MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY HOANG THI THANH THANH DETERMINANTS OF CUSTOMER SATISFACTION IN THE PERSONAL LOAN SERVICE: A STUDY OF PUBLIC AND PRIVATE BANKING SECTORS IN HO CHI MINH CITY MASTER’S THESIS In Business Administration Ology Code: 60.02 Supervisor Associate Professor NGUYEN DINH THO Ho Chi Minh City, 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1 ACKNOWLEGEMENT This research project would not have been possible without the support of many people. Firstly I would like to express my heartfelt gratitude and deepest appreciation to my supervisor, Associate Professor Nguyen Dinh Tho for his precious guidance, share experience, ceaseless encouragement, and valuable suggestions throughout the course of my research. My thanks would also go to all of my classmates, my colleagues, especially my “old pals”, Ms. Nguyen Thi Phuong Thao and Ms.
Le Thi Nhu Huyen for all of their friendship and encouragement. I also wish to thank my friends in Agribank, ACBank, Sacombank and Eximbank for their great support. My thanks would also go to the respondents, without them, my thesis could not have been done. Finally, I would like to express my deepest gratitude and honor to my dear parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2 ABSTRACT This study investigates the main factors of the personal loan service affecting customer satisfaction between public and private banks in Ho Chi Minh city. Data analysis over a few years reveals that bank‟s performance may be evaluated in relation to a set of satisfaction dimensions to indicate the strong and the weak points of a business. According to the results, customer satisfaction is positively related to the service. An interesting finding is that five components of service quality (tangibility, reliability, responsiveness, assurance, and empathy) have a positive and significant impact on customer satisfaction, which consists of a previous study of Parasuraman (1991).
On the other hand, brand image is an important determinant in relation with customer satisfaction that is measured by Akviran (1994). The different weights of customer expectation, perceived quality, and perceived value have implications for bank managers to use them as a reference source for customer satisfaction strategy. The research also provides a modified model of customer satisfaction to determine the critical personal loan service dimensions in public and private banks in Ho Chi Minh city. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 CONTENTS ACKNOWLEGEMENT .3 LIST OF TABLES .6 LIST OF FIGURES.
BACKGROUND OF THE STUDY. Vietnamese banking sector. The personal loan service. Customer satisfaction in Vietnam.
RATIONALE OF THE RESEARCH. STATEMENT OF THE PROBLEM. SCOPE OF THE RESEARCH. THE STRUCTURE OF THE RESEARCH .14 CHAPTER 2: LITERATURE REVIEW.
DETERMINANTS OF CUSTOMER SATISFACTION. CUSTOMER SATISFACTION WITH THE PERSONAL LOAN SERVICE. HYPOTHESES AND MODEL.19 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.23 CHAPTER 3: RESEARCH DESIGN. Operation of measures.
Scale to measure brand image. Scale to measure customer expectation. Scale to measure perceived quality. Scale to measure perceived value .35 CHAPTER 4: RESEARCH RESULTS.
Characteristics of sample. Reliability evaluation through Cronbach‟s Alpha .43 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Evaluation the measurement scale by using Exploratory Factor Analysis (EFA). Some rules in EFA test.
EFA for determinants of customer satisfaction. EFA for customer satisfaction. Correlation coefficient analysis. Multiple regression assumptions .56 CHAPTER 5: CONCLUSIONS AND IMPLICATIONS.
CONCLUSIONS FROM THE RESEARCH QUESTIONS. DICUSSIONS OF THE RESEARCH FINDINGS. MANAGERIAL IMPLICATIONS OF THE RESEARCH. Managerial implications for public banks.
Managerial implications for private banks. LIMITATIONS OF THE RESEARCH AND FUTURE RESEARCH .67 APPENDIX 1: GROUP DISCUSSION .79 APPENDIX 3: CRONBACH‟S ALPHA ANALYSIS RESULT .83 APPENDIX 4: FACTOR ANALYSIS RESULT .87 APPENDIX 5: MUPTIPLE REGRESSION ASSUMPTIONS .90 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 6 LIST OF TABLES Table 3. Measures of brand image. Measures of customer expectation.
Measures of perceived quality. Measures of perceived value. Measures of customer satisfaction. Sample characteristics of public banks.
Sample characteristics of private banks. Reliability test of the personal loan service and customer satisfaction in public and private banks. Final reliability test of the personal loan service and customer satisfaction in public and private banks. EFA analysis result of determinants in public and private banks.
EFA analysis result of customer satisfaction in public and private banks. Pearson correlation matrix in public and private banks. Model Summary b in public and private banks. Anova b in public and private banks.
Coefficients a in public and private banks. Model Summary b in public banks. Model Summary b in private banks. Anova b in public banks.
Anova b in private banks. Coefficients a in public banks. Coefficients a in private banks .54 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 7 LIST OF FIGURES Figure 2.26 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 8 CHAPTER 1: INTRODUCTION 1. BACKGROUND OF THE STUDY 1.
Vietnamese banking sector The banking sector in Vietnam has a significant growth rate during past two decades along with the economic development. This banking system consists of five commercial state-owned banks, thirty seven commercial joint-stock banks, six joint- venture banks, thirteen 100% foreign banks, and fifty three representative branches of foreign banks (Wikipedia, 2012). The development primarily concentrates on commercial joint-stock and foreign banks showing the attractiveness and potential development of Vietnam baking industry to inland investors as well as international financial institutions. The market changes create more challenges and difficulties for banks.
The public banks face adoption of technology and issues like credit proposals and personal matters. Processing bad debits, finding partners to increase financial ability, dealing with difficult issues from the tight currency policy and the limited credit scale are carried out by the private banks. Changing the attitude of personnel and developing strategies are justified for the strong and weak banks. All banks must design a new plan to survive in the innovative period (Bui, 2011).
With the entry of new generation tech-savvy private banks and the expansion of operations of foreign banks, the banking sector has become too competitive. Well-computerized foreign banks are beginning to compete seriously with the nationalized banks. They aim at a profitable and wealthy part of the market and, in contrast to the nationalized banks; they do not recognize any social responsibilities to small account holders. Almost of the banks are still controlled by Public Sector Banks (PSBs).
PSBs are still dominating the commercial banking system. To deal LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 9 with the emerging situations, bankers have to shed a lot of old ideas, change in practices, develop customer loyalty programs, and adopt a distinct approach to meet the challenges ahead. In a fiercely competitive market, non-price factors like customer service become more important. Hence, it is desirable for banks to develop a customer-centric approach for future survival and growth.
Efficient and speedy customer service is implemented to attract the existing customers in continuing and inducing new customers to try the services offered by a bank. Vietnamese banks have already taken lot of initiatives in this regard. Further, it has been realized that Vietnamese banks have miles to go to capture the recent trends and to compare with the Western counterparts. As a result, many banks have introduced new customer friendly measures like 24-hour banking, 7-day and anywhere banking, internet banking, extended business hours, ATM network, etc.
The personal loan service With years, banks are adding services to their customers. The Vietnamese banking industry is passing through a phase of customers market. The customers have more choices among the banks. A competition has been established within the banks‟ operating in Vietnam.
The development of business activities, manufacturing and trading, more and more individuals borrow a large of money from banks to manage their business. It creates a large chance for banks extending personal loan service with different loan methods such as partial loan, loan under credit limit, installment loan, etc. Besides, the Pubic Sector Banks have signed the determinant to decrease the loan interest rate to 17 - 18%/year for individuals (Nguyen, 2012). The enlarged loan objects, the loosened loan conditions, and the improved liquidity make the commercial banks give promotions.
In February, 2012 Oceanbank has the loan projects to buy houses with the interest rate down to 19%/year. It lends up maximum 80% of house value within up to 120 months. ABBank is implementing the program “Easy loans – LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 10 dream house ownership” and supporting the individual customers having income from salary, wages to loan funds in order to repair or buy a home and a residential land. Customer can borrow up to 90% of the total capital needs and not exceed 70% of collateral value.
At that time, it also loans to buy cars with the program “Whistling on the desired car” with a maximum loan period being 60 months and a loan money being 75% of car value. VPBank also has repayment home loan programs up to 10 years. ACBank loans to buy a house or a land up to 10 - 15 years. Loans for building and repairing a house are 7 years, the principal and interest money is amortized monthly with 18.5% - 19%/year of the loan interest rate, and the loan level depends on the repayment capacity of customers.
Although the policy of many banks in 2012 is focusing on promoting lending products, particularly consumer credit form with preferential terms than before, loan limits continue to increase, the caution in spending money of customers makes the bank's plans have not achieved as expected. To explain the problem, there are the following reasons. Firstly, banks apply the personal loan interest rate to buy a house in February, 2012 is 19% that is much lower than in 2011 but this time, a number of customers borrowing money are not much. Secondly, the consumer loan has potential risks.
So, the bank must apply the constraint conditions and consider the interest rates that can offset the costs and limit a part of the risk. This is a reason why some customers have real loan needs but they do not meet the conditions which banks offer. Finally, the other customer groups are eligible to borrow though they consider the direction of interest rates expected to fall in coming months. Even some customers purchasing cars are hesitant to wait for the policy from the management.
According to them, if forthcoming, the new fees as urban circulation LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 11 fees, road maintenance costs estimated at 20-50 million VND / vehicle / year is adopted, the plan to buy their cars must reconsider (Le and Huyen, 2012). Customer satisfaction in Vietnam Customer satisfaction for the personal loan service is at medium level to up and is lower than four of the five-point Likert scale. Customers are less satisfied or dissatisfied with some elements such as the personal loan interest rate, network, empathy and responsiveness. Specifically, the personal loan interest rate is considered as a big hindrance when customers borrow amount of money from Vietnamese banks.
In some cases, customers must sell mortgage properties to pay the loan interest and capital because the interest rate is higher with every passing day (Nguyen, 2011). RATIONALE OF THE RESEARCH In the current context, the personal consumption for purposes such as motor purchase, house reparation, expensive material purchase, dream vacation, education, wedding, business enlargement, or simply cash use for a down payment on a new car or anything is increasing quickly. However, customers still have a dilly-dallying attitude in choosing between public and private banks.