Chapter One: Introduction

1.1 Background of the Study

Banks play a critical role in the intermediation of economic needs, serving as profit-oriented financial
institutions that drive economic growth and monetary development. They act as intermediaries for the
financial sector, ensuring the flow of money within the economy. Jain (2020) notes that banks perform the
essential function of providing liquidity, profitability, and safety to the financial system.

Customers, whether individuals or businesses, are the primary source of income for banks, as they
purchase financial products and services (Chivandi et al., 2019). Adebisi & Matthew (2015) emphasize
that customers are vital for the survival of any business, making their satisfaction key to a bank’s success.
In the competitive financial sector, banks must understand the needs of their customers to design effective
marketing strategies and stay competitive (Grewal & Levy, 2019).

Consumer behavior in bank selection is influenced by several factors. Cultural, social, and psychological
aspects significantly affect how customers choose banks, and while banks may not directly control these
factors, they must consider them (Kotler & Armstrong, 2011). Several studies indicate that bank selection
is driven by convenience, accessibility, digital capabilities, competitive rates, and service quality
(Almossawi, 2010; Mokhlis et al., 2009; Lee & Shin, 2018). Understanding these factors allows banks to
develop offerings that meet customers' financial needs, particularly in developing economies (Ketema,
2020; Rahmayati, 2021).

Given these insights, this proposal seeks to explore a potential partnership with Wegagen Bank, focusing
on how a tailored product-service offering can meet evolving customer demands in Ethiopia’s competitive
banking landscape.

1.2 Statement of the Problem

The banking sector in Ethiopia is becoming increasingly competitive, with many institutions offering
similar products and services. To remain competitive, Wegagen Bank must identify the key factors that
influence customer choice when selecting a bank. Research suggests that variables such as service
charges, loan provision, and digital banking solutions are critical in determining customer preferences
(Bhatt & Jain, 2020). However, more specific and localized research is required to understand the
Ethiopian market fully. This proposal aims to address this gap by examining the factors that most
significantly influence customer bank selection decisions.
1.3 Research Questions

This proposal will aim to answer the following research questions:

1. How will service charges affect customers’ bank selection at Wegagen Bank?
2. How will interest rates on loans and deposits influence customer bank selection?
3. To what extent will the initial deposit requirement influence customers' bank choice?
4. How will loan provision affect customer preferences?
5. How will E-banking services impact customer bank selection?
6. How will ATM services affect bank choice?
7. To what extent will the number of branches influence customers’ selection of Wegagen Bank?
8. How will the safety of funds influence customer trust in Wegagen Bank?
9. How will personalized customer service impact customer bank selection?

1.4 Objectives of the Study

1.4.1 General Objective

The general objective of this proposal is to investigate the factors affecting customer bank selection in the
context of a potential partnership with Wegagen Bank.

1.4.2 Specific Objectives

1. To assess the impact of bank service charges on customer selection of Wegagen Bank.
2. To analyze the influence of interest rates on loans and deposits on bank selection.
3. To evaluate how the initial deposit requirement affects customer preferences.
4. To determine the impact of loan provision on customer bank choice.
5. To examine the role of E-banking services in influencing customer selection.
6. To explore how ATM services affect customer choices.
7. To assess the influence of branch availability on customer bank selection.
8. To investigate the effect of fund safety on customer trust and bank selection.
9. To examine how customer-based services impact bank selection at Wegagen Bank.

1.5 Research Hypotheses

The following hypotheses will be tested to determine the significance of various factors on customer bank
selection:
  H1: Bank service charges will have a significant effect on customer bank selection.
 H2: The number of branches will significantly influence customer bank selection.
 H3: Loan provision will significantly affect customer bank selection.
 H4: E-banking services will have a statistically significant influence on bank selection.
 H5: Safety of funds will significantly influence customer trust and bank selection.
 H6: Initial deposit requirements will affect customer decisions.
 H7: Interest rates on deposits and loans will significantly influence bank selection.
 H8: ATM services will impact customer bank choice.
 H9: Personalized customer service will significantly affect bank selection.

1.6 Significance of the Study

This study has both theoretical and practical implications. Theoretically, it will add to the body of
knowledge on factors influencing customer bank selection in developing economies. Practically, it will
provide insights to Wegagen Bank on how to tailor its services to better meet customer needs, potentially
increasing its market share and customer retention rates.

1.7 Scope of the Study

This study will focus on examining nine key factors that influence customer bank selection in the context
of Wegagen Bank. These include service charges, initial deposit requirements, loan availability, E-
banking services, fund safety, branch availability, interest rates, ATM services, and personalized customer
service.

1.8 Limitations of the Study

The findings of this study may be limited to the context of Wegagen Bank and may not be generalizable
to all Ethiopian banks or other countries. Additionally, the cross-sectional nature of the study may limit its
ability to capture long-term trends. A future longitudinal study could provide deeper insights into how
customer preferences evolve over time.

1.9 Organization of the Proposal

This proposal is structured into five chapters. Chapter One provides an introduction to the study, including
the background, problem statement, research questions, objectives, hypotheses, significance, scope, and
limitations. Chapter Two will cover the literature review, while Chapter Three will detail the research
methodology. Chapter Four will present data analysis and findings, and Chapter Five will offer
conclusions and recommendations
CHAPTER TWO: REVIEW OF RELATED LITERATURE REVIEW

2.1. Introduction

The main ideas of customer bank selection are covered in this section, along with the variables that
affect that choice. Additionally, this chapter presents theoretical frameworks, empirical research, a
literature review, and knowledge gaps in the field.

2.2. Theoretical Review

2.2.1. Banking sectors

Banks are financial entities that accept deposits from the general public and collect funds from any
other available sources so they may offer loans to anyone who needs them. The bank is a business
that deals with credit and money. Customers' deposits are accepted, and it offers loans and advances
to people who need credit for a variety of reasons. Accepting deposits with the goal of lending
money or making investments is referred to as banking. Additionally, banking entails offering a
variety of other financial services in addition to its primary banking activity of receiving deposits
and disbursing loans (W/Mariam, 2011).

2.2.2. Rational choice theory and competition theory

The rationality of choice theory and competition theory are the pertinent theoretical expositions that
support the investigation. The competition theory examines how businesses attempt to
compete for customers' patronage and loyalty through service improvements, meeting customers'
needs, and offering innovative products, whereas the rational choice theory offers helpful insights
into the preference or selection behavior of individual or business customers. A framework for
comprehending and frequently formally modeling social and economic behavior, choice theory is
sometimes known as rational choice theory or rational action theory (Aregbeyen, 2011).

According to rational choice theory, people are driven by the desires or goals that represent their
'preferences'. The link between preferences and limitations may be conceptualized in terms of a
means to a goal, which is the easiest way to understand it from a technical standpoint. According to
rational choice theory, people must choose which course of action is best for them by anticipating
the results of many options. Those who make rational decisions select the course of action that is
most likely to satisfy them (Scott, 2000).
When two or more businesses work independently to provide their goods to the same market of
customers, competition results. When businesses create comparable goods that appeal to the same
market segment, direct competition develops. When various businesses produce or market goods
that compete for the same amount of money in customers' pockets without engaging in direct head-
to-head rivalry, this is known as indirect competition (Aregbeyen, 2011).
2.2.3. Definition of customer

A customer is a person or corporation that makes a purchase of products or services from another
firm. Customers are crucial to businesses because they generate income; without them, they would
cease to exist. All organizations battle with one another to draw clients, whether through aggressive
product promotion, price reductions to increase clientele, or the creation of distinctive goods and
services that clients adore (www.investopedia.com).

2.2.4. The Consumer Behavior Theory

The buying habits of end customers are referred to as consumer behavior. It is the actions that
customers take while looking for, buying, using, assessing, and discarding the product—or it might
be the concept that they have for the item that will meet their requirements. Therefore, the goal of
the study of consumer behavior is to comprehend how consumers choose how to allocate their
available funds for purchases (Kotler & Keller, 2006). Understanding the fundamentals of consumer
behavior is essential because, according to marketing literature, the customer is the fundamental
idea of marketing, making it a crucial component of both marketing research and marketing
decision-making (Baines & Fill, 2014).

Consumer behavior is impacted by attitudes and expectations in addition to extrinsic variables. As a

result of a constant stream of events, knowledge, and personal experiences, these attitudes and
expectations are always shifting (Peer, 2009). Kotler & Armstrong (2011) add the study of how
people or groups acquire, utilize, and discard products, services, ideas, or experiences to meet their
needs and desires to your definition of consumer behavior.

2.2.5. Steps in the Customer Decision Process

Researchers realized that decision-makers possess a set of approaches ranging from careful analysis
to pure whim, depending on the importance of what they are utilizing and how much effort they are
willing to put into the decision.

A. Need or Problem Recognition

The buying process starts with recognition. The buyer recognizes a problem or need.

B. Information Search

After a need is recognized, the consumer goes on an information search to be able to make the right
purchase decision. He gathers information about the product category and its variations, various
alternatives, and various brands. Such a search could be ongoing, specific, or incidental.

C. Evaluation of Alternatives

Once the consumer has gathered information and identified the alternatives, he compares the
different alternatives available for certain features.

D. Purchase Decision

After the consumer has evaluated the various alternatives, he selects a particular brand. Consumer
purchases may be trials, first purchases, or repeat purchases.

E. Post-Purchase Behavior:

After the purchase, the consumer uses the product and reevaluates the chosen alternative in light of
its performance in relation to expectations. (Kotler & Armstrong, 2011).

2.3. Empirical Review

The study of client bank choice behaviors throughout the world has received a lot of attention for a
number of years. However, because many procedures and approaches were employed, it was shown
that no one aspect had a greater impact on customers' selection decisions than others.

2.3.1. International studies

Numerous bank-specific factors, including the number of branches, e-banking, service fees,
availability of services, prices, accessibility, innovative products, quality of facilities, staff
management, reputation and confidence, financial performance, and bank loyalty, have been
identified in prior studies that focused on bank selection criteria. Numerous variables, in the eyes of
the banks, influence the clients' bank choices. In this research, several of these elements are brought
up and looked at.

2.3.1.1. Number of branch

According to research by Mohamad et al. (2014) and Ahmed (2011), the presence of several
branches in various areas was one of the key elements in customers' decisions to choose a bank.
Other research has found that clients are more likely to choose a bank with more branch locations
(Katitcioglu et al., 2011). It is more convenient for a consumer to conduct business with a bank
when there are more branch offices.

In order to determine clients' retail bank selection decisions in South Africa, Muzenda (2014)
conducted research in which five factors were taken into account: security, service quality,
technology and service, location, and affordability. According to the survey, security perceptions
have a significant impact on customers' bank decisions, whereas pricing has less of an impact.
Mwange (2017) tried to look at the factors that influence University of Zambia students' choices of
commercial banks. The researcher's findings also revealed that out of 40 factors that affected
student bank choice, the top ten in descending order were as follows: bank proximity to the
university; recommendation from a friend; the number of tellers in the bank; the fact that the
university already uses the bank; the convenience of the location; the reputation of the bank; the
friendliness of the staff; the proximity to the student's home; and innovative e-banking services
(Garba, Jaji, & Usman, 2017). With support from the state of Bauchi, the authors looked at the
factors that influence bank choice in northern Nigeria. They claimed that technology and security
issues have a role in influencing customers' choices of banks among bank customers in the research
region.

The goal of the study by Srouji, Halim, Lubis, and Hamdallah (2018) was to determine the factors
that influence which bank clients in Jordan, both Islamic and conventional, are chosen. The key
findings indicated that, in contrast to conventional banks, clients of Islamic banks were more
influenced by their religious beliefs. While bank convenience and bank reputation and images were
positively significant for both types of banks, only conventional bank clients were influenced by
factors such as service quality, branch locations, ATM accessibility, transaction processing speed,
and bank image. In their study, Oluwaseyitan, Hashim, and Yusof (2018) investigated the factors
that international students at Malaysian public institutions consider while choosing a banking major.
Five of the nine factors identified in the literature as the main predictors of banking choice among
foreign students were revealed by their study's findings. These include (i) outside factors,
(ii) convenient locations, (iii) ATM accessibility, (iv) high-quality services, and (v) financial gains
from saving.

According to Fathelrahman (2019), the main factor influencing bank customers' choices in
Sudanese banks to rank the most crucial factors in bank selection, mean analysis and exploratory
factor analysis are used. The primary findings of the study indicated that corporeal efficiency is the
most significant factor that has affected the customer's choice. Bank marketing initiatives,
convenience, and service delivery are other criteria that are considered to be significant. In
his research, Bugyei (2020) looked at the factors that influenced bank choice in the Ghanaian
municipality of Mfantseman. The results showed a strong correlation between client bank
preference and bank branding, promotion, accessibility to bank locations, and the types of electronic
services provided by banks.

2.3.1.2.Service charge

Aregbeyen (2011) highlighted cheap or fair service charges as one of the primary reasons for a
bank's selection by the selected respondents. Kumar (2017) also found out in his study that the intra-
bank banking charge or fee is playing a key role in influencing client bank decisions. Based on the
study performed by Lelissa & Lelissa (2017) to examine the primary factors influencing bank
selection decisions by consumers in Ethiopia, most of the customers appear less sensitive to the
costs of different banking services. Based on the study done by Tehulu and Wondmagegn (2014),
they identified elements impacting consumers. According to their research, reduced service costs
have no substantial influence on clients selecting their own banks (Commercial Bank of Ethiopia,
Dashen Bank, Wegagen bank, and Wegagen Bank) over a unified bank. Furthermore, Maiyaki
(2011) believes that service cost and benefit have minimal impact on bank choices. Service fees on
their accounts are one of the most critical elements in consumer bank selection decisions (Owusu,
2014).

Kumar (2017) wanted to advance academic knowledge and comprehend the management
ramifications of Bangladeshi clients' bank selection criteria. The results demonstrate that the intra-
bank banking fee or charge has a significant impact on the banks that customers choose. One of the
key criteria affecting client bank decisions is a sizable ATM network with adequate security.

According to Dogbe, Bamfo, and Sarsah's study (2019), they looked at the bank selection factors
used by Ghanaian university students. The variables that assess students' choice of bank criteria
were initially identified using exploratory factor analysis. Six components were culled from the
study to quantify university students' bank-choosing criteria. These included operational skill,
outside influence, tangible proof, e-banking capabilities, ease of use, and the expense of
maintaining a bank account. Out these, e-banking facilities, convenience and cost of operating a
bank account, were statistically significant in determining the selection ofa bank.

2.3.1.3. Requirement of initial deposit

The bare minimum required to open an account with a financial institution, such as a bank, is
known as the minimum deposit or initial deposit. The bank required a variety of materials when
customers opened bank accounts. such as an ID card, a photo the size of a passport, and a down
payment. Every bank has certain requirements, one of which is a minimum starting deposit. The
minimal sum of money required to open an account with a financial institution is known as a
minimum or initial deposit. Therefore, the requirement for a minimum initial deposit influences the
clients' choice of bank.

There have been several studies conducted on the effect of initial deposit requirements on customer
bank selection. One study published in the Journal of Financial Services Research found that higher
initial deposit requirements were associated with lower customer satisfaction and loyalty,
particularly among low-income customers (Bauer et al., 2007). Another study published in the
Journal of Retailing and Consumer Services found that initial deposit requirements were not a
significant factor in customer bank selection, but rather convenience and accessibility were the most
important factors (Wang et al., 2014).

Additionally, a survey conducted by Bankrate found that 38% of Americans would not be able to
come up with $1,000 in an emergency, which suggests that high initial deposit requirements may be
a barrier for many potential customers (Bankrate, 2019). A research study was conducted on the
factors influencing the criteria used by Nigerian business clients when choosing banks (Aregbeyen,
2011). The survey finds that the main factors influencing consumers' choice of banks are the safety
of their money and the accessibility of technology-based services. Significant disparities in factor
choices and preferences were also seen across the age and gender spectrum.

Overall, while the importance of initial deposit requirements may vary among customers, it is
important for banks to consider the potential impact on their customer base and offer flexible
options to cater to a range of customers.

2.3.1.4. Safety of funds

A degree of guarantee for money put in banks equates to financial safety. Aregbeyen (2011)
performed a study on the factors influencing Nigerian business clients' bank choice criteria. In the
course of his inquiry, a total of 1750 responses on the significance of 25 distinct aspects were
sought out and examined when choosing a deposit bank. According to the report, one of the main
factors influencing consumers' bank selection is the protection of their money. The study (Tehulu &
Wondmagegn, 2014) found that a major factor in client bank selection is the safety of money.

2.3.1.5. Availability of ATM service

An automated teller machine, sometimes known as an ATM, is a type of self-service banking

facility. Customers of the bank can check their balances and withdraw cash. By placing ATMs in
various locations around the nation, different banks provide ATM services. The number of ATMs
may be the most crucial selection factor for bank clients, according to certain research in the
literature. According to Saleh, Rosman, and Nani's (2013) research, one of the most important
factors influencing a customer's decision to choose a bank in Kelantan, Malaysia, was the
availability of ATM service. This factor is made up of multiple components, including the
availability of ATM services around the clock, the availability of ATM facilities at banks, and
accessible ATM locations.

Layla and Amaldeen (2021) identify the selection standards for businessmen applying to Saudi
Arabian banks. Through survey analysis, the researchers' approach was used to ascertain and
comprehend the criteria that businessmen consider when choosing a bank. The findings
demonstrated that businesses were more interested in commercial banking. The variables that
influence clients' decisions to use a bank include the country's economy and the circumstances that
led them to make the decision about the bank. Other significant aspects are Internet banking, more
ATMs, and the goods and services offered by the bank. In order to determine the most crucial
elements affecting consumers' decisions while choosing a bank in Malaysia, Saleh et al. (2013)
questioned 100 Muslim and non-Muslim bank customers. Their research demonstrates the
importance of accessibility as a selection factor, which includes ATM facilities, convenient ATM
locations, 24-hour availability of ATM services, and quick service. On the other hand, reliability,
responsiveness, value-added service, convenience, and assurance also increase in importance.

2.3.1.6. E-Banking

E-banking is a platform that allows for the virtual provision of financial services. With the advent of
technologies like ATMs and e-banking, the rivalry in the banking sector has intensified, and clients
are anticipating a rise in demand for financial services (Hinson, Osarenkhoe, & Okoe,
2013). Some of the most common e-banking procedures at banks that offer the service to their
customers include balance inquiries, cash withdrawals, transfers within the same bank, and
statement printing. The several e-banking channels that banks employ to offer these services to their
clients include ATMs, debit cards, internet banking, and mobile banking.

2.3.1.7. Provision of loans

The main duties of a bank are to receive deposits and give loans to their clients. Customers' requests
and wants will determine how the banks will provide loans. The banks additionally assess client
applications in light of the institution's lending criteria and the federal loan policy. Due to the loans'
inherent risk of default, the majority of banks offer small loans. Customers must borrow money
from financial firms, in their opinion. One of the deciding elements in a customer's choice of bank is
the loan.

Banks are financial organizations that provide loans and take deposits. A local bank is often where a
person gets a loan if they need one to buy a house or a car. The majority of Americans maintain a
sizable amount of their financial assets in banks as deposits in checking or savings accounts or other
forms of bank accounts. Banks should be the subject of the most thorough research since they are
the biggest financial intermediaries in our economy (Mishkin, 2004).

2.3.1.8. Provision of customer-based service

The provision of customer-based service has been found to have a significant impact on customer
bank selection. One study published in the International Journal of Bank Marketing found that
customers who perceived higher levels of customer service were more likely to choose a particular
bank and remain loyal to that bank (Singh & Srivastava, 2012). Another study published in the
Journal of Financial Services Marketing found that personalized service and attention were
important factors in customer satisfaction and loyalty (Liu & Chen, 2015).

Furthermore, a survey conducted by Accenture found that 52% of customers would switch banks if
they received poor customer service, highlighting the importance of providing high-quality service
to retain customers (Accenture, 2019). Sahadev and Swati (2020) researched the bank's client
selection criteria in Nepal. In order to accomplish their goal, 137 questionnaires were distributed
and collected from respondents among the specified demographic of customers of a commercial
bank in the Nepalese city of Bhairahawa. Reliability is the most crucial criterion or aspect affecting
the client in choosing a bank, according to a conclusion from their survey.
According to the findings of the factor analysis, convenience and dependability are the key factors
in choosing a bank. Value-added services and timeliness, on the other hand, were the two least
important factors for Nepalese clients when choosing a bank.

In their study, Ibrahim, Hamid, and Abdulai (2021) look at first-year students' bank selection and
loyalty decisions (most of them are opening or operating bank accounts for the first time on their
own). We performed an exploratory analysis on 320 valid surveys. The survey discovered that, in
Ghana, elements affecting people's decisions to choose a bank included, in order of importance:
bank service, convenience, service quality, bank image, staff attitude or recommendations, core
service, communication, and customer service. Additionally, in order of significance, it was
determined that friendly operations, rules, relationship management, service quality/financial
advantages, customer happiness, and bank image were accountable for their continued devotion to
banks in Ghana.

Overall, the provision of customer-based service is an essential factor in customer bank selection
and retention. Banks should focus on providing personalized and attentive service to meet the needs
and preferences of their customers.

2.3.1.9. Interest

Interest is a revenue or payment that is taken into account on loan and deposit accounts. Different
methods can be used to calculate interest. The results of the principle (amount of money), interest
rate, and time period are the total interest. One of the economic factors that is most heavily
scrutinized is interest rates. The primary source of income for banks is interest. Banks typically
generate money by receiving deposits with lower interest rates and offering loans with higher
interest rates. The banks' profit share is represented by the difference between the two interest rate
levels. Customers choose their banks based on the fact that they receive income from their deposits
as well.

The change in interest rates has the most impact on interest rates. They immediately impact our
daily lives and have a significant impact on the state of the economy; thus, the news media covers
their movements virtually every day. They have an impact on the choices that individuals make for
themselves, including whether to spend or save, whether to buy a home, and whether to invest in
bonds or save money. Interest rates can have an impact on how firms and families make financial
decisions, such as whether to invest in new manufacturing equipment or save money in a bank
(Mishkin, 2004).

2.3.2. Local studies

A few studies on consumers' bank choice decisions have been done in Ethiopia. Among these,
W/mariyam (2011), Tekletsadik (2013), Tehulu and Wondmagegn (2014), Tessema (2016),
Agarwal (2017), Kebede (2017), Lelissa and Lelissa (2017), Yeshitila (2017), Eshetu (2018),
Addisu (2018), Tesfaye, Abera, Menegesha (2018), Shewmolo and Gwtwnet (2020), and Hussen
(2022) are a few to mention. W/mariyam (2011) conducted a survey of 201 bank customers using a
non-probability convenience sample approach to examine the factors that influence customer
satisfaction in banking in Ethiopia. According to his research, the two most essential factors for
customers when choosing a bank are convenience and service for all clients, with the bank's image
ranking second.

He advised bank managers to consider using hierarchical information integration as a tool to

investigate difficult decision-making issues like choosing a bank. In his research on Addis Abeba
city, Tekletsadik (2013) determined that convenience, reliability, and service supply were the most
crucial elements. He employed factor analysis and 120 consumers from four Addis Ababa banks in
his study. Finally, this research showed that ease, dependability, and service supply for the whole
customer base are the primary elements influencing customers' choice of bank. On the other hand,
product variety, reputation, and referrals from family and friends are the three least significant
considerations for clients when choosing a bank.

In their study, Tehulu and Wondmagegn (2014) examined the factors that influence consumers'
decisions to choose private or state-owned commercial banks in Ethiopia. In their study, they used a
survey method, especially a questionnaire, to gather information from 204 customers at five
commercial banks who participated in a sample. According to the findings of their study, important
factors included the staff's pleasant or friendly demeanor, ATM service, bank speed, service quality,
external bank appearance and internal seating arrangement, a secure feeling, proximity to one's
home or place of employment, the availability of multiple branches, and lengthy operating hours.

Tessema (2016) looked into the value of bank selection criteria for consumers who use several
banks and how clients rate the criteria according to how important it is to use different banks and
banking services. He also included 193 respondents and employed non-probability convenience
sampling. His research's conclusions revealed that choosing between many banks is greatly
influenced by branch location and ATM accessibility.

Agarwal (2017) also did the study in Arba Minch City. He employed a sample size of 385
consumers from any bank in his analysis, and he contacted the clients and collected their comments.
The author indicated that the result of his study states that technology factors and social influence
are significant factors, while convenience factors have aninsignificant impact.

By using data from Addis Abeba, Shode (2016) performed research on the factors that affect
customer satisfaction at the Commercial Bank of Ethiopia. In his research, seven branches were
chosen at random. Five-point Likert-scale questionnaires were created and given to 210 consumers
on a convenience sampling basis in order to accomplish the study's goal. According to his study, the
main factors influencing customer satisfaction in Ethiopian commercial banks were found to be
service quality, service features, and a customer-compliant handling mechanism.

In their 2017 study, Lelissa & Lelissa looked at the key factors influencing bank choice and client
loyalty in Ethiopia. This study uses an exploratory factor analysis on the 101 questionnaire, which
includes 38 component components, to identify the important bank-specific and personal aspects
that affect the consumers' bank selection. They discovered that the most important determining
elements in choosing a bank appear to be the availability and quality of services, as well as the
standard and accessibility of physical and human resources.

In Addis Abeba, Yeshitila (2017) looked at the elements that influence bank choice and how clients
rank those aspects according to how important they are to using banks and financial services. 358
bank customers from various jobs, ages, and income levels in Addis Abeba city participated in the
study, which utilized a two-stage stratified sampling procedure and both qualitative and quantitative
data analysis methodologies. His research's conclusions showed that while service quality, financial
advantages, and bank reputation have significant negative relationships with bank selection,
convenience, security, technology, marketing, and promotion, the bank's image and proximity have
significant positive relationships.

Eshetu (2018) also did a study on the empirical examination of the selection criteria used by Addis
Ababa University graduating students. He also chose a total of 400 graduating students for his study
using a non-probability convenience sampling approach. According to the study's findings,
students' judgments on which banks to choose are influenced by convenience, the availability of
branches and ATMs, bank reputation, and online banking. According to this survey, banks should
think about expanding the number of branches and ATMs that are conveniently accessible on
campuses, at homes, and at places of employment, have convenient operating hours, and provide
electronic banking services.

Addisu (2018) measured the strength of the link between the dependent variable of each of the five
commercial banks' selection decisions and the determinant factors using descriptive statistics and a
multinomial logistic regression model (MLRM). The results of the multinomial regression model
showed that the significant factors influencing customers' decision to choose a bank were gender,
age of respondents, educational levels, types of employment, friendly or pleasing staff manners,
ATM service provision, number of counter windows, speed, service quality, external appearance,
sitting arrangement, total assets of banks, safety of funds, secure felling, number of branches, and
proximity of the bank to home or workplace.

Tesfaye, Abera, and Mengesha (2018) set out to examine the variables that affect customers' choice
of bank. They use a cross-sectional survey approach for their study, which is mostly based on
information gathered through questionnaires and interviews. The study used a 384-person sample
size. The results of their study showed that, of the five factors, four—technology, service quality,
bank image and reputation, and convenience—have significant and favorable relationships with
bank selection decisions, whereas financial factors have negligible relationships.

Shewmolo & Getnet's (2020) study sought to identify the key variables that consumers consider
when choosing a bank and how they rank these variables according to how important they are to
their decision to use Worabe Town, Ethiopia's banking services. 395 convenience bank customers
participated in a descriptive, cross-sectional survey that was used to determine the determinants of
bank choice across various vocations in the analysis. The results of their research show that group
effects, role, status, and family effects have a significant impact on customers' bank preferences, but
that culture has a negligible impact on customer bank preferences, and the five service quality
dimensions have a significant impact as well. According to their research, the five most crucial
factors for clients when choosing a bank are strong customer service, bank security, an ATM
facility, a wide range of services offered, and internet banking. Low service fees and parking
availability, on the other hand, are the two criteria that clients consider least when choosing a bank.
Hussen (2021) conducted research on creating an effective marketing plan to retain current clients
and draw in new ones. Commercial banks must determine the factors that influence client decisions
about which banks to use. The research is based on responses from 201 city of Addis Abeba
residents from a variety of professions (students, workers, and businesses). The results of his survey
show that ease and service provision for the whole customer base are the two most critical bank
selection criteria for clients, with the bank's image ranking second among male customers. The least
essential criteria for choosing a bank for a consumer are financial advantage, technology, reputation,
and an advertising plan for female customers.

As a result, research on bank selection decisions may be found in Ethiopia's contemporary literature
on banking. However, it is not thoroughly addressed, just as no study looks at how to influence a
client's choice to choose a bank by the criteria of starting deposit requirement, loan availability,
interest rates for both deposits and loans, and customer service availability. Therefore, our study
will try to bridge this gap.

2.4. Summary of the literature review and knowledge gap

A survey of the literature on the factors that influence customers' bank choice has been done.
According to a study of the literature, established and rising nations, including the United States,
China, Bangladesh, Malaysia, and Pakistan, are represented in the majority of research that has been
undertaken with the goal of determining the factors affecting bank selection decisions. The literature
analysis also finds that just a few studies have been done in Africa thus far, including those in South
Africa, Ghana, Nigeria, and Sudan.

Some research in Ethiopia looks at factors that influence bank choice. W/mariyam (2011) highlights
convenience and service supply as the two most crucial bank selection factors for clients in his
survey. In his study, Tekletsadik (2013) recognized convenience, dependability, and service
offering as the key elements. Tessema (2016) also found in his study that customers' choice of bank
is influenced by branch location and ATM accessibility. Commercial banks in Ethiopia have shown
that customer choice of bank is significantly influenced by service quality, service features, and the
customer complaint management system (Kebede, 2016).

Agarwal (2017) discovered that while convenience variables had a negligible effect on consumer
bank selection intentions, technology factors, social influence, service quality factors, bank image
factors, and financial considerations all had substantial effects. The study by Lelissa and Lelissa
(2017) concluded that the speed of services, the size of the branch network, the placement of
branches, and the accessibility to forex resources were the most crucial aspects. This was based on a
descriptive analysis utilizing mean scores and factor analysis. According to a study by Yeshitila
(2017), factors such as accessibility, safety, technology, marketing, promotion, the bank's
reputation, and proximity significantly influence the decision to choose a certain bank.

According to Eshetu's (2018) research, students' judgments on which banks to choose are
influenced by convenience, the availability of branches and ATMs, bank reputation, and online
banking. Addisu (2018) reported that the results of the multinomial regression model for the entire
sample showed that gender, age of respondents, levels of education, types of employment, friendly,
pleasant staff, ATM service provision, numbers of counter windows, speed, service quality, external
appearance, sitting arrangement, total assets of banks, safety of funds, secure felling, numbers of
branches, and proximity of the bank to home or workplace were the significant.

According to Shewmolo & Getnet (2020), consumers' banks are significantly impacted by group
effect, role and status, and family influence. According to Hussein's most recent survey (2021), the
two most crucial factors for clients when choosing a bank are convenience and service for all
customers, with the bank's reputation coming in second. This study attempts to fill a gap in the
literature by examining how initial deposit requirements, loan availability, e-banking, interest rates
on deposits and loans, and customer-based service provision in the case of Wegagen bank affect
customers' decisions to choose a particular bank.

2.5. The conceptual frame work

Based on the above-mentioned theoretical and empirical literature review, this study has identified
service fees, initial deposit requirements, loan availability, e-banking, the security of funds, the
number of branches, interest rates applied to savings and loans, the accessibility of ATM services,
and the availability of customer-based service as potential determinants of customers' bank
selection. As a result, the researcher created the conceptual framework below to direct the
investigation. The relationship between dependent and independent variables can be expressed in
the following.
Figure 2.1. Conceptual Framework of the study

Service Charge

Initial Deposit
Requirement

Loan Provision

E-banking

Safety of Funds

Number of
Branches

Interest on
Customer Bank Selection
Deposits
Provision of
Customer-Based

Source: Ara & Begum (2018)

As Figure 2.1 shows, consumers bank selections (dependent variable) is influenced by

bank specific (service charge, requirement of initial deposit, providing of loan, E- banking,
safety of funds, number of branch, interest in deposited and to loan, availability of ATM
service, provision of customer based service).
CHAPTER THREE: RESEARCH METHODOLOGY

3.1. Introduction

In this chapter, the research methodology will be described to explore the relationship between
factors influencing Wgagen bank customers' bank selection. It will include the research design,
target population, sample size and sampling procedure, data collection methods, and data
analysis approach.

3.2. Research Design

The study will adopt a descriptive research design to assess the factors determining customer
bank selection. A descriptive research design will allow for the collection of systematic data to
present comprehensive findings. Additionally, the research will incorporate an explanatory
design to explore the effects of specific bank factors on customer selection decisions.

3.3. Research Approach

A quantitative research approach will be utilized in this study. Data will be collected via a survey
questionnaire distributed to sample respondents. Quantitative research, as Creswell (2009)
suggests, involves methods like experiments and surveys that allow for objective numerical
analysis. This approach will be appropriate as it employs a scientific methodology, ensuring
reliable and valid data collection, enabling the study to generalize its findings to a broader
population.

3.4. Target Population, Sample Size, and Sampling Technique

3.4.1. Target Population

The target population for this study will be Wegagen Bank customers in Addis Ababa. These
customers will serve as the sample from which generalizations will be made.

3.4.2. Sampling Method and Sample Size

The study will adopt non-probability sampling, specifically convenience sampling, due to the
large target population. This method will be effective in reaching respondents at key locations
such as bank branches and ATMs. The sample size will be determined using Kothari’s (2004)
estimation formula, aiming to select 384 respondents based on a confidence interval of 95% and
a 5% sampling error.

3.5. Data Types, Sources, and Collection Instruments

3.5.1. Data Type and Sources

This research will rely on primary quantitative data collected through questionnaires. The
questionnaires will be tailored to elicit information directly related to customers’ bank selection
factors, ensuring relevance to the study’s objectives.

3.5.2. Data Collection Instruments

The data will be collected using structured, closed-ended questionnaires. These will be
administered to Wegagen Bank customers using convenience sampling at high-traffic areas such
as bank lobbies, queues, ATMs, and waiting areas. The questionnaire will use a Likert scale to
measure customers' attitudes toward various factors influencing their bank selection.

3.6. Methods of Data Analysis

The data collected will be entered into SPSS software for analysis. Descriptive statistics such as
mean and standard deviation will be applied, alongside multiple regression analysis to establish
the relationship between factors affecting customers' bank selection decisions. The regression
model will be used to predict the dependent variable, which is the customer’s bank selection
decision, based on independent variables like service charge, loan provisions, and ATM
accessibility.

3.7. Study Variables and Measurement

3.7.1. Study Variables

DependentVariable:
The dependent variable will be customer decisions regarding bank selection, measured using a
Likert scale. The study will focus on loyalty and confidence levels in customers’ choices.
IndependentVariables:
The independent variables will include service charges, initial deposit requirements, loan
provisions, e-banking, interest rates, branch network, ATM service accessibility, fund security,
and customer-based services. These factors will also be measured using a five-point Likert scale.

3.7.2. Measurement of Variables

The variables will be measured using a Likert scale, allowing respondents to rate the importance
of each factor influencing their bank selection decision.

3.8. Validity and Reliability

3.8.1. Validity

Internal and external validity will be achieved by ensuring that the questionnaires accurately
measure the intended constructs and that the results can be generalized to the broader population
of wegagen Bank customers.

3.8.2. Reliability

To ensure the reliability of the data collection instrument, a standardized questionnaire will be
used. The internal consistency of each construct will be tested using Cronbach’s alpha to ensure
reliability in the measurement of variables.

3.9. Ethical Consideration

Ethical considerations will be integral to the research process. Respondents will be informed
about the purpose of the study and will be assured of the confidentiality and anonymity of their
responses. Ethical guidelines will be followed throughout data collection, analysis, and reporting
to maintain integrity and responsibility in the research.