Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

Challenges of Amhara Credit & Saving Institution In Relation To Service Quality Dimensions: In
Case of North Gondar Zone
Sewareg Getenet Gelaw
Lecturer, Department of Marketing Management, College of Business & Economics, University of
Gondar
Abstract
Having found that the improvements of service quality in ACSI are highly needed for the challenges
from the customers in line with service mix operations, the study identified the gaps in catering service
quality dimensions in an effectual manner. The main objective of this study was to assess the
challenges of ACSI in delivering its service to its customers and offer suggestions to design a strategy to
solve problems. A descriptive research design was utilized with the qualitative and quantitative research
approach. Data were collected from 100 consumers of ACSI, through questionnaires. The collected data
were analyzed thorough descriptive data analysis methods. The result of the study shows that some of
the dimensions of service quality have been challenging enough for ACSI as the respondents reported
their disagreement. The study offered specific recommendations for the improvements of service quality
on personal hospitality of employees and safe and secure of the institution attributed from the
dimensions of Empathy and reliability respectively.
Keywords: Service Quality, ACSI, Tangibility, Reliability, Responsiveness, Assurance, Empathy
1. Introduction
Service sector is the lifeline for the social economic growth of a country. It is today the largest and
fastest growing sector globally contributing more to the global output and employing more people than
any other sector. For most countries around the world, services are the largest part of their economy.
The real reason for the growth of the service sector is due to the increase in urbanization, privatization
and more demand for intermediate and final consumer services. Availability of quality services is vital
for the well being of the economy.
Microfinance institutions are found among the institutions which provide different financial service for
the poor who are out of the conventional banking system particularly in developing countries.
Microfinance Institutions (MFIs) provide financial services to poor clients who in most cases have no
access to formal financial institutions. During the last three decades, microfinance has captured the
interest of both academics and policy makers. This is, among other things, due to the success of the
industry (Assefa et al., 2013).
Since the first Proclamation of 1996 that gave the legal background for the operation of the micro-
financing business, the industry has witnessed a major boom. Today, there are 31 MFIs registered with
the National Bank of Ethiopia serving clients. The Ethiopian microfinance market is dominated by a few
large MFIs, all of which are linked to regional state government ownership. The three largest
institutions account for 65% of the market share in terms of borrowing clients, and 74% by loan
provision. These are Amhara (ACSI), Dedebit (DECSI) and Oromia (OCSSCO) Credit and Savings
Institutions (Ebisa et al., 2013).
Many studies which are conducted on microfinance institutions also indicate that, the contribution of
these institutions for poverty alleviation is significant. But the institutions face many challenges that
inhibit their contribution for the development of the country. Hurissa (2012) identified the challenges of
microfinance institutions by conducting research on the selected MFIs in Addis Ababa city. This study
of Ebisa et al. (2013) concludes that the importance of MFIs is unquestionable where they contribute a
lot to support the Ethiopian poor who are out of the formal banking system. The challenges of the
Ethiopian microfinance institution were identified at a country level in this research.
Micro finance institutions play a great role in supporting the economic activities of the rural and urban
poor in developing countries. Studies show that African MFIs are important actors in the financial
sector, and they are well positioned to grow and reach the millions of potential clients who currently do
not have access to mainstream financial services (Lafourcade et al., 2005).
For quite a long time, formal financial institutions were not serving a useful purpose for the Poor. In
developing countries the poorer section of the community did not get access to formal financial
sectors. They were simply kept out of the reach of the formal financial Institutions for several
reasons. First, formal financial sectors require collateral and credit Rationing. Second, they prefer for
high-income clients and large loans. Third, the processes and procedures of providing loan are
bureaucratic and lengthy. Fourth, they are often urban based and give lending to those engaged in
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trade and industry. Fifth, they usually consider the demand for loan by the poor as unattractive and
unprofitable (Bouman, 1984, cited in Padma and Getachew, 2005; Chowdhury (N.D); Ghate, 1992);
Khandker, 1998; and Henk M, 1998).
There is no exception in Ethiopia as rightly pointed out in several studies (See Gebeyehu, 2002;
Mulat et al, 1998 and Wolday, 2000, 2001 and 2002). Amhara saving and credit institution faces
different kinds of challenges to satisfying customer in its service delivery.
ACSI has kinds of problems on the way of service delivery for its customer. The current financial market
in the Amhara region faces problems of low access to channel (branches and other structures). The
branches of ACSI, through widely networked, face the challenge related to access. Given the dispersed
natures of the people‟s settlement and poor physical infrastructure, the branches are not equally
accessible for remote rural kebels.
On the other hand, traditional channels such as branch expansion are being very costly. Having had
many challenges, ACSI could not improve its banking penetration in the region with respect to setting
up of new channels such as technology solution, lack of know-how on customers, after credit low on
time return of creditors unsuccessful creditors lose. Thus the study has captivated the importance of
feeding the gaps with the research associated with the absolute conceptualization.
 Hence the objectives of the study are as follows
1. To assess the service quality dimensions of ACSI.
2. To identify the factor that affect service quality within the ACSI.
3. To investigate methods of improvements of service quality in ACSI.
4. To design a strategy to solve a problem toward service delivery.
2. Research Methodology
This study employed descriptive type of research design to assess the challenges that limit ACSI to
deliver quality service. The approach of both qualitative and quantitative with the target population of
ACSI north Gondar branches customers from three branches i.e. Azezo, Maraki, and Gondar has been
selected for the study.
The researchers have used convenience sampling technique where the total number of current
customers of ACSI in Maraki and Azezo branch is more than 47000 (data. December 2009). The
sampling size was determined as 100 through Yamane‟s (1967) formula to with 90% confidence and 0.1
assuming specifically.
Both primary sources of data were collected from customers and employees of ACSI through
questionnaires. On the other hand, secondary source of data were books, journals, magazines and
websites. The collected data from respondents were analyzed through descriptive statistics tools.
3. Literature Review
3.1 Service Quality Measurement
Since service quality attributes are not expected to be equally important across service industries, it has
been suggested to include importance weights in the service quality measurement scales (Cronin and
Taylor, 1992; Parasuraman, Zeithaml and Berry, 1995, 1998; Parasuraman, Berry and Zeithaml, 1991;
Zeithaml, Parasuraman and Berry, 1990). Gronroos (1990) identified six specific dimensions viz.,
professionalism and skills, reliability and trustworthiness, attitudes and behavior, accessibility and
flexibility, recovery, and reputation and credibility, on which service quality could be measured.
However, these dimensions have not been subject to any rigorous empirical testing, although a number
of studies have used scales based on such principles (e.g., Lehtinen and Lehtinen, 1991). Lehtinen and
Lehtinen (1982) discussed three dimensions viz., physical quality, involving physical aspects; corporate
quality, involving a service firm‟s image and reputation; and interactive quality, involving interactions
between service personnel and customers.
According to Parasuraman, Zeithaml and Berry (1988), five principal dimensions that customers use to
judge service quality include- reliability, responsiveness, assurance, empathy, and tangibles as shown
below;.
Reliability: the ability to perform the promised services both dependably and accurately. Reliable
service performed is a customer expectation and means that the service is accomplished on time, in the
same manner, and without errors every time.

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Responsiveness: the willingness to help customers and to provide prompt service. Keeping customers
waiting particularly for no apparent reason creates unnecessary negative perceptions of quality. If a
service failure occurs, the ability to recover quickly and with professionalism can create very positive
perceptions of quality.
Assurance: the knowledge and courtesy of employees so well so their ability to convey trust and
confidence. The assurance dimension includes the following features: competence to perform the
service, politeness and respect for the customer, effective communication with the customer, and the
general attitude that the server has the customer„s best interests at heart.
Empathy: the provision of caring, individualized attention to customers. Empathy includes the
following features: approachability, sensitivity and effort to understand the customer„s needs.
Tangibles: the appearance of physical facilities, equipment, personnel, and communication materials.
The condition of the physical surroundings is tangible evidence of the care and attentions to detail that
are exhibited by the service provider. This assessment dimension also can extend to the conduct of
other customers in the service.
3.2 Customer Satisfaction
Most researchers agree that satisfaction is an attitude or evaluation that is formed by the customer
comparing their pre-purchase expectations of what they would receive from the product to their
subjective perceptions of the performance they actually did receive (Oliver, 1980). Additionally, Yi (1990)
also stated that customer satisfaction is a collective outcome of perception, evaluation and
psychological reactions to the consumption experience with a product/service. Zeithaml and Bitner
(2003) translated Oliver‟s definition of satisfaction to mean that 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. The customer satisfaction literature shows that expectation is the most direct determinant
of satisfaction, followed by perceived performance (Kim, 2005). A review of the emerging literature
suggests that there does appear to be relative consensus among marketing researchers that customer
satisfaction and service quality are separate (i.e., unique) constructs that share a close relationship
(Bitner & Hubbert, 1994; Patterson and Johnson, 1993). In fact, satisfaction and perceived quality are
highly inter-correlated (Bitner and Hubbert, 1994). Both theoretical and empirical arguments for the
order of occurrence between quality and satisfaction have been put forwarded (Cronin et al., 2000), and
most marketing researchers accept a theoretical framework in which quality performance leads to
satisfaction (Dabholkar et al., 2000; Butcher, 2005; Butcher, Sparks, & O‟Callaghan, 2003).
Parasuraman et al. (1988) proposed that higher levels of perceived service quality result in increased
consumer satisfaction. Chen (2008) also in a study of mobile service industry showed that there is a
significant relationship between customer satisfaction and service quality.
In conclusion, customer satisfaction is defined as a result of customer‟s evaluation to the consumption
experience with the services. However, the customers have different levels of satisfaction as they have
different attitudes and perceived performance from the product/service.
Reichheld and Sasser (1990) state that satisfied customers are likely to buy more frequently and in
greater volume and to purchase other goods and services offered by the firm.
3.3 History of MFIs in Ethiopia
Since the takeover of the present government in 1991, considerable attempt has been made to liberalize
the financial sector. To this effect, Proclamation No. 84/94 was issued, which allows private
domestic investors to participate in banking and insurance activities, which Were previously
monopolized by the government. However, the issuance of this proclamation
Alone did not totally solve the financial problem of the economically active poor people in Rural and
urban areas (Seifu 2002). Another Proclamation, No. 40/96 was issued to solve the problem of the
delivery of financial services to the poor. Following the issuance of this proclamation the microfinance
industry of Ethiopia showed a remarkable growth in terms of outreach and sustainability. Furthermore,
the National Bank of Ethiopia issued a new directive on May 2002 to improve the regulation limits on
loan size (Br. 5000), repayment period (one year), and lending methodology (social collateral). The
government also started micro-enterprise lending program after signing a development credit
agreement (that is Market Town Development Project) with International Development Association (IDA)
on March 30, 1990) which has been managed by Development Bank of Ethiopia. The objectives of the
program were to finance very small businesses and household income generating activities, and to
provide at least 50 percent of the loan to women entrepreneurs (implementation completion
report, MTDP, 1999, cited in Asmelash, 2003). When one goes through the bulk of literature on
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the impact of microfinance, one can find quite different results, which are generally inconclusive. In
some cases, microfinance is said to have brought positive impacts on the life of the clients. A growing
database of empirical studies shows that microfinance has positive impacts to boost the ability of
poor people to Improve the conditions in which they live. Research works indicate that the poor have
taken advantage of increased earnings to improve consumption levels, send their children to school,
and build assets. In some other instances, microfinance is said to play insignificant role towards
mitigating the problem of the poor. But looking at the positive impacts, several studies indicate
that microfinance allows poor people to increase their incomes by starting new enterprises or
Expanding existing ones. The argument is that through diversified sources of income, the people could
be able to shield themselves against external shocks. Savings and micro insurance services could also
allow poor individuals to plan for future expenses, cope with stochastic crises and cover unanticipated
expenses.
In Ethiopia, microfinance institutions are considered to be useful development strategy to reduce
poverty having the objective to provide finance the poorest people. Micro finance holds enormous
potential for national economic growth by supporting the economic activates of the poor and thus
contributing to poverty alleviation; different researchers have shown the importance of saving facilities
for the poor specially when linked to loans made back into the same community. Microfinance
institutions are hybrid organizations, combining commercial and social goals (mekonnen yelewum
wossen, 2006). Microfinance is indicated among the specific means that is given grater emphasize and
is expected to play essential roll reducing poverty in rural areas of the country where the bulk of its
public dwell those most of the micro finance service providing institutes have articulated crating a small
and easily accessible loan to the poor as their primary objective with the expectation of fostering pro-
poor growth.
Most of micro finances like ACSI, aspires to see peoples of regions free form grips of abject poverty with
all the power determining their future in their own hands to ensure its institutional sustainability and
also it‟s to improve the economic situation of low income productivity poor Amhara region, primarily
through increasing access to lending and saving services. It will maintain cost effectiveness in service
delivery, and integrate its activity with government working towards achieving food security and poverty
alleviation in the region. Some of the importance of financial inclusions is listed below
 Benefit to the entire financial system
 Contributes to the wider context of economic inclusion
 Helps empower the low income people socio-economically
 Facilitate the establishment of stable financial intermediation
 Keeps financial stability and expansion of formal financial sector
 Facilitate efficient payments and transfers
 Develop effective monetary policy

Financial inclusion is a key factor in shaping the growth presses of the economy. Loan stimulant the
growth of economy saving services helps to be strong in domestic saving mobilization. Increasing access
to saving helps the community to become economic citizens. Credit and services coupled with other
financial services have important role in attaining grater economic and social security.
4. Data Analysis
In order to find out the Challenges of ACSI in line with service quality dimensions, the data collected
from the respondents has been the leading source to decide on the basis of the results leading to
discussions to meet the objectives of the study as follows.

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Table 4.1: Tangibility

No Question Description In In
number percent

1, ACSI uses state of the art technology and equipment‟s in Agree 10 10.62
their service delivery Strongly agree 14 14.8
Disagree 18 19
Strongly 38 40
disagree
Neutral 15 15.8
Total 95 100
2, Employees are well dressed and neat in appearance Agree 18 18.9
Strongly agree 12 12.7
Disagree 31 32.7
Strongly 17 17.9
disagree
Neutral 17 17.9
Total 95 100

Regarding the first item of the table 4.1, out of 95 respondents 38(40%) respondents strongly disagree,
18(19%) respondents disagree, 15(15.8%) the respondents were neutral, 14(14.8%) respondents said
strongly agree. 10(10.62%) respondents were agreed.
As discussed on the second item out of 95 respondents, by ACSI employee dressing neat style
31(32.7%) respondents were disagreed. 18(18.9%) respondents said agree. 17(17.9%) respondents said
strongly disagree and neutral. 12(12.7%) respondents said strongly agree. From this point of view we
understand that most of customers of ACSI are confused because it is hard to separate customers from
employees because the use of uniforms‟ kind are not identified at the best.
Table 4.2: Reliability
No Items Description In In
(option) number percent
3. The materials ACSI like the deposit slip, and other Agree 35 36.8
documents are visually appealing Strongly agree 16 16.8
Disagree 19 20
Strongly 15 15.8
disagree
Neutral 10 10.5
Total 95 100
4. The ACSI employees are reliable to their promise what Agree 35 36.8
they promised to their customers to do
Strongly agree 22 23.1
Disagree 13 13.7
Strongly 12 12.7
disagree
Neutral 13 13.7
Total 95 100
5. When problems happen the ACSI give immediate solution Agree 29 30.5
Strongly agree 12 12.7
Disagree 22 23.1
Strongly 11 11.8

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disagree
Neutral 21 22.1
Total 95 100
6. ACSI provide their service at the time when they promised Agree 29 30.5
to do it. Strongly agree 13 13.7
Disagree 26 27.3
Strongly 11 11.8
disagree
Neutral 16 16.8
Total 95 100

From the table 4.2, concerning to the first item, out of 95 respondents from ACSI, 35(36.8%)
respondents were agreed. 19(20%) respondents said disagree. 16(16.8%) respondents said strongly
agree. 15(15.8%) respondents were strongly disagree. 10(10.5%) respondents said neutral. Regarding to
the second item as mentioned above out of 95 respondents ACSI customers, 35(36.8%) respondents
said agree. 22(23.1%) respondents said strongly agree. 13(13.7%) respondents said both disagree and
neutral. 12(12.7%) respondents were strongly disagree. As discussed early on question number 5 from
95 respondents, 29(30.5) respondents said agree. 22(23.1%) respondents were disagree. 21(22.1%)
respondents said neutral. 12(12.7%) respondents said strongly agree. 11(11.8%) respondents were said
strongly disagree. Regarding to this data the ACSI employees to give customers relatively satisfy their
customer. From the above discussion on question number 6 among 95 respondent ACSI customers,
29(30.5%) respondents were said agree. 26(27.3%) of respondents were said disagree. 16(16.8%)
respondents were neutral. 13(13.7%) of respondents said strongly agree. 11(11.8%) respondents were
strongly disagree.
Those the ACSI give information and help when exactly the service performed, even if few numbers of
customers have been disagreed and neutral.
Table 4.3: Responsiveness
No Questions Description In In
(option) number percent
7. The ACSI will gives all services it promotes Agree 33 34.7
Strongly agree 19 20
Disagree 15 15.8
Strongly disagree 12 12.7
Neutral 16 16.8
Total 95 100
8. ACSI employees will always willing to help it Agree 38 40
customers Strongly agree 22 23.1
Disagree 12 12.6
Strongly disagree 9 9.4
Neutral 14 14.73
Total 95 100
9. ACSI employees are never be busy to respond to your Agree 38 40
request Strongly agree 13 13.6
Disagree 17 17.9
Strongly disagree 11 11.7
Neutral 16 16.8
Total 95 100

From the table 4.3, the first item details that out 95 respondents from ACSI customers, 33(34.7%)
respondents agreed. 19(20%) respondents strongly agreed. 16(16.8%) respondents were neutral.
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15(15.8%) respondents disagreed and 12(12.7%) respondents strongly disagreed. The ACSI gives all
promotional services to their customer. However, some number of customers found to be disagreed and
neutral. As we have discussed previously on question number eight, respondents from ACSI, out of
95 customers, 38(40%) respondents agreed, 22(23.1%) respondents strongly agreed. 14(14.73%)
respondents were neutral. 12(12.6%) respondents disagreed. 9(9.4%) of respondents strongly disagreed.
Concerning to question number nine above customer respondents from ACSI from 95 customers
collected data review that, 38(40%) respondents were said that agree .17(17.9%) respondents disagreed.
16(16.8%) respondents were neutral. 13(13.6%) respondents strongly agreed. 11(11.7%) respondents
strongly disagreed.
Most of customers have been agreed with ACSI employees are genuinely responsive, even if a few
number of respondents have been disagree and neutral.
Table 4.4: Assurance
No Questions Description In In
(option) number percent
10. Employees in ACSI have the knowledge to answer the Agree 36 37.9
question
Strongly agree 16 16.8
Disagree 13 13.6
Strongly disagree 12 12.6
Neutral 18 18.9
Total 95 100
11. ACSI employees are consistence courteous with you Agree 39 41.05
Strongly agree 19 20
Disagree 12 12.6
Strongly disagree 12 12.6
Neutral 13 13.7
Total 95 100
12. You feel self in all transaction of ACSI Agree 33 34.7
Strongly agree 23 24.2
Disagree 14 14.7
Strongly disagree 10 10.5
Neutral 15 15.78
Total 95 100

As drawn from the table 4.4, the question number ten implies that 36(37.9%) respondents selected
agree .18(18.9%) respondents were neutral 16(16.8%) respondents said that they were strongly agreed.
13(13.6%) respondents mentioned that they disagreed. 12(12.6%) respondents of ACSI were strongly
disagreed. From the data mentioned above, it can be understood that most of the ACSI employees were
knowledgeable to customers to answer customers‟ questions. Regarding question number eleven, it
tried to discuss on the consistency of ACSI employees as 39(41.05%) respondents mentioned that as
they agreed 19(20%) respondents strongly agreed . 13(13.7%) respondents were neutral. 12(12.6%)
respondents were both strongly disagreed and disagreed. As we observe in item number twelve, out of
95 respondents from ACSI customers .33(34.7%) respondents said agree .23(24.2%) respondents said
strongly agree.15(15.78%) respondents said neutral . 14(14.7%) respondents said disagree. 10(10.5%)
respondents mentioned strongly disagree.
Generally ACSI employees are trust and confidence to help their costumer, however a few customers
have reported disagree and neutral.

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4.5: Empathy
No Questions Description In In
(option) number percent
13. ACSI employees give individual attention to customers Agree 35 36.84
Strongly agree 17 17.9
Disagree 15 15.78
Strongly disagree 12 12.6
Neutral 16 16.8
Total 95 100
14. The employees of ACSI understand customers specific Agree 36 37.9
need
Strongly agree 17 17.9
Disagree 14 14.73
Strongly disagree 14 14.73
Neutral 17 17.9
Total 95 100
15. The ACSI employees convenient operating hours to its Agree 36 37.9
customers
Strongly agree 27 28.42
Disagree 15 15.78
Strongly disagree 15 15.78
Neutral 12 12.6
Total 95 100
16. ACSI fulfill your best interest at heart Agree 29 30.5
Strongly agree 21 22.1
Disagree 16 16.8
Strongly disagree 11 11.7
Neutral 18 18.9
Total 95 100

17. Are you satisfied the service that provide by ACSI Agree 31 32.6
Strongly agree 24 25.26
Disagree 13 13.68
Strongly disagree 11 11.7
Neutral 16 16.8
Total 95 100

On this part from the table 4.5, for the question 13 we try to show the respondents‟ answer from 95
ACSI customers, 35(36.84%) respondents mentioned agree. 17(17.9%) respondents said strongly
agree.16 (16.8%) respondents were neutral. 15(15.78%) respondents said disagree. 12(12.6%)
respondents said strongly disagree. Regarding to question number fourteen, 36(37.9%) respondents
mentioned agree. 17(17.9%) respondents said strongly agree and neutral and 14(14.73%) respondents
said strongly disagree and disagree. Question number 15 from the total sample of 95 respondents

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portrays that 36(37.9%) respondents mentioned that they agree .27(28.42%) respondents said strongly
agree. 15(15.78%) respondents mentioned that they strongly disagree and disagree. 12(12.6%)
respondents were neutral. Question number sixteen explains that 29(30.5%) respondents agree.
21(22.1%) mentioned that they strongly agree. 18(18.9%) of respondents were neutral. 16(16.8%)
respondents said disagree .11(11.7) respondents said strongly disagree Concerning on the last question
on the above table from the total of 95 respondents, 31(32.6%) respondents said agree, 24(25.26%)
respondents said strongly agree. 16 (16.8%) respondents were neutral.13 (13.68%) respondents
mentioned disagree.11 (11.7%) respondents said that strongly disagree.
From the above data most probability ACSI employees give services to understand the customers to
customer‟s specific need and carrying individualize attention.
5. Conclusion

 From the overall dimension of service quality it indicates that customers who responded to our
research assure that among the five service dimensions, most of customers are satisfied on assurance
and responsiveness of the service quality dimensions of ACSI. However, in both reliability and empathy,
the customers of ACSI are not fully satisfied. In addition, customers are highly dissatisfied in one of the
service dimensions “tangibility” because the tangibility principle on ACSI is low. The study also
indicates positive relationship between service quality and customer satisfaction. The service quality
form the customer‟s view of point: there is a little gap between customers‟ needs and the services
rendered by the institution.

6. Recommendations

 Among the service dimensions tangibility has a significant effect on customer satisfaction. Hence
ACSI should undertake a significant effect of the tangibility of service quality on customer satisfaction
by working on attractiveness of employees on customers through infrastructure, technology and
uniforms which will make a difference.
 ACSI must analyze persistently on customers‟ pass book preparation since there is a gap on the pass
book among customers who are not at the level of understanding international calendar.
 ACSI should undertake the service dimension of Empathy (personal hospitality of employees) and
reliability (safe and secure of the institution) since it is found that there is a problem of availability on
time, punctuality and hospitality, attention and good treatment which must be fulfilled for its
customers so ACSI can improve its service quality on these dimensions.
 ACSI north Gondar branch are suggested to focus on their recourses like infrastructure, road,
electricity to improve the overall perceived service quality.
 ACSI should give regular training for those who take the credit in either group or personal service
both before and after they take credit to clarify the ambiguities which may create bad image.
 In order to be competent in banking service, ACSI should improve its services in technology, in order
to address its customers such as arranging ATM machines in different areas.
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