banking service quality in emerging Ethiopian markets where accessibility functions as a critical satisfaction driver distinct from urban or developed banking contexts.

Date: 2026-04-06
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Published in Journal of Economics and Trade, 2026, 11 (1), pp.367-383

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05582831

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