Chapter One

1.0 Introduction
This chapter introduces the study and presents detailed description of key elements such as the
study background, statement of the problem, research objectives and questions, research scope,
the significance of the study and the study organization as well as key terms used in the study.
The research seeks to explore financial intermediation challenges through customer satisfaction
survey, with EcoBank (S/L) being used as a case study.

1.1 Background of the Study

Financial intermediation is a pervasive feature of all of the world’s economies. But, as Franklin
Allen (2001) observed in his AFA Presidential Address, there is a widespread view that financial
intermediaries can be ignored because they have no real effects. They are a veil. They do not
affect asset prices or the allocation of resources. As evidence of this view, Allen pointed out that
the millennium issue of the Journal of Finance contained surveys of asset pricing, continuous
time finance, and corporate finance, but did not survey financial intermediation. Here we take the
view that the savings-investment process, the workings of capital markets, corporate finance
decisions, and consumer portfolio choices cannot be understood without studying financial
intermediaries.

Why are financial intermediaries important? One reason is that the overwhelming proportion of
every dollar financed externally comes from banks. According to Mayor (2010), bank loans are
the predominant source of external funding for most countries in the world. In few countries that
capital markets are significant source of financing. Equity markets are insignificant. In other
words, if finance department staffing reflected how firms actually finance themselves, roughly
25% of the faculty would be researchers in financial intermediation and the rest would study
internal capital markets.

As the main source of external funding, banks play important roles in corporate governance,
especially during periods of firm distress and bankruptcy. The idea that banks “monitor” firms is
one of the central explanations for the role of bank loans in corporate finance. Bank loan

1
covenants can act as trip wires signaling to the bank that it can and should intervene into the
affairs of the firm. Unlike bonds, bank loans tend not to be dispersed across many investors. This
facilitates intervention and renegotiation of capital structures. Bankers are often on company
boards of directors. Banks are also important in producing liquidity by, for example, backing
commercial paper with loan commitments or standby letters of credit.

Consumers use bank demand deposits as a medium of exchange, that is, writing checks, using
credit cards, holding savings accounts, visiting automatic teller machines, and so on. Demand
deposits are securities with special features. They can be denominated in any amount; they can
be put to the bank at par (i.e., redeemed at face value) in exchange for currency. These features
allow demand deposits to act as a medium of exchange. But, the banking system must then
“clear” these obligations. Clearing links the activities of banks in clearinghouses. In addition, the
fact that consumers can withdraw their funds at any time has, led to banking panics in some
countries, historically, and in many countries more recently.

Banking systems seem fragile. Between 1980 and 1995, thirty-five countries experienced
banking crises, periods in which their banking systems essentially stopped functioning and these
economies entered recessions. (See Demirgüç-Kunt, Detragiache, and Gupta (2000), and Caprio
and Klingebiel (1996).) Because bank loans are the main source of external financing for firms,
if the banking system is weakened, there appear to be significant real effects (e.g., see Bernanke
(1983), Gibson (1995), Peek and Rosengren (1997, 2000)). The relationship between bank health
and business cycles is at the root of widespread government policies concerning bank regulation
and supervision, deposit insurance, capital requirements, the lender-of-last-resort role of the
central bank, and so on. Clearly, the design of public policies depends on our understanding of
the problems with intermediaries. Even without a collapse of the banking system, a credit crunch
has sometimes been alleged to occur when banks tighten lending, possibly due to their own
inability to obtain financing. Also, the transmission mechanism of monetary policy may be
through the banking system.

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1.2 Background of the Case Study Area
EcoBank (S/L) is chosen as the research case study. The rationale for selecting EcoBank as the
study case study is basically as a result of its global presence on one hand and its spread of
branches across Sierra Leone on the other hand. The primary data for the study were largely
collected from EcoBank’s head office in Freetown, which happens to be the capital city of Sierra
Leone. Freetown houses the seat of government and has all the major government offices and
agencies and also accommodates all the heads offices of the commercial banks in Sierra Leone.
Freetown has a cosmopolitan population with diverse banking experience as they are exposed to
all the different banks operating in the country currently.

Founded in 1985 and headquartered in Lomé, Togo, EcoBank is a banking and financial services
group which provides a wide range of banking, consumer and commercial finance, investments,
and securities and asset management services to financial institutions, government agencies,
international organizations, multinationals, medium, small and micro businesses and individual
customers. Its product portfolio includes savings accounts, diaspora accounts, current accounts,
credit cards, debit cards, personal loans, mortgage loans, car loans, business accounts, business
loans and microfinance. The group also offers services including Internet banking, mobile
banking, foreign exchange services, trade services, transfers and payments, cash management,
treasury services, investment banking and securities and asset management services. The group
operates through a network of 1,268 branches and offices, 2,773 ATMs and POS machines. The
group has a presence in 36 African countries with international offices in Paris, London, Dubai
and Beijing to support their customers who conduct business in the global economy.

EcoBank (S/L) is 100% owned by Ecobank Transnational Incorporated. Ecobank Transnational

manages and provides technical assistance to the subsidiary. The Bank commenced business in
Sierra Leone in November 2006. It provides a wide range of financial services to several
thousand customers through its head office and branches in Freetown and several other places in
the country. EcoBank including other commercial banks are regulated by the Central Bank of
Sierra Leone (BSL) and the Ministry of Finance of the Republic of Sierra Leone. The Bank’s
share capital is currently SLL 16 billion while the networth is SLL 12.6 billion.

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1.3 Statement of the Problem
The issue of customer satisfaction is an important part of the aims and goals of commercial
banks in Sierra Leone. For instance EcoBank had its theme for the year 2020 being “customer
first”. This sudden concentration on customer service excellence and ultimate satisfaction by
banks is attributed to the fact that over the years there has been serious accusations by the
general public over their poor service delivery in the form of rude staff attitude, delays in the
delivery of services, unreasonable high charges and commissions on turn-over (COT), high ATM
charges and limited access to loan facilities. There is also the issue of network problem where
there is continuous breakdown of network connectivity which causes most customers to spend
profitable hours in the banking halls which otherwise could have been used productively
elsewhere.

Another factor that bothers on efficient and effective customer service is the small interest earned
on deposits and the high lending rates charged by banks on loans to customers. These are issues
that bother on the customers directly and cause customers to be dissatisfied with the service one
way or the other. There is the need to know from time to time how customers feel about the
quality of service they get from their bankers so as to re-strategize to give an appreciable service
quality. This study therefore hopes to document from the customers the truth in the problems
indicated above and their perception of the quality of service that they are currently receiving
from their bankers and investigate their main sources of dissatisfaction.

1.4 Research Questions

In order to achieve the above aim and objectives of the study, the following research questions
were designed:
 What factors generally make customers dissatisfied with the services of their bankers?
 What is the extent of the gap between customer expectation and customer perception of
the service deliver by EcoBank?
 What factors are most likely to promote customer loyalty?

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1.5 Objectives of the Study
In light of the above problem, the main objective of this research is to explore financial
intermediation challenges in Sierra Leone through customers’ satisfaction survey. The specific
objectives are to:
 Investigate the quality-of-service delivery by banks to customers.
 Identify factors that may cause customer dissatisfaction.
 Find out if any gap exists between customer perception and expectation regarding the
quality of service deliver by EcoBank.

1.6 Significance of the study

It is very important for a study of this kind to be undertaken as the outcome will provide valuable
insights into the financial intermediation functions of commercial banks in particular and the
financial sector in general. The study will immensely contribute to the field of service marketing
in academia by adding to the vast store of literature in the area of customer service. The outcome
of this study will also put emphasis on the need for banks to continuously improve the quality of
their customer service delivery in terms of products dealt in, technology, staff-customer contacts,
interest rates and speed of service. It will be of immense importance to banks in Sierra Leone as
it gives a brief picture of the quality of service and the level of satisfaction customers perceive
they are receiving from the services provided by their banks. Hence the findings will serve as
guidelines for the formulation of policies on the quality of banks’ services. It is hope to bridge
specific knowledge gaps for which further research is recommended. The results will also be
used by other researchers, students, and policy makers who are interested in the banking sector.

Finally, and most importantly, this study is going to broaden the researcher’s horizon and
endows him with relevant skills and expertise to enable him embark on more sophisticated
research work in future.

1.7 The Scope of the Study

This research seeks to assess financial intermediation challenges in Sierra Leone from the
perspective of customer satisfaction with primary focus on EcoBank. Primary data for this
research are fundamentally collected from management staff of EcoBank head office in

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Freetown within a period covering five years (2018 – 2022). The centralization of most of the
key banking functions in the municipality coupled with the rapid growth in customer population
and economic activities make the city an ideal place for the study.

1.8 Organization of the Study

This research work is categorized into five chapters. The first chapter is the introduction and it
covers the background of the study, statement of the problem, the research objectives and
questions, significance of the study, the scope of the study and the study organization.

Chapter two reviews literature relevant to the research area and draws meaningful conclusions
based on the existing works that have been previously done in the field.

Chapter three tackles the methodology used for the study, taking into account the need to achieve
a representative sample of the population and accuracy of information provided by respondents.
It also covers the research design adopted, the sampling methods and the data collection methods
that were employed.

Chapter four covers methods of data presentation and analysis of the accumulated data in the
form of tables and graphs with explanations, in order to deduce findings that bother on the
objectives of the study.

The last but not the least, chapter five presents the conclusion, recommendations and summary of
the findings emerged from the study. This chapter is followed by the reference which
acknowledges all persons and institutions cited in the study. This chapter also presents crucial
suggestions for future research and limitations of the study are restated.

1.9 Definition or Description of Key Terminologies

Key terms which are predominantly used in this study are defined and clarified to provide a
succinct and explicit understanding of these terms and the context they are used in this study.
Contextualising these terms are indispensable to understanding the basic concepts of GST
administration. In other words, defining and clarifying key terms are very crucial in any
scientific study because it guides potential readers to comprehend the issues under consideration.
If readers understand the context in which key terms are utilised they would be able to put the

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study into perspective. The following terms/phrases are defined or described in the context of
this study:
Financial Intermediary - A financial intermediary is an institution or individual that serves
as a middleman among diverse parties in order to facilitate financial transactions. Common types
include commercial banks, investment banks, stockbrokers, pooled investment funds, and stock
exchanges.
Financial Intermediation - The financial intermediation process channels funds between
third parties with a surplus and those with a lack of funds.
Customer Satisfaction - this is defined as a measurement that determines how happy
customers are with a company’s products, services, and capabilities. Customer satisfaction
information, including surveys and ratings, can help a company determine how to best improve
or changes its products and services.
Commercial Bank - Commercial bank refers to a financial institution that accepts deposits,
offers checking account services, makes various loans, and offers basic financial products
like certificates of deposit (CDs) and savings accounts to individuals and small businesses.
Credit History – Credit history is the past behavioural patterns of a customer with regard to
loans. A credit bureau will collect the information of a customer and then translate it to a number
between 300 and 900. This is known as your credit score and the higher the credit score, the
better your chances are to avail a loan or a credit card.
Collateral – Any security provided to the bank in exchange for a loan is known as collateral. A
collateral can be in the form of land, gold, etc. This is called a secured loan and is less risky than
an unsecured loan for the lender. In case of secured loans, the lender may auction off the
collateral if the borrower fails to pay off his/her loan.
Electronic Clearing Service – This is a technology used by banks wherein a certain
amount of money is directly debited from your account on a specified date every month towards
the payment of a loan, mutual fund account, etc.
Processing Fee – In order to process a loan application of a customer, banks usually charge a
fee. This fee is known as a processing fee.
Overdraft Fee – In the event, that you run out of money in your account, certain banks under
certain schemes allow you to withdraw more money than you have in your account. This is a

7
loan, in a sense, and the bank will charge you a fee on repayment. This fee is called overdraft
fee.
Liquidity – The ability to sell an asset in the market without affecting its price is called
liquidity.
Monetary Policies – This refers to the rules and regulations that Central Bank normally put
in place in order to standardize banking procedures in the nation.
Debtor – A debtor is an individual or organization that owes money to the bank or any other
financial institution.
Credit Rating – This is an assessment of an individual’s past credit history equated into a
number between 300 and 900. This is usually the main determinant of whether an individual
attains a loan or not. Credit bureaus collect this data on all individuals that have a history of
credit.
Micro Finance – Small loans provided to the poor in urban, rural and sub-urban parts of the
country in order to help them raise their income level is known as micro financing.
Mobile Banking – Availing banking services with the help of a mobile phone is referred to as
mobile banking.
KYC – KYC (Know Your Customer) is a procedure that all banks undergo in order to establish
the correct identity of a customer. This is to ensure that no fraudulent operations are taking place
in the bank.
Fixed Rate – A fixed rate is when the rate of interest for a loan remains constant throughout
the entire tenure.
Floating Rate – Opposite of fixed rate, a floating rate of interest are interest rates that change
during the tenure of the loan. These interest rates change as per the changes of interest rates in
the economy.
NEFT (National Electronic Funds Transfer) – NEFT is an electronic means to transfer money
from one bank to another or within the same branch. Depending on the bank, NEFT charges and
the minimum amount that can be transferred may vary.
ATM Fees - Fees you’re charged for using an out-of-network ATM or exceeding a certain
number of ATM transactions for your account, if limited.

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Automated Teller Machine (ATM) Card - A card that gives you access to your account
through an ATM. If it’s a debit card, it will also work at retailers.
Checking Account - The basic account for easy access to your money. Helpful for managing
day-to-day expenses and recurring (monthly) bills.
Savings Account - An interest-bearing deposit account used for storing money, like an
emergency fund.
Service Charge - A charge for a service or a penalty for not meeting certain requirements,
such as insufficient funds in a checking account.
Wire Transfer - An electronic payment service for transferring funds by wire. Wire transfers
are guaranteed funds for the recipient, meaning the payment cannot be revoked by the sender
after the transfer.
Personal identification number (PIN) - A number issued with your debit or credit card
so you can withdraw money from ATMs. To help prevent fraud, keep your PIN secret. A PIN
should be memorized, never written down or disclosed to anyone else.

1.10 Summary
This chapter provides a general introduction and background to the study. It presents a detailed
description of the study background, statement of the problem, the study objectives and specific
research questions, research scope, significance of the study, and the study organization.
Subsequent chapters will be expanding on details of the elements mentioned in this chapter.

9
 Chapter Two
Literature Review
2.0 Introduction
This chapter reviews relevant works done by previous researchers in the field of financial
intermediation and customer satisfaction. The review generally focuses on both theoretical and
empirical overview of financial intermediation and customer satisfaction survey conducted in
various financial institutions across several African countries. In this chapter, a number of
relevant concepts on financial intermediation and customer satisfaction determinants are
presented. Also considered in this chapter are overview of the Sierra Leone financial system and
major challenges faced with effective financial intermediation in Sierra Leone.

2.1Concept and Nature of Financial Intermediation and Customer

Satisfaction:
2.1.1 Concept of Financial Intermediation
Financial intermediation is an institution that facilitates the channeling of funds between lenders
and borrowers indirectly (Nelson E.R. 1999). That is, savers (lenders) give funds to an
intermediation institution (such as a bank), and in turn institution gives those funds to spenders
(borrowers). Andrew and Osuji (2013) state that financial intermediation involves the
transformation of mobilized deposits liabilities by banks into banks assets or credits such as
loans and overdraft. This means that financial intermediation is the process of taking in money
from depositors and lending same to borrowers for investments which in turn help the economy
to grow. Efficient financial intermediation causes high level of employment generation and
income which invariably enhances the level of economic development, (Conning J. & Kevane
M. (2002).

To ensure that investible funds are made available for economic activities, social and community
services sector inclusive in the urban and rural areas and the quest for overall development of the
economy informed the decision of financial system focusing more financial intermediation,
(Rosengard J.K. 2001). Financial intermediation is typically an institution that facilitates the
channeling of funds between lenders and borrowers indirectly, ( Pill H. & Pradhan M. 1997). That

10
is, savers (lenders) give funds to an intermediary institution (such as a bank), and that institution
gives those funds to spenders (borrowers). (Gorton and Winton 2002) define financial
intermediaries as firms that borrow consumers/savers and lend same to companies that need
resources for investment. Financial intermediaries can be classified into institutional investors,
pure intermediaries like investment banks and Deposit Money Banks. Among all the financial
intermediaries, banks are the major financial intermediaries that accept deposits and make loans
directly to the borrowers (Quilym, 2012).

Mahmood and Bilal (2010) opined that the rising magnitude of financial intermediation have
adverse implications on the growth of Sierra Leone economy because in the absence of
developed capital market, the private sector which contributes a greater percentage to economic
growth in Sierra Leone will primarily depend on bank credit as a source of financing their
investments which will lead to economic growth. This means that the constant rise of financial
intermediation discourages potential savings due to low returns on deposits, and ultimately
reduces lending activities and investment potential of investors as a result of high cost of funding
(Ndung'u and Ngugi, 2000; Mahmood and Bilal, 2010). Financial intermediation involves the
transformation of mobilized deposits liabilities by financial intermediaries such as banks into
bank assets or credits such as loan and overdraft. It is simply the process whereby financial
intermediaries take in money from depositors and lend same out to borrowers for investment and
other economic development purposes (Andrew and Osuji, 2013). According to Acha (2011),
financial intermediation is a system of channeling funds from lenders (economic surplus unit) to
borrowers (economic deficit unit) through financial institutions.

2.1.2 Concept of Customer Satisfaction

According to (Kumbhar, 2011), the term “customer” refers to the purchaser/user of a good or
service offers by a business firm, whether it is individual or corporate. (Riscinto-Kozub, 2008)
defines a bank customer as any individual or entity for which the bank agrees to conduct an
account or provides a service. Customer satisfaction is one of the most important factors in
business. When it comes to commercial banks, customer satisfaction level differentiates one
bank from another, thus measuring customer satisfaction is exceedingly important. (Zopounidis,
2012, 37.) This is the reason why banks listen to customer requirements and complaints.
Profitable business cannot exist without satisfied customers, especially in service-oriented

11
industries. Traditionally the level of customer satisfaction was determined by the quality of
services, price and purchasing process.

Customer satisfaction is defined as customers’ response to the perceived gap between prior
expectations or experiences and actual performance of products or services consumed (Che-Ha
& Hashim, 2007). Customer satisfaction is an affective state or feeling towards the products or
services. Competition in banking industry becomes more and more intense and financial
institutions place great importance on customers. Customer satisfaction could lead to stronger
customer base which is a competitive advantage to the institutions (Salifu, Decaro, Evans, Hobbs
& Iyer, 2010). Due to the importance of customer satisfaction, it has become academics’ and
practitioners’ interests in service industry. There is a continuous growth in research of customer
satisfaction in retail banking sector (Salifu, Decaro, Evans, Hobbs & Iyer, 2010). However,
Anderson, Fornell and Lehman (1994) provided a better explanation by describing the customer
satisfaction as a kind of purchase behaviour and the experience of using a product. It is much
dependent on buyers’ expectation which determines the consistency of the product performance.
Should there be consistency, the customer will be satisfied; otherwise they will show dissatisfied
results (Ho, 2009).

Generally, customer satisfaction is conceptualized as an attitude-like judgment or a pleasurable

level of consumption-related fulfillment resulting from purchases or consumers’ interactions.
Consumers make the judgment based on the experiences attached to suppliers’ products or
services, the sales processes, and the after-sale services (Ho, 2009). On the other hand, customer
satisfaction is viewed as personal experience and mentality linked to personal expectation and
service delivered. It is described as the customers’ experiences associated with the purchase and
usage of a product or service (Salifu, Decaro, Evans, Hobbs & Iyer, 2010). When transacting
with banks, customers always judge the level of services and the priority given by bank and
finally decide about repurchase behaviour. Customer satisfaction level is high when they obtain
maximum usage and profit with minimum price (Afsar, Rehman, Qureshi & Shahjehan, 2010).

On the contrary, dissatisfaction arises when pricing does not accommodate customers’ needs. For
instance, the interest rates on loans, charges on the usage of online services and the processing
fees are among the factors which determine customer satisfaction (Afsar, Rehman, Qureshi &

12
Shahjehan, 2010). Satisfaction can both be conceptualized from an affective and cognitive prism.
Customer satisfaction is found to leave an impact directly on cognitive evaluation of consumers
and effective responses. In addition, satisfaction is a kind of cognitive state that solicits feedback
from customer after service or product consumption (Ho, 2009). According to some research,
behavioural responses like repeat purchase, word-of-mouth, and complaint behaviour are the
factors used to evaluate customer satisfaction or experiences regarding products or services.
Researchers introduced the disconfirmation of expectation model to explain the nature and
operationalization of customer satisfaction. The mentioned model identified that customer
satisfaction is a function of causal relationship between expectation and service performance
(Salifu, Decaro, Evans, Hobbs & Iyer, 2010).

In actual fact, confirmation or disconfirmation paradigm is the theoretical model central to

majority of satisfaction studies. With reference to disconfirmation paradigm, expectancy
disconfirmation could be categorized into two processes. The first process is the
acknowledgement of expectations towards the products or services while the second is
comparison of experienced performance of the products or services with prior expectations (Ho,
2009). Customer satisfaction is classified as an outcome or a process. When customer
satisfaction is regarded as an outcome, customer satisfaction refers to a cognitive and affective
state of responses to current consumption experience (Salifu, Decaro, Evans, Hobbs & Iyer,
2010). In the opposite, as a process, customer satisfaction is viewed as a function of the whole
consumption process or a specific element of the consumption process, leading to satisfaction.
As a result, researchers who aligned customer satisfaction towards process, focused on
perceptual, evaluative, and psychological components of processes (Salifu, Decaro, Evans,
Hobbs & Iyer, 2010).

Researchers defined a variety of forms of customer satisfaction. Overall, research on customer

satisfaction could be divided into two perspectives (Ho, 2009). First, traditional models
advocated that customer satisfaction is the result of cognitive process. On the contrary, new
conceptual developments stated that affective process may serve as an indicator to forecast
customer satisfaction and to identify customers’ affection. Second, certain researchers debated
that customer satisfaction should be viewed as a judgment and cumulative experience towards
products or services, instead of transaction-specific (Ho, 2009).

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 Theoretical Framework on Financial Intermediation and
2.2
Customer Satisfaction
Financial intermediation theory was first formalized in the works of Goldsmith (1969),
McKinnon (1973), and Shaw (1973) who saw financial markets, both money and capital markets
playing a pivotal role in economic development, attributing the differences in economic growth
across countries to the quantity and quality of services provided by financial institutions.
Corroborating this view is the result of research by Nwaogwugwu (2008) and Dabwor (2009) on
the stock market development and economic growth in Nigeria, the causal linkage. The result
reveals that there is a bi-directional causality between growth in capital market activities and
economic growth in Nigeria. However, this contrasts with Robinson (1952), who argued that
financial markets are essentially hand maidens to domestic industry, and respond passively to
other factors that produce cross-country differences in growth: “there is general tendency for
supply of finance to move with the demand for it. It seems to be the case that where enterprise
leads finance follows. The same impulse within an economy, which set enterprises on foot,
makes owners of wealth, venturesome and when a strong impulse to invest is fettered by lack of
finance, devices are invented to release it and habits and institutions are developed”

The Robinson school of thought therefore believes that economic growth will lead to expansion
of the financial sector. Goldsmith (1969) attributed the positive correlation between financial
development and the level of real per capita GNP to the positive effect that financial
development has on encouraging more efficient use of the capital stock. In addition, the process
of growth has feedback effects on financial markets by creating incentives for further financial
development. McKinnon’s thesis is based on the complementarity hypothesis, which in contrast
to the Neo-classical monetary growth theory, argued that there is a complementarity between
money and physical capital, which is reflected in money demand. According to McKinnon,
complementarity links the demand for money directly and positively with the process of physical
capital accumulation because “the conditions of money supply have a first order impact on
decision to save and invest”. Shaw (1973) proposed a debt intermediation hypothesis, whereby

14
expanded financial intermediation between the savers and investors resulting from financial
liberalization (higher real interest rates) and development increase the incentive to save and
invest, stimulates investments due to an increase supply of credit, and raises the average
efficiency of investment. This view stresses the importance of free entry into and competition
within the financial markets as prerequisites for successful financial intermediation. McKinnon
(1973) and Shaw (1973) argued that policies leading to the repression of financial markets
reduce the incentive to save. They described the key elements of financial repression as:
 High reserve requirements on deposits
 Legal ceilings on bank lending and deposit rates
 Directed credit
 Restriction on foreign currency capital transactions
 Restriction on entry into banking activities
Though the McKinnon-Shaw framework informed the design of financial sectors reforms in
many developing countries, countries experiences later showed that while the framework
explains some of the quantitative changes in savings and investment at the aggregate level, it
glosses over the micro-level interactions in the financial markets and among financial institutions
which affects the supply of savings and the demand for credit by economic agents and the
subsequent effect on economic growth.

This shortcoming later formed the spring board for the development of agency theories of
financial intermediation. One of the earliest attempts to interpret the experience of developing
countries within this framework can be found in Stiglitz and Weiss (1981) which stressed the
importance of imperfect information in financial markets and its effect on the overall allocation
of resources and economic growth. They showed that credit rationings for example, may arise
from imperfect information about the quality of potential borrowers.

The structuralism approach emphasizes structural problems such as market inefficiencies as the
principal cause for economic backwardness of developing countries. They criticized the market
clearing assumptions implicit in the financial liberalization school, especially the assumption that
higher interest rates attract more savings into the formal financial sector (Van Wijnbergen, 1982
and 1983). Moreover, Van Wijnbergen argued that it could very well be the case that informal
markets will provide more financial intermediation. Since institutions in this sector are not

15
subject to reserve requirements and other regulations that affect financial institution in the formal
sector. He also argued that in the event that informal sector agents substitute their deposits for
that in the formal sector due to high interest rates, the unexpected consequence will be an
adverse effect on financial intermediation and economic growth.

2.3 Financial Intermediation by Banks

Banks are heavily involved in facilitating the modern chain of market-based financial
intermediation. This chain is long and complex: It involves loans originated to be securitized,
special-purpose vehicles that purchase and bundle these loans, investors who buy the securities,
entities that provide credit and liquidity enhancement to guarantee assets and make the
corresponding securities more reliable, asset-backed commercial paper conduits that sell
commercial paper, money market mutual funds that purchase that commercial paper, and the
repo market, where highly rated securities have come to be a form of currency (Gorton and
Metrick 2010). There are also many other steps, players, and processes.

Banks act as intermediaries between savers and persons who are able and willing to borrow
money. This relationship is often described as that between savers and investors, but the
borrower is not obliged to invest, in the sense of obtaining new capital goods (Cameron, 1972:7).
As intermediaries, banks “may vigorously seek out and attract reservoirs of idle funds which will
be allocated to entrepreneurs for investment in projects with a high rate of social return; or they
may listlessly exploit their quasi-monopolistic position and fritter away investment possibilities
with unproductive loans” (Cameron, 1972:7-8). It can probably be assumed that in both cases
financial intermediation might have certain consequences on economic growth. Financial
intermediaries or banks, through the process of financial intermediation mobilize deposits from
depositors/savers and allocate credit facilities to borrowers/investor for investments that will lead
to economic development. Economic development comprises the activities private and public
sector which need bank credit to expand and grow their business. Mahmood and Bilal (2010)
opined that the rising magnitude of financial intermediation costs have adverse implications on
the development of Sierra Leone economy because in the absence of developed capital market,
the private sector which contributes a greater percentage to economic development in Sierra
Leone will primarily depend on bank credit as a source of financing their investments which will

16
lead to economic development. This means that the constant rise of financial intermediation
discourages potential savings due to low returns on deposits.

2.4 Empirical Literature Review on Financial Intermediation and

Customer Satisfaction:
2.4.1 Empirical Review on Financial Intermediation
There have been numerous studies on the effect of financial intermediation on the long run
economic growth. But, there is no consistent evidence for a significant effect of financial
intermediation on economic development in Sierra Leone, looking both positive and negative
direction. Results and evidence about the effect of financial intermediation differ by country,
methodology used and the area covered. Tonye and Andabai (2014) examined the relationship
between financial intermediation and economic growth in Sierra Leone. The methodology used
was vector error correction model. The study found that there is long run relationship between
financial intermediation and economic growth. The study concluded that about 89% of the
variations in economic growth in Sierra Leone are explained by changes in financial
intermediation variables. This study does not consider effects of financial intermediation on
economic development using credit to private sector, lending rate and interest rate margin as
independent variables in the country.

Basher (2013) examined the linkage between open markets, financial sector development and
economic growth to know if markets along with financial sector development affect economic
growth in selected Sub-Sahara African Countries. The study made use of Granger causality test,
Johansen integration test and vector error correction model. It was found that the causation
between open markets, financial sector development and growth in these countries is weak and
insignificant, and such cannot be used to forecast long-term economic growth. This study also
does not consider effects of financial intermediation on economic development using credit to
private sector, lending rate and interest rate margin as independent variables in the country.
Haruna (2012) investigates the determinants of cost of financial intermediation in Ghana's Pre-
consolidated banking sector using 13 banks quoted on the Ghana Stock Exchange. The study
made use of panel data regression models. It was found that operating expense and loan loss
provision accounts for greater variation in commercial banks financial intermediation cost. This

17
study does not consider effects of financial intermediation on economic development using credit
to private sector, lending rate and interest rate margin as independent variables in the country.

Idries (2010) investigated the cost of financial intermediation in Jordan from 2000 to 2008. The
study made use of random effects estimation approach. The study indicates that high and
increasing financial intermediation cost are derived from efficiency level complimented by
capital adequacy ratio and loan to total asset ratio. This study does not consider effects of
financial intermediation on economic development using credit to private sector, lending rate and
interest rate margin as independent variables in the country. Beck and Hesse (2006) investigated
the causes of high financial intermediation cost in Uganda. The study made use of a unique bank
level data set on the Uganda banking system over the period 1999 to 2005. The study found that
bank level characteristics, such as bank size, operating costs and composition of loan portfolio
affects financial intermediation cost. The study also found that financial intermediation costs
have no robust and economic significant relationship with foreign bank ownership, market
structure and bank efficiency in Uganda. This study does not consider effects of financial
intermediation on economic development using credit to private sector, lending rate and interest
rate margin as independent variables in the country.

2.4.2 Empirical Review on Customer Satisfaction

Among the most popular studies on customer satisfaction is the qualitative study performed by
Parasuraman, Zeithaml and Berry (1985). Based on the focus group interviews with consumers
and executives, service quality model was proposed. There were five gaps identified respectively
for each group of respondents in the proposed model. On top of that, criteria in evaluating
service quality were classified into ten service quality determinants which include reliability,
responsiveness, competence, access, courtesy, communication, credibility, security,
understanding, and lastly tangibles. Later, the instrument known as SERVQUAL was developed
to measure service quality and the ten determinants were further consolidated into five
dimensions which consist of tangibles, reliability, responsiveness, assurance, and empathy
(Parasuraman, Zeithaml & Berry, 1985).

Wong (2011) conducted a study to investigate the direct effect of service quality, perceived value
and corporate image on customer satisfaction. On top of that, some researchers also examined

18
the indirect effect on customer loyalty in domestic retail banking sector. The research results
indicated that service quality, perceived value and corporate image have direct and positive
relationship with customer satisfaction. Multiple regression tests revealed that the independent
variables collectively explained 65 percent of the variances in dependent variable. Corporate
image was found to be the strongest predictor followed by service quality and perceived value. In
addition, it was also proven that customer satisfaction leaves a positive influence on customer
loyalty in domestic retail banking sector. Lo, Osman, Ramayah & Rahim (2010) adopted the
underlying model of SERVQUAL (Parasuraman, Zeithaml & Berry, 1988) with five dimensions
to assess the impact of service quality on customer loyalty among banks in Penang. The findings
substantiated that service quality influences customer loyalty positively. The service quality
dimensions which played a significant role in the model were identified as reliability, empathy
and assurance.

Toelle (2006) researched on the linkages among service quality, perceived value, customer
satisfaction and customer loyalty in the setting of Indonesian retail banking. The findings showed
that customers assessed value based on service quality attributes, especially employee
performance and reliability. The study also signified that employee performance and reliability
are significantly related to customer satisfaction, mediated by customer value. In addition, the
research also suggested that indirect effect of service quality and customer satisfaction have an
impact on customer loyalty. These results further supported the research done by Cronin, Brady
and Hult (2000).

Bontis, Booker and Serenko (2007) conducted a research to understand the mediating effect of
organizational reputation on customer loyalty. The results indicated that there is a significant
relationship between organizational reputation and customer loyalty. The findings also
substantiated the widely accepted theory which advocated the link between customer satisfaction
and customer loyalty. Many factors of customer satisfaction have been discussed in literature
studied. Price of services, quality of services and image of brand are the main determinants of
customer satisfaction. Many studies emphasized on customer satisfaction and suggested it as a
main contributor for business success and competitiveness. The results found that all
independent variables such as price of service, quality of service, and corporate image have
positive association with the customer satisfaction. The study revealed that the price of service is

19
positively related to customer satisfaction. Results showed that the better the relationship
between price of services, the higher the customer satisfaction level which subsequently led to
greater performance. Secondly, the greater level of quality of services determines the greater
customer satisfaction. Thus, it is essential to find that the quality of services has a greater impact
on customer satisfaction. Thirdly, brand image has direct relationship with customer satisfaction
as well. It means that the image leaves an impact on customer satisfaction (Saeed, Niazi, Arif &
Jehan, 2011).

2.5 Major Determinants of Customer Satisfaction:

2.5.1 Price of Services
Banking services charge or price of services is termed as the amount of payment that requested
by the seller of services such as financial institutions or banks. Term of service charge as well as
price is determined by few factors such as willingness of the buyer to pay, willingness of the
seller to accept, intensity of competition price, substitute products etc (Uddin & Akhter, 2012).
Furthermore, price fluctuation in all service industries results in price-performance and the
degree of price-performance stability moderates the relationship between performance potential
and successive performance and satisfaction judgments (Voss, 1998). Price represents an attempt
to establish the potential buyers’ willingness to purchase as a function of various prices set by the
seller. The level of acceptance of price can be defined as the maximum price which a buyer is
ready or decide to pay for the products and services (Saeed, Niazi, Arif & Jehan, 2011).
However, consumer price of acceptance represented an individual utility profiles (Kohli, 1991).
The essential role of price as a purchasing determinant as well as so called post-purchasing
process is well recognized (Matzler, Wurtele & Renzl, 2006). According to Keaveney (1995),
qualitative study of customer switching behaviour in services sector, half of the customer
switched services because of poor price perception compared to other competitors (Keaveney,
1995). Furthermore, price perception directly influences customer satisfaction, with the
likelihood of switching and also the likelihood of recommendation to others in banking industry
(Varki & Colgate, 2001). Price satisfaction consists of a most complex construct consisting of
few dimensions, for example price fairness, price transparency, price reliability and more. These
essential dimensions constitute the determinants of price satisfaction and consequently customer
satisfaction (Matzler, Wurtele & Renzl, 2006).

20
2.5.2 Brand Reputation
Marketing literature including NCSI and ACSI examined positive link between customer
satisfaction and brand reputation. Wafa etal (2009) mentioned that, the nature and amount of a
consumer's experience with an evoked set of brands. Perceived brand reputation has significant
impacts on customer satisfaction and a consumer's beliefs about brand are derived from personal
use experience, word-of-mouth endorsements/criticisms, and/or the marketing efforts of
companies, (Woodruff et. al., 1983). A brand perception is also one of the important aspects of
the banking sector. Perceived brand reputation in banking sector refers to the banks reputation
and expiating place of bank in the banking industry (Che-Ha and Hashim, 2007; Reynolds,
2007). It measures experience of the customer how he/she fill with this brand and their services.
A perceived overall brand performance is determined by some combination of beliefs about the
brand's various performance dimensions (Woodruff et al., 1983; Che-Ha and Hashim, 2007). A
brand perception is important factor to service provides because, satisfied customer with brand
will recommends that service to others.

2.5.3 Perceived Value

Value is recognized as an abstract concept and it is hard to define. Economists, social scientists
and engineers who come from different industries comprehend value in their own context. The
definition was proposed as trade-off of total benefits received to total sacrifices from customers’
perspectives. It is also the most common definition in marketing literature (Ismail & Khatibi,
2004). Perceived value is defined as compression between price paid by customers for products
or services and utility derived by perception (Kumbhar, 2011). In other words, customers make
assessment on benefits they gain relative to the total costs (Bontis, Booker & Serenko, 2007).
Nevertheless, constituents of value are very personal and subjective and vary between customers
(Ismail & Khatibi, 2004). Expressions of value could be classified into four categories: (i) value
is low price, (ii) value is whatever the customer wants in a product, (iii) value is the quality
customer gets for the price he/she pays, and (iv) value is what the customer gets in exchange for
what he/she gives out (Wong, 2011). The notion of relative perceived value leads to three
distinct value positions: (i) offering medium quality at a reasonable price, (ii) offering superior
quality at a premium price, or (iii) offering inferior quality at a low price (Wong, 2011). An
integrative configuration of perceived value comprises three models: (i) customer value in

21
exchange (which is a benefits costs model), (ii) customer value built up (which focus on the
benefits side of the value equation), and (iii) customer value dynamics (which reflect the
dynamics of how customers evaluate the supplier’s total offering) (Wong, 2011). There are two
critical ideas associated with customer perceived value. Firstly, customer perceived value is a
result from the consumers’ pre-purchase perception which is known as expectation, evaluation
during the transaction and post-purchase assessment (expectation versus benefits received).
Secondly, customer perceived value is equated as difference between benefits received and
sacrifices given (Wong, 2011).

2.5.4 Relationship Marketing

With the highly competitive banking industry nowadays, many financial service providers such
as banks or financial institutions tend to retain its customer base while build strong relationships
with their customers. It has become a marketing strategy tool to differentiate themselves and
banking products and services, in order to keep customer satisfaction, retention and loyalty
(Evans, 2002). Relationship marketing is considered as a strategy to establish, maintain and
increase customer relationships (Berry, 1983). Relationship marketing could also be defined as
creating value for target customers depending on their respective preferences, needs and wants
and delivering products or services tailored to the customers (Berry, 1995). Main characteristics
of relationship marketing include individual customer is treated as a unique person or unit,
company activities are directed towards existing customers through continuous interactions and
effective dialogues (Blomqvist, Dahl & Haeger, 1993). Relationship marketing is realized via a
mutual symbiosis and fulfillment of promises (Ndubisi, 2003). The ultimate goal of relationship
marketing is building and maintaining lasting relationships between the organizations and
customers which benefit both parties (Rapp & Collins, 1990).

The current business trend shows the shift from short-term transaction oriented to long-term
relationship focus (Webster, 1992). It was stated that the sustainable business growth strategy is
to understand customers’ needs clearer and to create superior value (Ndubisi, 2003). According
to Calonius (1988), promise concept is an integral part in the relationship marketing. Marketing
is not restricted only to giving promises and persuading customers, but also include fulfilling
promises. Fulfilling promises is believed to be crucial in achieving customer satisfaction,
retaining customer base and achieving long-term profitability (Reichheld & Sasser, 1990).

22
A few elements were proposed in the relationship marketing literature and the main elements
comprise (i) trust (Ndubisi, 2004), (ii) commitment (Ndubisi, 2004) and (iii) communication
(Morgan & Hunt, 1994). Morgan and Hunt (1994) argued that trust is a significant element in
relationship marketing. Effective relationship marketing relies heavily on the management of
trust since a service must be bought by customer before experiencing it. Trust referred to the
willingness to rely on an exchange partner in whom one has confidence. The breakdown of trust
caused customer dissatisfaction (Moorman, Deshpande & Zaltman, 1993). Resources of sellers
such as personnel, technology and systems must be able to create trust in customers (Gronroos,
1990). In addition, trust was also defined as the belief that a partner’s word is trustworthy and
individuals will fulfill obligations in the relationship (Schurr & Ozanne, 1985). Wilson (1995)
stated that commitment is the most common dependent variable adopted in buyer-seller
relationship studies. In marketing field, commitment was described as an enduring desire to
maintain a valued relationship and this demanded a higher level of obligation (Moorman,
Zaltman & Deshpande, 1992). On the other hand, psychologists stated that commitment is
decision or cognition which binds a person to a behavioral disposition (Kiesler, 1971). When an
individual believes that he or she receives more value from a relationship, he or she is highly
likely to be more committed. As a result, committed customers would reciprocate effort due to
past benefits received and committed companies would enjoy the advantages contributed by such
reciprocity (Mowday, Porter & Steers, 1982).

Communication could be defined as the ability to furnish timely, reliable and trustworthy
information (Anderson & Narus, 1990). Specifically, communication comprises three
components in relationship marketing. The three components include providing information
which could be trusted, providing information when delivery issues happen and providing
information on quality problems and fulfilling promises. Communication should involve
interactive dialogue between the organization and its customers during pre-selling, selling,
consuming and post-consuming stages (Anderson & Narus, 1990). Communicator has the
responsibility to build awareness, build customer preference by promoting quality, value,
performance and encourage prospective buyers to make a purchase decision (Nelson & Chan,
2005).

2.5.5 Customer Loyalty

23
Loyalty is defined as an attitude and observed behaviour in service context. It is a desire to
maintain relationship with an organization (Bontis, Booker & Serenko, 2007). Loyalty is defined
as a deeply held commitment to repurchase a preferred products or services consistently in
future. It results in repetitive patronage of same brand despite situational influences and
marketing efforts to influence behaviours (Che-Ha & Hashim, 2007). The behavioural
perspective suggested loyalty as repeated patronage although it did not probe to the motive
behind it. However, mere intention may not be a good representation of behaviours since it does
not necessarily result in actions. Sometimes behaviours are triggered by habit, third party’s
influence, convenience or random chance (Bontis, Booker & Serenko, 2007). Bank loyalty is
defined as the biased behavioural response displayed by consumers with respect to a bank. It is a
function of psychological processes, such as decision making and evaluation process which
result in brand commitment (Bloemer, Ruyter & Peeters, 1998).

The degree of loyalty in banking industry could be measured by tracking customers’ accounts
and observing the degree of continuity in purchase over a specific time frame (Bloemer, Ruyter
& Peeters, 1998). Apart from this, loyalty could also be measured as the likelihood of switching
in the absence of switching costs (Bontis, Booker & Serenko, 2007). Nonetheless, some
researchers criticized that behavioural measures like repeated patronage or visit frequency are
lack of a conceptual basis. Moreover, behavioural measures have a narrow view on a dynamic
process (Bloemer, Ruyter & Peeters, 1998). For example, a low frequency of purchases of a
particular product or service may be attributed to situational factors which consist of non-
availability, variety seeking and lack of provider preference. As a result, the behavioural
approach is not a good indicator of the reasons lead to loyalty. But, it is a consumer's disposition
in terms of preferences which in turn determine loyalty. There are circumstances where repeated
purchasing behaviour does not base on a preferential disposition, rather due to a number of
switching barriers (Bloemer, Ruyter & Peeters, 1998).

Getting a new customer always costs higher than retaining a new customer. According to a
study, cost of attracting a new customer is five times higher than keeping an existing customer
satisfied and loyal (Lo, Osman, Ramayah & Rahim, 2010). Customers are considered as retained
when they repeatedly purchase products and services and the purchase quantity increases. The
study done by Srinivasan et.al (2007) segregated loyal customers into two distinct categories

24
which are satisfied and dissatisfied customers. Surprisingly, Srinivasan et.al (2007) revealed that
satisfied customers do not necessarily loyal to a particular products or services. This means that
satisfaction is not a compulsory requirement for loyalty to exist. In certain circumstances,
customers are loyal due to attachment and commitment to the supplier. Likewise, a satisfied
customer could easily switch to better suppliers with higher quality of products or services if
trust, commitment and attachment do not exist. Switching barrier is a factor which makes it hard
or costly for customers to change suppliers. Furthermore, switching costs are referred to as the
technical, financial or psychological factors which make it cumbersome or costly for a customer
to change supplier for products or services (Afsar, Rehman, Qureshi & Shahjehan, 2010).

There is a direct relationship between switching costs and customer loyalty. The higher the
switching cost, the higher chances customer remains loyal. In this context, switching cost is
viewed as a cost that hinders customers from patronizing rivals’ business since risk or expense
involved in switching and accompanying decrease in the appeal of other alternatives (Afsar,
Rehman, Qureshi & Shahjehan, 2010). Customer loyalty is essential to long-term profitability
and success. With the presence of brand loyalty, customers would repeatedly buy the products or
services and also make recommendation to friends and families (Che-Ha & Hashim, 2007).
Although customer loyalty is important to businesses, they often fail to invest adequately to
retain loyal customers for their products and services. Various findings have alarmed the urgency
for business leaders and executives to adopt new innovative strategies to shape loyal customers
towards their products and services, and even further increase the loyal customer base (Afsar,
Rehman, Qureshi & Shahjehan, 2010).

It is more probable for customers to be loyal if a customer-oriented climate is provided. This

climate exists only when companies attempt to understand genuine customers’ needs and design
products to accommodate the needs (Ehigie, 2006). Customer satisfaction has been identified as
a fundamental role for getting customer loyalty. Higher customer satisfaction reduces a bank’s
cost in providing services due to lesser complaints to deal with. Customers would opt for other
banks if their current service providers are unable to satisfy their needs. Banks must always
remember that valued customers require truly personalized services (Ehigie, 2006). Since
customers seldom express their needs explicitly to the banks, it would be too late until customers

25
decide to leave for competitors. As a result, researchers ought to study bank customers’ minds by
comparing what should be offered and what is actually offered (Ehigie, 2006).

2.6 Overview of Financial System and Intermediation in Sierra

Leone
2.6.1 Financial System of Sierra Leone
Wright G.A.N. (1999) defines financial system as a system that allows the exchange of funds
between lenders, investors, and borrowers. The financial system is critical for countries
economic development as it pools and allocates resources to promote productivity and economic
growth. Financial systems operate at national, global, and firm-specific levels. They consist of
complex, closely related services, markets, and institutions intended to provide an efficient and
regular linkage between investors and depositors (Yaron J. & Benjamin M. 1997). Money, credit,
and finance are used as medium of exchange in financial systems. They serve as a medium of
known value for which goods and services can be exchanged as an alternative to bartering (Pill
H. & Pradhan M. 1997). A modern financial system may include banks (public sector or private
sector), financial markets, financial instruments, and financial services. Financial systems allow
funds to be allocated, invested, or moved between economic sectors. They enable individuals and
companies to share the associated risks.

Sierra Leone’s financial system is dominated by an oligopolistic banking system comprising the
Bank of Sierra Leone (BSL), and 14 licensed commercial banks. Amongst the three local
commercial banks only two, the Sierra Leone Commercial Bank and Rokel Commercial Bank
are solely and partly owned by the government. The other, Union Trust Bank, is entirely owned
by Sierra Leoneans and 11 are foreign owned banks. These foreign owned banks control 75% of
financial sector assets. Other financial institutions include the Finance and Trust Corporation,
discount houses, community banks, non-deposit taking finance companies, insurance companies,
foreign exchange bureaus, and micro-finance Institutions, none of which take deposits. The

26
banking sector is stable, safe and sound. There have been significant improvements in key financial
soundness indicators like capital adequacy, liquidity pos ition, asset quality, corporate governance
and earnings performance (BSL 2017 report). The microfinance industry has expanded rapidly and
this component of the financial system is becoming an important pr ovider of financial services to
micro, small and medium-sized enterprises and lower income segments of the population.

Notwithstanding these developments, there are inherent structural factors that impede efforts to
deepen the financial system for achieving strong and inclusive growth. The outreach of financial
services in the rural areas remains limited, despite the growth in the number of community
banks, financial services associations, and commercial banks’ branches. The bulk of financial
institutions and services are concentrated in Freetown and districts headquarter towns, thereby
restricting financial inclusion to mainly the urban population. This limits the size of savings
mobilized to stimulate growth and develop the economy. Banking products and services are still
largely limited to accepting deposits, granting of loans and advances, and foreign exchange
dealings. The main source of income for the entire banking industry is investment in
Government Treasury Bills. However, the growing competition among financial institutions has
forced banks to move towards providing relatively sophisticated products including internet and
mobile phone banking, point of sales and the use of Automated Teller Machines (ATMs).

2.7 Financial Intermediation Challenges in Sierra Leone

2.7.1 ICT Gap in Operational Services
The banking sector of Sierra Leone is dominated by small assets-based banks that are not
internationally competitive. William N. Massaquoi (2010), noted that in repositioning the Sierra
Leone banking sector for competitiveness and effective financial intermediation will involve the
deployment of information technology to play dominant catalytic role in growing the sector.
Thus in the face of the keen competition in the sector, market players must devise new survival
strategies. Banking institutions world-wide are compelled by the emergence of information
technology to fast-forward to more radical transformation of business systems and models. It is
in the same spirit that Bill Gates (2001) noted that: “the successful companies of the next
decades will be the ones that use digital tools to re-invent the way they work. These companies
will make decisions quickly, act efficiently and directly touch their customers in positive ways.

27
Going digital will put on the leading edge of the shock wave of change. That will shatter the old
ways of doing business”.

The world is now in a new era of technological revolution. Countries are beginning to compete
and fight over control of information rather than natural resources. The vogue today is E-
platform which implies offering financial services through electronic media to various customers
irrespective of place, time and distance. A customer friendly environment with high quality
service delivers needs to be created in order to enhance high patronage. To this end,
improvement in banking technology and institutional arrangements for transmission mechanism
as well as other operational areas of banking operations to ensure operational efficiency has
become a compelling necessity. This encompasses electronic money, internet banking,
telephone/mobile banking, reduction of cash transaction, smart card, ATM transactions and
capacity to process high volume of transactions among others.

2.7.2 Weak Human Resources Management

The centrality of the human resource in enterprise management is a generally accepted dictum. It
is in this light that management needs to make adequate investment in human factor. It should be
noted that there is no competitive weapon more potent and effective in a financial market than
the quality of its human resources. As remarked by Sanusi (1995) machines and advanced
technology can provide informational and transactional convenience but only manpower can
provide the credibility, creativity and care that can build long-term customer and client
relationships. In other words, there is need for capacity building in the banking sector of Sierra
Leone in order to enable it cope with the wind of technological development. Besides, no matter
how accurate or competent a computer is, it cannot feed itself with input and it can neither offer
a welcoming smile nor a warm handshake (Ochejele, 2000). Banking (and indeed the entire
sectors in the financial markets) is people-related and the quality of personnel will make the vital
distinction between what constitutes a good bank and a bad one. Consequently, of all the
challenges facing the Sierra Leone financial market, human capital development is the most
daunting.

2.7.3 Ineffective Fraud Prevention and Monitoring Mechanism

28
Another major challenge facing the banking sector and consequently, financial intermediation is
the need to minimize the high rate of frauds and other malpractices in the system. It is imperative
that bank managers and other market players give greater attention to the subject of maintaining
the highest ethical and professional standards in all their transactions and dealings with their
customers. This entails having adequate knowledge of Code of Conduct and Banking Practice
jointly designed by the Chartered Institute of Bankers (CIB), Central Bank of Sierra Leone
(BSL) and the Bankers Committee (General Assembly of Bank Chief Executives). Issues of
business integrity, respect for legitimate laws and regulations, concern for the society in which a
bank operates will become as much important as profit consideration in the 21 st century.
Currently, Sierra Leone has unenviable reputation as one of the most corrupt nations in the world
(Dabwor, 2008). Just like the money market, capital market suffers from a number of
malpractices perpetuated by the operators in the market, although the level of malpractices is not
as pronounced as in the banking sector. Some major malpractices in the capital market as
identify by Usman (2002) include “insider dealings, market manipulations, false trading; market
rigging and false representations”.

2.7.4 Weak Liquidity Management

While it is expected that there will be more external resource inflow to fund growth of the
economy in Sierra Leoen country, financial institutions must recognize their primary role in
internal resource mobilization. It is assumed that the economy is awashed with liquidity and
substantial portion of this liquidity is held as idle cash balances outside the banking system. The
business of resource mobilization should therefore be seen as a major challenge facing the
industry. In addition to internal mobilization of funds, market operators must also ensure
effective channeling of these resources to productive segments of our economy. The
responsibility of promoting the economy’s growth should be seen as a major challenge by all
firms in the industry. Fund mobilization and allocation should therefore form a major plank of
management policies in this century.

2.7.5 Less Autonomy of BSL

The turnaround of the banking sector and indeed the economy would be difficult without an
institutional and operational autonomy of the BSL (Ekundayo, 1996). The current situation

29
where the apex financial institution in the country is only given nominal autonomy which it
cannot exercise effectively is not very healthy for the banking sector. The BSL should be given a
leverage to establish its authority over its traditional area of jurisdiction. It is only with such
authority that the apex financial institution will be able to formulate viable monetary policies and
offer advisory services to the Central Government on financial matters. To this, may be added
the need for internationalization of the Sierra Leone capital market in spite of the malpractices in
the market.

2.7.6 Technological Innovation

Innovation is another challenge facing the financial markets in the country. Innovation implies
new way of doing things. A likely situation that may characterize some organizations is the
possibility of complacency. Experiences have shown that once some organizations have attained
certain regulatory provisions, there would be no further incentive for improvement. It should be
pointed out that there is “no bliss point” as far as any system’s operation is concerned. This
forms the basis of the current literature in management christened. Total Quality Management
(TQM), management needs to develop ways that have never been tried before and ways that will
give the organization a real edge over its competitors (Simon Millet 2013). These calls for the
establishment of research department that will monitor development in the markets, the economy
and the world at large so as to timely advise management accordingly. Innovation can be
achieved through rigorous analysis of current processes, expectations, market, innate experience
and common sense with a view to working out a new way of doing things (Jacob Jusu Saffa
2015). This challenge also entails strategic business management which allows an organization
to be proactive rather than being reactive in shaping its own future. Strategic management allows
an organization to formulate and implement better decisions through the use of systematic,
logical and rational approach to strategic choice. One of the benefits of this approach is the
empowerment of an individual and the strengthening of its decision-making capacity.

2.8 The Existence of Financial Intermediaries

30
The most basic question with regard to financial intermediaries is: why do they exist? This
question is related to the theory of the firm because a financial intermediary is a firm, perhaps a
special kind of firm, but nevertheless a firm. Organization of economic activity within a firm
occurs when that organizational form dominates trade in a market (Rosengard J.K. 2001 ). In the
case of the savings-investment process, households with resources to invest could go to capital
markets and buy securities issued directly by firms, in which case there is no intermediation. To
say the same thing a different way, nonfinancial firms need not borrow from banks; they can
approach investors directly in capital markets. Nevertheless, as mentioned in the Introduction,
most new external finance to firms does not occur this way. Instead, it occurs through bank-like
intermediation, in which households buy securities issued by intermediaries who in turn invest
the money by lending it to borrowers (Conning J. & Kevane M. 2002). Again, the obligations of
firms and the claims ultimately owned by investors are not the same securities; intermediaries
transform claims. The existence of such intermediaries implies that direct contact in capital
markets between households and firms is dominated. “Why is this?” is the central question for
the theory of intermediation.

Bank-like intermediaries are pervasive, but this may not require much explanation. On the
liability side, demand deposits appear to be a unique kind of security, but originally this may
have been due to regulation. Today, money market mutual funds may be good substitutes for
demand deposits. On the asset side, intermediaries may simply be passive portfolio managers,
that is, there may be nothing special about bank loans relative to corporate bonds. This is the
view articulated by Fama (1980). Similarly, Black (1975) sees nothing special about bank loans.

2.9 Financial Sector Development and Financial Intermediation

Emerging evidence suggests that both the level of banking sector development and stock market
development exert a causal impact on economic growth. While banking is more deeply
entrenched in Sub-Saharan African economies than securities markets and other non-bank
sectors, distinct challenges face policymakers in trying to ensure that both banks and markets
reach their full functional potential. Measures that succeed in deepening financial markets and
limiting the distorting exercise of market power result in more firms and individuals securing
access to credit at acceptable cost. Experience shows that formal financial institutions are slow to
incur the set-up costs involved in reaching a dispersed, poor clientele. In looking to

31
improvements, however, two aspects appear crucial, namely information and the relatively high
fixed costs of small-scale lending. A range of innovative, specialised micro-finance institutions,
mostly subsidised, has become established with remarkable success. Loan delinquency has been
low - far lower than in the previous generation of subsidised lending programs operated in many
developing countries and the reach of the institutions in terms of sheer numbers, as well as to
previously, grossly neglected groups, such as women and the very poor, has been remarkable.
This success is attributed to reliance on innovation in, for example, the use of group lending
contracts exploiting the potential of social capital and peer pressure to reduce willful
delinquency, dynamic incentives using regular repayment schedules and follow-up loans or
“progressive lending,” and lighter distributed management structures that reduce costs and
enable lenders to keep loan rates down to reasonable levels.

It is through its support of growth that financial development has its strongest impact on
improving the living standards of the poor. Though some argue that the services of the formal
financial system only benefit the rich, research suggests otherwise. Furthermore, countries with
strong, deep financial systems find that, on balance, they are better insulated from
macroeconomic shocks. Major challenges mostly faced with effective financial intermediation in
various countries include:
 State-owned financial institutions are generally inefficient and lead to the blurring of the
boundaries between the political-cum-economic activities of the state and the economic
activities of the financial institution.
 Corrupt governments compel both state-owned and private financial institutions to extend
credit to particular favoured individuals and institutions on grounds other than economic.
 General conditions of political instability lead to economic instability, which in turn leads
to financial instability. Financial instability leads to reduced capital flows into a country
and reduced financial intermediation through a loss of confidence in rights enforcement.
 One of the biggest problems is that formal institutions do not have the risk analysis
expertise or the familiarity with the often rural, poor potential clients. Moreover, formal
lending is highly collateralised rendering it inappropriate for the poor. While informal
organisations and NGOs are more familiar with these markets, they lack the resources of
the formal lending institutions to adequately serve the poor.

32
  A lack of familiarity with potential clientele often leads to inappropriate instruments
when the formal institutions dare to delve in low-end markets. Research suggests that
such players sometimes cannot distinguish between liquidity and credit needs among the
poor. Micro-credit institutions have a tendency to be supply-driven and do not match
specific needs (Rosengard, 2001).
 Related to the above, there is greater access to savings vehicles than credit and hence an
imbalance. In Senegal, from 1993 to 1995, deposits by commercial banks grew 44% in
nominal terms while credit extension fell by 16.5%. For all countries south of the Sahara
demand for deposit services outstrips demand for credit services by 7:1 (Rosengard,
2001).
 Further, savings mobilised from the poor in SA and Senegal, for example, support large
borrowers, despite the finance needs of the poor.Because the small, low-end market lacks
depth and liquidity, formal players find it difficult to exploit economies of scale in
service delivery. The added problem of lack of physical and technical infrastructure
exacerbates the problem of delivery.

2.9.1 Regulatory and Legal Factors

Other problems in accessing finance find root in the legal and regulatory environment as the
following illustrate:
 Weak judiciaries call into question the ability of the judicial system to enforce creditor
rights in the event of default.
 In many African countries, central bank leadership is politically determined and the
institution itself may lack autonomy. The unfortunate result is that its ability to supervise
the financial system coherently is compromised.
 Compounding the above, over-regulation can emerge, for instance, preventing foreign
players in local markets (Conning and Kevane, 2002). Further, most financial regulations
were scoped for large players with sizeable deposits, and prudential requirements that
focus on protection of depositors restrict banks’ ability to cater for the poor.
 Furthermore, most countries still lack legal frameworks that recognise micro-financiers;
some countries like South Africa and Senegal have started to make changes. This affects
nontraditional banks’ ability to mobilise deposits legally.

33
  Often, legislation is complex and difficult to administer. Interest rate caps are prevalent
and these are distortionary. Contrary to popular expectations, research suggests that the
poor are willing to pay market rates for productive uses of borrowed funds (Nelson,
1999).
 Problematic legislation leads to fragmentation whereby no operational or strategic
linkage among formal, semi-formal and informal micro-finance institutions exists. This
leads to a failure to tap into synergies – where some are good at collecting deposits but
lack local knowledge and information and vice versa.

2.9.2 Social, Religious and Cultural Factor

Effective financial intermediation is impeded by the following social factors:
 Illiteracy is high among rural poor people, especially women, and specialised credit
officers are required to deal with this type of client. In sense, employees of formal
institutions are also illiterate when it comes to dealing with these clients.
 In some places, women have cultural and religious restrictions that prevent them from
seeking credit. They may take up credit only with their fathers, brothers or husbands as
co-signatories.
 In predominantly Muslim societies, fair market interest rates cannot be charged on
religious and moral grounds.

2.9.3 Technological Factor

The financial sector has long been an early adopter of innovations in information and
communications technology. Internationalisation of finance (despite efforts to block it) has been
one consequence. This has helped lower the cost of equity and loan capital on average, even if it
has also heightened vulnerability to capital flows. While a few countries such as South Africa
and Swaziland have started making use of technological advances in financial services, such as
smart cards, many African countries are still some way behind international norms in rolling out
the relevant infrastructure that will facilitate delivery to rural populations.

2.10 The ISO 9001:2000 standards and Customer Satisfaction

34
The ISO standards are a set of recommendations that can be applied by organizations of any size,
regardless of type and service or products provided. An organization that applies the standards
correctly is able to deliver services that make customers satisfied. ISO is a non-governmental
organization and the standards are not required to be applied, however, many organizations
recognize and implement them, since the standards help measure customer satisfaction and
demands. ISO 9001:2000 standards put customer satisfaction in the center of a successful
organization (Hoyle 2009, 4). The principle of customer focused is explained as follows:

Organizations depend on their customers and therefore should understand current and future
customer needs, should meet customer requirements and strive to exceed customer expectations
(Eight Quality Management Principles,). The standard states that an organization should
understand customer's needs. In this case, customers can be purchasers or users of inside or
outside of an organization. It states that by understanding customer needs and wishes,
organizations can achieve a better position on the market and be more flexible toward changes.
The standard also claims that organizations should constantly measure customer satisfaction and
take steps to increase it (Mutafelija and Stromberg 2003, 122). To measure customer satisfaction,
ISO standards recommend conducting a survey, but there are no requirements about what kind of
survey a company should have. However, there are advices on what to do with results:
 Company is able to determine current level of customer satisfaction;
 Company knows what customers’ needs that have not met;
 Company is above to develop new ideas about products and services;
 Company is looking for new opportunities regarding customers’ satisfaction.

2.11 SERVQUAL Measurements of Customer Expectation and

Ultimate Satisfaction
The SERVQUAL model was developed by Parasuraman, Zeithaml and Berry (1988,) to identify
five different gaps between customers’ expectation and service that is provided by a company to
satisfy that expectation. Customer expectations mean desires and hopes they have prior to the
service and perceptions mean evaluation of the service that have been provided. If expectations
are greater than the actual performance, then customer dissatisfaction occurs. On a contrary, the

35
smaller these gaps, the better service quality is. The SERVQUAL model measures five gaps that
enables analyses of the service quality from the customer perspective (Strong, 2014, 211).

2.11.1 GAP 1 – Expected Service: Management Perception of

Consumer Expectations
The GAP 1 shows the gap between customer expectations and how management sees those
expectations. The gap appears when managements do not understand customer wants and
wishes. It is likely to happen in companies with lack of good customer satisfaction research.
Moreover, bureaucracy is also responsible for a big gap since it is an ineffective way of
communication. To avoid the gap, the company should always conduct different researches and
be aware of customer expectations. A company that is aware about the gap should seek the best
ways to get in touch with customers and become aware of their expectations. To keep the gap
small, a company should aim at building strong relationships with customers, avoid many layers
of management and develop an effective way of upward communication. (Zeithaml, Bitner and
Gremler 2006, 38.)

2.11.2 GAP 2 – Management Perception: Service Specifications

Understanding customer needs is important, though companies also need to know what kind of
services should be provided to customers. GAP 2 appears when services are designed without
thinking about customer needs. It can appear because of inadequate service scope, absence of
goal settings or inappropriate task standardization. To make the gap smaller, a company should
develop strategy to measure customer perception and company's performance. (Zeithaml et al.
2006, 39.)

2.11.3 GAP 3 – Service Delivery Gap

Even if a company has closed the first two gaps, it may still have problems providing services
that meet customer expectations. GAP 3 appears when the company fails to deliver services in
the way that customers need. The gap indicates that delivered service did not match the
standards. It happens due to failure to analyze and match the supply and demand, as well as

36
inefficient human resource policy. To close this gap, companies should build their strategies
around delivering excellent service. To be more precise, service is delivered as it was designed
when employees are motivated and are able to deliver quality service. A company should hire
people with necessary skills and interest in doing the work. Then the company should reward and
promote the employees to retain them. (Maglio, Kieliszewski 2010, 210.) Team-work and co-
operation are essential elements that company should consider in order to close this gap
(Zeithaml et al. 2006, 42).

2.11.4 GAP 4 – Service Delivery: External Communications

When a company has done everything to close previous gaps, there is still a risk of failure to
meet customer expectations, if the service that is delivered does not match with communications
about it. The GAP 4 can be also called a communication gap: when companies advertise the
services on different Medias, customers expect the quality of services to be as promised.
Otherwise, customers are dissatisfied and consider the quality of service low. Therefore,
companies should focus on developing strategies to reach customers in order to provide services
in the right way (Zeithaml et al. 2006, 43). Companies can close the GAP 4 by creating
advertisements that accurately describe the offerings and how they delivered. As a result,
realistic expectations will promote positive perception of services (Kulasin, Fortuny-Santos
2005, 134).

2.11.5 GAP 5 – Expected Service: Perceived Service

The previous gaps create the GAP 5, which define the difference between expected services and
perception of the received service. The key to closing the GAP 5 is to close previous four gaps.
Companies should carry out different researches to know customer expectations while working
with employees to provide the right service in the right time. After publishing the GAP model,
Parasuraman, Berry and Ziethaml developed five dimensions and a scale named SERVQUAL to
measure the gaps mentioned above. The dimensions are described as followed:

 Tangibles: Aspects of personnel, equipment and physical facilities

 Assurance: The ability of employees to convey trust, their knowledge and courtesy

37
  Reliability: The ability of a company to perform the services accurately
 Empathy: The level of individualized attention to customers
 Responsiveness: The willingness of employees to help customers and deliver quality
service. (Iwaarden, J., Wiele, T., Ball, L. & Millen, R. International Journal of Quality &
Reliability Management Vol.20 Issue 8 2003, 922).

2.12 Summary
This chapter exhaustively explored both theoretical and empirical perspectives relevant to the
study area with the aim of identifying research gaps in relation to financial intermediation and
customer satisfaction from the point of view of financial institutions. The chapter began with an
introduction revealing the purpose of the chapter and providing precise explanation on general
concept of financial intermediation and customer satisfaction. The subsequent chapter discusses
the research methodology and design adopted for the study, with particular emphasis on the link
between the theoretical framework discussed in this chapter and the design of the questionnaires
used in data collection.

Chapter Three
Research Methodology
3.0 Introduction
This chapter focuses on research design, approach and the methodology used to collect and
analyse data in order to achieve the study objectives. It also explains the research population,
sample and sampling technique. This is an exploratory study that examines and analyses the
challenges associated with financial intermediation in relation to customer satisfaction, using
EcoBank (S/L) Ltd as a case study. The scope and nature of the research require that empirical
data being collected, analysed and interpreted in order to put into perspective and explain
financial intermediation challenges in the context of Sierra Leone financial system. This chapter,

38
therefore, provides a systematic research approach and methodology utilised to collect both
primary and secondary data relevant to answering the research questions and ultimately
addressing the identified research problem statement. A case study approach was employed with
a qualitative research design to gather raw data from the study participants.

3.1 Research Design

Academic research requires that an appropriate and relevant research design being selected and
utilised to ensure a successful completion of any academic work. In the context of this study,
research design denotes a systematic approach and procedures used by the researcher to
accumulate data in order to put into perspective issues under consideration. The issues in regard
of this study refer to financial intermediation challenges and customer satisfaction techniques.
Research designs are also referred to as plans and the techniques adopted in carrying out research
work that span the decisions from broad assumptions to detailed methods of data collection and
analysis (Trochim, 2006). Researchers consider the use of different research designs including
qualitative, quantitative, and mixed designs. The overall decision involves which design should
be used to study a topic. Informing this decision should be the worldview assumptions the
researcher brings to the study; procedures of inquiry (called strategies); and specific methods of
data collection, analysis, and interpretation, Donnelly (2008). The selection of a research design
is generally based on the nature of the research problem or issue being addressed, the
researchers’ personal experiences, and the audiences for the study.
In this study, a qualitative research design is adopted. This design is suitable because the study
explores financial intermediation challenges in the context of customer satisfaction. A qualitative
study entails collection of data using focused-group interview and survey, basically aiming
understanding a particular phenomenon. The method is subjective in nature, and as such involves
describing situations, people, interactions, behaviours, and events. Hancock (1998) explained
that a qualitative method requires direct observation and that the researcher should interview
participants, carry out focus group discussions, and analyze case studies. Implementation of this
method of study involves being informed about the preconditions and views of the study in order
to avoid any forms of biases. An advantage of qualitative study is the fact that it offers deeper
insight on study subjects (Hancock 1998, 12). It also involves the use of a smaller sample size,
which reduces the cost of the study while providing a greater understanding of the study

39
question. A major concern, however, is that it may produce unreliable data due to its subjective
nature. It may also present difficulty in data analysis which involves sort, filter, and
manipulation.

3.2 Study Area

EcoBank (S/L) Ltd is chosen as the case study area of this thesis, and primary data for the study
(through interviews, survey, and questionnaire administration) were mostly collected from
EcoBank (S/L) Ltd.’s customers and senior management staff of the bank head office in
Freetown. Freetown is the capital city of Sierra Leone and houses the seat of government and has
all the major government offices and agencies and also accommodates all the heads offices of the
commercial banks in Sierra Leone. Freetown has a cosmopolitan population of over 1,000,000
people with diverse banking experience as they are exposed to all the different banks operating
in the country currently.

EcoBank (S/L) commenced business in Sierra Leone in 2006. It provides a wide range of
financial services to several thousand customers through its head office and branches in
Freetown as well as several other places in the country. EcoBank is a banking and financial
services group with headquarters in Lomé, Togo. The bank provides a wide range of banking,
consumer and commercial finance, investments, and securities and asset management services to
financial institutions, government agencies, international organizations, multinationals, medium,
small and micro businesses and individual customers. Its product portfolio includes savings
accounts, diaspora accounts, current accounts, credit cards, debit cards, personal loans, mortgage
loans, car loans, business accounts, business loans and microfinance. The group also offers
services including Internet banking, mobile banking, foreign exchange services, trade services,
transfers and payments, cash management, treasury services, investment banking and securities
and asset management services. The group operates through a network of 1,268 branches and
offices, 2,773 ATMs and POS machines. The group has a presence in 36 African countries with
international offices in Paris, London, Dubai and Beijing to support their customers who conduct
business in the global economy.

3.3 Target Population of the Study

40
A research population can be defined as the totality of a well-defined collection of individuals or
objects that have a common, binding characteristics or traits. In the context of this study, the
target population includes all EcoBank (S/L) customers and staff, employees of commercial bank
supervision department Bank of Sierra Leone (BSL). The main reason for using this category of
target population frame is that their activities directly or indirectly have bearing on the subject
matter of the study. Financial intermediation challenges and customer satisfaction survey in the
context of commercial banks is the scope of the study. The research covers a population of over
fifty thousand (50,000) direct stakeholders.

3.3.1 Sample Size

In conducting a research study, it is practically impossible, time-consuming and too expensive to
test every individual in the entire population. Therefore, smaller chunks of a unit sample are
chosen to represent the relevant attributes of the whole of the units (Graziano & Raulin, 1997).
Due to the vast nature of the population of this study, it was impossible to include everybody in
the study population; as a result, a sample had to be used. The study sample size includes thirty
(30) EcoBank (S/L) customers who were selected within Western Urban Area, fifteen (15)
supervisory management level staff of EcoBank head office in Freetown, and five (5) BSL senior
personnel. It was also imperative to ensure that respondents in the sample were representative of
the target study population. The table below represents the study sample frame:

Sample Frame Selected from the Population

Sample Frame No.
EcoBank (S/L) customers (within Western Urban Area) 30
EcoBank supervisory management level staff 15
BSL senior personnel (from commercial banks supervision department) 05
Total 50

3.3.2 Sampling Technique

41
In this study, a purposive sampling technique was used to select the study participants that were
representative of the target population. Patton & Kuzel, (1990, 2002) described a purposive
sampling, also known as judgmental, selective or subjective sampling, as a type of non-
probability sampling technique that is usually applied where the units to be investigated are
based on the judgment of the researcher and the sample being investigated is quite small,
especially when compared with probability sampling techniques. Nichols (2000) argues that in
a qualitative research that seeks in-depth understanding of a particular problem, a sample size in
the range of 30 to 50 is normally enough for a small scale study and 50 to 100 for a large scale.
A wide range of sources of qualitative data also increases the credibility and validity of the
research findings (Pratt and Loizos 1992). Hence this study employed a total of 50 eligible and
willing participants, and about 40 semi-structured questionnaires were designed and
administered.

3.4 Research Instrument

This section discusses data collection instruments utilised during the research process to answer
the research questions in order to achieve the objectives of the study. These instruments are
selected based on the research design and methodology employed by the researchers. It is also
important to mention that the correct usage of the selected research instruments ensure
information acceptability and consistency. In other words, research instruments appropriateness
ensures reliable research results. A case study is no exception to this rule. According to Brink,
the data collection methods or techniques form an important part of a research work. Patton
(2002) viewed that using more than one data collection instrument strengthens and gives
credibility to a research study. In order to fill the information gap, a multi-source methodology is
imperative. Yin (2003) presents a multi-source data collection technique as a unique feature with
case studies which is the ability to deal with multiple evidences in a particular case. Some of
these evidences are documents, interviews and observation. None of these sources has
preponderance over the other, they are complementary. The use of more than one data collection
instrument portrays a true picture of the case under study. In this regard, the researchers gathered
the required data from two (2) different sources for this study. This approach was adopted
because it revealed issues that could not be raised in using only one data collection instrument.

42
This study utilized instruments such as focused-group interview, survey, observation, and semi-
structured questionnaire administration, in order to accumulate the relevant data used in
addressing the research problem. The research questionnaires were developed by the researchers
and were reviewed by some experts in academia and in senior management positions at EcoBank
(S/L). Subsequently, a pilot test of the questionnaire was conducted for ten (10) participants from
the study sample frame in order to identify and eliminate potential ambiguity in the
questionnaire. Fundamentally, the questionnaire was designed to collect data from the study
sample frame.

3.5 Sources of Data Collection:

Broadly speaking, the study made use of two key data sources - primary and secondary data
sources in order to generate relevant data for the study.

3.5.1 Primary Data

The main research instruments used to collect data from this source were questionnaires,
interviews, and field observations. This was done with the focus on the objectives set in the
study. The primary data were collected from the selected respondents within the sample frame in
the research population. The analysis of the study findings was substantially based on primary
data. Interview questions directed to the respondents varied with their administrative capacity. A
major factor that was also of utmost importance was the major challenges faced with financial
intermediation in Sierra Leone and the impact on customer satisfaction in the context of financial
institutions.

3.5.2 Secondary Data

Secondary data sources basically include published materials – journals, articles, newspapers
etc., obtained from libraries and the internet. It also includes literature review on the subject area
of the study to obtain supplementary information in order to answer the questions set in the
problem definition. Reviewing existing literature on a topic helps to formulate questions on areas
that are lacking. This therefore makes literature review a means to an end and not an end in itself

43
because it helps the investigator to develop sharper and more insightful questions about the topic
(Cooper 1984). This study utilized various secondary data sources including EcoBank (S/L)
Annual Financial Statements Report, BSL Reports, publications, related literature review, books,
journals, articles, newspapers, and the internet, in order to compliment the primary data.

3.6 Data Presentation and Analysis:

3.6.1 Data Presentation

Primary data collected through questionnaire and interviews were presented using tables, pie-
chart, and bar chart in order to clearly depict the challenges associated with financial
intermediation in Sierra Leone.

3.6.2 Data Analysis

This section explains the methods and techniques used for analysing and interpreting data
collected from the case study. Explaining and discussing these techniques is essential because it
enables correct integration of empirical data with reviewed literature to arrive at research
findings and to make appropriate recommendations. This section also explains how data was
double-checked and validated to ensure that the written report is, to a certain extent, and
objectively based on accurate information. In research, collected data are meaningless until they
are analysed and interpreted. Similarly, Mello (2007) states that “data has no meaning unless it is
analysed and interpreted”. The process of categorising and making data meaningful is referred to
as data analysis. The manner data is analysed, interpreted and reported also depends on the
research design utilised. In the context of this study, both primary and secondary data were
collected. Thus, it is imperative that proper analysis of the data being done. Matthews and Ross
(2010) describes “data analysis as a process of working with the data to summarise, describe, and
explain the data in terms of the research questions”. Specifically on qualitative data, Bernard and
Ryan (2010) claim that analysis is ‘mischievously ambiguous’. It can mean, ‘the analysis of
qualitative data’ or it can mean, ‘the qualitative analysis of data’. What this means is that data
analysis does not always assume the same approach.

Data can be analysed to understand general trends, for example, social issues, or to make
meaning out of it in order to write a well-informed research report. In this regard, Bernard and

44
Ryan (2010) advise that this confusion can be eliminated by clearly distinguishing between data
and analysis. Data analysis is the technique of looking for patterns that can assist to clarify the
reason why they are there and what they represent. It must be noted that analysis begins prior to
data collection. More often than not, data analysis and collection happen concurrently. Even Fox
and Bayat (2011) agree that the process of data collection and analysis may run concomitantly.
Bernard and Ryan (2010), therefore, caution that researchers need to have prior knowledge about
what you are studying. This must continue all the way through the research process.

The basic steps in the analytic process consist of identifying issues, determining the availability
of suitable data, deciding on which methods are appropriate for answering the questions of
interest, applying the methods and evaluating, summarizing and communicating the results. Data
analysis is essential for understanding results from surveys, administrative sources and pilot
studies; for providing information on data gaps; for planning new statistical activities; and for
formulating quality objectives. In this study, data was analysed by use of percentages with
Micro-soft Excel office package in line with the research objectives. Data was coded and keyed
into computer for analysis to make interpretation possible.

3.7 Questionnaire Administration

The initial questionnaire developed were pilot tested with ten (10) respondents from the
population sample frame. The primary objective of using this pilot questionnaire was to ensure
that the questions were clear and not ambiguous, such that responses would be consistent with
the purpose of the study. Few questions were reviewed as a result of non-response from the
respondents of the pilot study. This was done to improve the reliability and validity of the
questionnaire. The questionnaires were self-administered on one-to-one basis to the respondents
willing to fill or provide answers to the questionnaire at the entities premises. The completed
questionnaires were collected by the researchers within two days’ time. The primary data
collected were reviewed by the researchers to ensure maximum accuracy, legibility,
completeness, consistency, and to reduce ambiguity. However, not all the questionnaires
administered were filled out for different reasons which were mainly due to time factor.

3.8 Ethical Considerations

45
The researcher had first obtained a research permit from EcoBank (S/L) head office and
identified himself through information request form obtained from Njala administration. The
researcher, prior to conducting focused-group interviews and administering questionnaires, had
to adequately explain to the respondents the study aim and objectives, as well as the importance
of the study outcome. The study respondents were required to be of legal age (18 years and
older) in order for them to be eligible to participate in the study. Typically, the age limit the
researcher used in this study for inclusion of participants was 20 years and above. In addition,
participants must have been willing and able to give informed consent and participate fully in all
aspects of the study. No potential participants were excluded on the basis of race or gender. To
ensure confidentiality, names of respondents were not used in the data presentation and analysis
stage of the study, and respondents were not forced to fill the questionnaires. All the sources
used to obtain the information were acknowledged.

3.9 Summary

This chapter presented a comprehensive coverage of the research method, techniques and tools
(instruments) that the researchers tested and proved to be appropriate in soliciting answers to the
research questions outlined in the introductory chapter of this study. In this chapter, the
researchers adopted a qualitative research design to evaluate the challenges faced with financial
intermediation in Sierra Leone. The researcher used research instruments such as focused-group
interviews, questionnaires administration, survey, and observation, in order to collect primary
data from the study participants. This gave a better chance to understand the situation from a
larger focus than that which was represented by the theoretical framework alone and both means
of collecting information together, substantiated the data collected. This thus, enabled the
researchers to identify the themes and patterns of perspectives among participants’ responses.

Chapter Four
Presentation of Data, Analysis and Interpretation
4.0 Introduction

46
The chapter presents the result of the fieldwork conducted by the researcher. The result is mainly
the responses of the questionnaires administered to the study participants, which include
ECoBank management staff, customers, and BSL commercial bank department staff. Statistical
Package for Social Scientists (SPSS) version 23.0 was used to perform the analysis and
Microsoft Excel 2016 was used to generate the charts to explain the results. The questionnaires
were administered to 50 respondents. Out of the 50 questionnaires administered, 40 were
obtained but 35 were valid for analysis while 5 were invalid as a result of improper and double
responses. The valid questionnaires which formed the analysis yielded 66% response rate. The
findings of this chapter is generalized to reflect the ultimate views of the whole population of the
study. Hence the findings provide a significant basis for relevant recommendations made in
chapter five, which is the final chapter of this study.

4.1 Demographic Profile of the Study Participants

The researcher collected information pertaining demographic profile of the study participants.
Gender of participants was considered to be very relevant because it greatly influences financial
intermediation and customer satisfaction strategies in Sierra Leone as confirmed by earlier
studies (Rogers, 1995). The comprehensive outcome of each of the demographic characteristics
is presented in the table below.

Table 4.1: Sex of Participants

Sex Number Percentage (%)
Male 39 78%
Female 11 22%
Total 50 100
Source: Researcher’s Field Work, Nov, 2022.

Table 4.0 above depicts the sex of the sampled participants of the study. From t he table, it is
revealed that the majority of the participants were men. The statistics demonstrated that 39 of the
respondents, constituting 78%, were men and 11 women, representing 22%. The skewed result in
favour of men is primarily attributed to the purposive sampling method used for the selection of
the respondents. It should also be noted that, across all the institutions or sections of which the
sample was taken, were heavily male dominated. These statistics confirmed some belief that most
or majority of EcoBank customers in Sierra Leone are men.

47
4.1.1 Ages of Participants
The next demographic variable of the participants which the researchers found out about was
their age. The table below highlights the age distribution of participants.

Table 4.2: Ages of Respondents

Age Bracket Number Percentage (%)
10-19 Years 0 0%
20-30 Years 11 22%
31-40 Years 28 56%
41-50 Years 7 14%
50 Years and Above 4 8%
Total 50 100
Source: Researcher’s Field Work, Nov, 2022.

Table 4.2 above displays the various age brackets of the study participants. The age variable of
the participants indicated that, large proportion of the participants was in the age bracket of 31 –
40 years, representing 56%. This was followed by participants within age bracket of 20-30 years,
who accounted for 22% of the sample size. The next age bracket is 41 – 50 years with 14
percentage point. Interestingly the age bracket of 50 years and above had 8 percentage point with
age bracket of 10 – 19 years having 0 percent. These analyses indicated that majority of the study
population are aged over thirty-one years. According to Abu Shanab et al. (2007), ‘age is a
significant factor that positively influences the outcome of a study.

4.1.2 Assessment of Respondents’ Educational Level

Respondents were asked about their level of education in the administered questionnaires and
interviews conducted. Responses relating to participants’ academic qualification are presented in
the figure below.

48
Figure 4.1: Educational Level of Respondents

22.5 44%

17.5

12.5
22%
18%
7.5
10%
2.5 6%
0%
Primary Secondary Diploma Higher Na- University Post Gradu-
School School Grad- tional Graduate ate
Dropout uate Diploma
Academic 0 3 11 9 22 5
Qualification
of Respon-
dents

Source: Researcher’s Field Work, Nov, 2022.

Figure 4.1 highlights the educational level of the study respondents. As highlighted in the Figure
above, majority of the respondents selected are graduates with first degree. 22 of the
respondents, constituting 44% are university graduates; followed by 5 others, representing 10%
who hold post graduate qualifications. 9 of them with 18 percentage point hold qualification in
Higher National Diploma (HND). 11 are in the category of Diploma level qualification,
constituting 22% whilst 3 of them, accounting for 6% are holders of secondary school
certificates. None of the respondents is a primary school dropout. Possession of high academic
qualification by the respondents was anticipated, since majority of the study participants are
working in institutions which have required educational level as criteria for recruitment. All the
respondents are regular participants in the research scope of the study and provide significant
assessment basis for the study findings.

4.1.3 Occupational Grouping of Respondents

Table 4.3: Occupation of Respondents
49
 Occupation No. of Respondent Percentage (%) of
Respondent
Student 8 16%
Bike Rider 5 10%
Trader 10 20%
Teacher 14 28%
Housewife 4 8%
Unemployed 2 4%
Others 7 14%
Total 50 100%
Source: Researcher’s Field Work, Nov, 2022.

Table 4.3 above presents the various occupations of the study respondents. Respondents were
asked to indicate their occupational status. The results indicate that respondents working in
teaching occupation, representing 28% outnumbered the rest of the occupational grouping of the
study participants. This is immediately followed by respondents in the occupation as traders or
business people, representing 20%. Occupation of student accounts for 16% whilst those of bike
rider, housewife, unemployed, and others respectively constitute 10%, 8%, 4%, and 14%. It can
be generalized from this analysis that majority of the study population are teachers.

4.2 Institutional Distribution of Participants

Table 4.4: Institution of Respondents
Institution Number of Percentage (%)
Respondents of Respondents
Selected Selected

50
 EcoBank (S/L) Customer Service Department Staff 15 30%
Commercial Banks Regulation Department of BSL 5 10%
EcoBank Customer Group 30 60%
Total 50 100%
Source: Researcher’s Field Work, Nov, 2022.

Figure 4.2: Institutional Representation of Respondents

30

60%
50%
40% 15
30%
20%
10% 5
0%
Institutional Representation of
Respondents

Source: Researcher’s Field Work, Nov, 2022.

As seen in table 4.5 and figure 4.2 above, the institutional distributions of the participants are
represented. It is examined that large proportion of the participants, representing 60%, belongs to
the group of EcoBank (S/L) customers. This was followed by participants working with
EcoBank at customer services department, which constitutes 30% whilst respondents working at
commercial banks regulation department of BSL represent 10%.

4.3 Analysis of Empirical Data Obtained from Questionnaire

Administration
The aim of this section is to present and critically analyse the views or perceptions of
respondents regarding financial intermediation challenges in Sierra Leone. The researchers
conducted customer satisfaction survey and EcoBank (S/L) is used as the case study area of the

51
study. A total of forty (40) closed-ended questionnaires were received from the sampled
respondent groups of the study. Thirty-five (35) valid questionnaires representing 88% of the
total received, were analysed and interpreted.

Table 4.5: Analysis of Responses Obtained from Valid Questionnaire

Respondents Group Number of Valid Number Percentage

Questionnaire of (%) Response
Administered Questionnaire Rate of Valid
Received Questionnaire
EcoBank (S/L) Customer Service
10 8 23%
Department
Commercial Banks Regulation
5 4 11%
Department of BSL
EcoBank Customer Groups
25 23 66%
Total
40 35 60%
Source: Researcher’s Field Work, Nov, 2022.

Figure 4.3: Depiction of Response Rates Obtained from Valid

Questionnaires Administered to Respondents

52
 Participants Response Rates (%)

23%
EcoBank (S/L) Customer Services
Commercial Banks Regulation
Department of BSL
EcoBank Customer Groups
11%
66%

S
ource: Researcher’s Field Work, Nov, 2022.

Table 4.5 and figure 4.3 show the number of questionnaires administered on-one-to-one basis to
the various sampled respondent groups of the study including the number of valid questionnaires
collected as well as percentage responses obtained from the valid questionnaires. As displayed in
table 4.5 and figure 4.3 above, it is examined that 25 questionnaires were administered to
EcoBank customers with 23 valid ones collected, representing 66% response rate. 10
questionnaires were administered to staff of EcoBank customer services department at the bank
head office in Freetown. Out of this figure, 8 valid questionnaires were collected, constituting a
response rate of 23%. Finally, BSL Commercial Banks Regulation Department personnel were
administered with 5 questionnaires of which 4 valid ones were collected, accounting for 11% of
response rate.

53
4.4 Level of Customers’ Satisfaction with the Services offer by
EcoBank.
After reviewing the filled customer questionnaires and interviews conducted with them, a five
service quality dimensions made up of thirty (30) closed-ended questionnaires were developed in
order to determine customers’ satisfaction level with EcoBank services. Each question was based
on a 5-point weighted likert scale as shown below:
1. Satisfied, 2. Strongly Satisfied, 3. Less Satisfied, 4. Strongly Less-Satisfied, 5. Uncertain.
The table below displays the major services offer by EcoBank S/L and customers’ response rate
obtained regarding satisfaction with the services.

Description Customers’ Perception and Response Rate

Satisfied Strongly Less Strongly Uncertain
Satisfied Satisfied Less-
Satisfied
Everyday 33% 40% 20% 3% 3%
Banking
E-Products 27% 47% 16% 7% 3%

Payment & 40% 27% 13% 20% 0%

Transfers
Cards & ATM 24% 27% 33% 13% 3%
Loans 17% 16% 33% 23% 10%
Hajj 30% 20% 23% 10% 17%
Investment 40% 33% 20% 7% 0%
Solutions
Microfinance 34% 27% 23% 13% 3%

Table 4.6: EcoBank Services Offer and Customers’ Response Rate

Source: Researcher’s Field Work, Nov, 2022.

As depicted in Table, customers were administered with questionnaires in which their opinions
regarding their level of satisfaction with the services offer by EcoBank were sought. From the
table, 40% of customers responded as strongly satisfied with everyday banking. i.e, they are very

54
pleased with the bank’s policy of managing their accounts (current, savings, and fixed deposit
account). This was followed by another set of customers representing 33%, who also expressed
that they were satisfied with the everyday banking system. 20% said they were less satisfied
while one customer representing 3% indicated that he was strongly less-satisfied and another one
customer also representing 3% was uncertain. This indicates that there is high financial
intermediation at EcoBank and customers are very satisfied with the system. 47% of customers
said to have been strongly satisfied with E-products i.e, SMS and E-Alerts, E-Statements etc.
while 27% responded that they are satisfied, 16% and 7% respectively responded that they are
less satisfied and strongly less-satisfied. One customer, representing 3% was uncertain. Payments
and transfer services constitute of 40% of customers who said were satisfied, while 27%, 13%,
and 20% respectively expressed that they were strongly satisfied, less satisfied, and strongly less-
satisfied. 3% was uncertain. While 33% and 27% of customers were strongly satisfied with
investment solutions and microfinance services, it was clearly noticed that 24%, 17% and 30% of
customers were satisfied with the following services: Cards & ATM, Loans, and Hajj services.

4.5 Service Quality Dimensions of EcoBank S/L Ltd.

In order to measure the level of service quality delivery by EcoBank and to assess customers’
satisfaction, the five dimensions: tangibility, empathy, responsiveness, reliability and assurance
developed by Parasuraman et al (1988) was used. The performance of the services delivered was
measured by the customers’ expectation and perception of the SERVQUAL dimensions, a
descriptive statistics on the responds from the customers were used to undertake the needed
measurements. The quality gap according to Parasuraman et al (1988) is the difference between
perception (P) and expectation (E). (Q= P-E). When Q is positive it implies customers are
satisfied and when negative dissatisfied.

4.5.1 Tangibility Dimension

Tangibility deals with the appearance of physical facilities, equipment, personnel appearance,
and communication materials. Descriptive statistics were taken based on the expectation and the
perception of the customers of the bank.

55
Table 4.7: Descriptive Statistics on Tangibility Dimension
Tangibility Expectation Tangibility Perception
No Item Mean Std. No Item Mean Gap
Dev.
1 The bank should 4.74 .443 The bank has up-to-date 4.31 -0.43
have modern looking equipment
equipment
2 The bank’s physical 4.61 .546 The bank’s physical 4.30 -0.31
facilities should be facilities are visually
visually appealing appealing
3 The employees 4.64 .524 The employees are well 4.31 -0.33
should be well dressed and neat
dressed and neat- appearing
appearing
4 Materials associated 4.61 .532 Materials associated with 4.38 -0.23
with the service, the service, such as
such as booklet, booklet, cheque book and
cheque book and statements should be
statements should be visually appealing
visually appealing
Average 4.650 Average 4.325 -1.27
Source: Researcher’s Field Work, Nov, 2022.

From Table 4.2, the average scores (mean) are so high in relation to the scale of measurement.
This means that customers consider visually appealing physical facilities, efficient equipment
and good-looking workers. Out of the items, customers are very much interested in the
equipment used to deliver the services. With tangibles, the mean results of the items in Table 4.2
indicate that customers agree that ECoBank has modern looking facilities to perform the banking
services. Among the tangibles the item, ‘materials and equipment for service delivery are
modern and efficient’ produced the highest mean.

This is consistent with the quality service practices of the bank where ATMs are constantly
checked for efficiency. The grand mean 4.33 is also on the high, indicating that customers agree

56
that tangibles of ECoBank S/L are modern, efficient and aesthetically appealing. Irrespective of
the various means of the factors for both expectation and perception, mean score for the
expectation were found to be relatively higher than its perception for each of the factors
considered.

Figure 4.3: Analysis of Service Dimension Gap for Tangibility

Chart Title
4.7

4.65
4.6

4.5
Tangibility
4.4

4.3 4.33

4.2

4.1
Expectation Perception
S
ource: Researcher’s Field Work, Nov, 2022.

Clearly, it has been shown from Figure 4.3 that, in terms of tangibility, as the customers were
expecting the bank to provide a service quality level of 4.650 representing 93%, the bank are
rather providing a service quality level of 4.325 representing 86.5% with a gap of 0.325 (6.5%)
lower than the expectation of the customers. This was in agreement with Rubinstein (2010), who
found out that because corporate world is moving across borders, tangibility of corporation has
increased dramatically across all service delivery. This finding may be attributed to that fact
since banks are in a competition for customers; items on tangibility were expected to be higher.
However this was not so, since perception falls short of the expectation of the customers, which
also can be attributed to the fact that, respondents were having a higher expectation thereby
leaving it in such underscore for its perception on the tangibles.

57
4.5.2 Reliability Dimension
Reliability dimension of a corporate entity is the ability to perform the promised service
dependably and accurately, in this study, the researcher deals with the promise of executing a
task, solving customers’ problems and taking sincere interest in the problems solving and others.

Table 4.8: Descriptive Statistics on Reliability Dimension

Reliability Expectation Reliability Perception
Item Mean Std Item Mean Std
Dev Dev
When the bank promises 4.64 .498 When the bank promises 4.31 -0.33
to do something by a to do something by a
certain time, it does it certain time, it does it
When a customer has a 4.50 .543 When a customer has a 4.32 -0.18
problem, the bank should problem, the bank shows
show sincere interest in sincere interest in solving
solving it it
The bank should perform 4.48 .543 The bank performs its 4.32 -0.16
its service right the first service right the first time
time
The bank should provide 4.46 .593 The bank provides its 4.49 -0.03
its services at the time it services at the time as
promises to do so promised
The bank should keep its 4.69 .466 The bank insists on 4.54 -0.15
record accurately and free accurate and error-free
from errors record
Average 4.554 Average 4.396 -0.85
Source: Researcher’s Field Work, Nov, 2022.

On the issue of reliability of the services delivered by ECoBank, five items were measured. The
mean scores of the items in Table 4.3 for both expectation and perception indicate that the
services of ECoBank are reliable. Customers are provided with the services as promised and
when there are problems, the bank shows interest and the preparedness to deal with the problems
customers are encountered with. Out of the five items measuring service reliability, the bank
insists on ‘accurate and error free records’ which yielded the highest mean score of 4.54 for its
perception. This means that ECoBank keeps proper records of transactions and provides as
accurate as possible financial statements and other data on transactions of its customers.

58
Cumulatively, irrespective of the higher means for both expectation and perception, the
cumulative mean score were 4.554 and 4.396 respectively.

Figure 4.4: Analysis of service dimension gap for reliability

Perception, 4.396, Expectation, 4.554, Expectation

87.92% 91.08% Perception

Source: Researcher’s Field Work, Nov, 2022.

As shown in Figure 4.4, as customers were expecting a service quality level of 4.554 (91.08%),
the bank was rather delivering a service quality level of 4.396 (87.92%) with a service gap of
1.158 (3.16%) falling short of the expectations of the customers. This indicates that, service
delivery was unsatisfactory to the customers in terms of service quality dimension on reliability.
This finding is in total agreement with Hussar (2000) who stated that the increasing rate of
technology growth, has affected the expectations of customers from their service providers
thereby affecting service quality.

4.5.3 Responsiveness Dimension

Responsiveness is the willingness to help customers and provide prompt service and others such
as making information available to customers and not appearing too busy to respond to request.

59
Table 4.9: Descriptive Statistics on Responsiveness Dimension
Responsiveness Expectation Responsiveness Perception
Item Mean Std Dev Item Mean Std
Dev
Employees should give 4.64 .512 Employees should give 4.44 -0.2
prompt service prompt service
Employee should make 4.56 .512 Employee should make 4.39 -0.17
information easily information easily
obtainable obtainable
Employees are always 4.44 .602 Employees are always 4.33 -0.11
willing to help you willing to help you
Employees should not be 4.62 .569 Employees should not be 4.39 -0.23
too busy to respond to too busy to respond to
your request your request
Average 4.565 Average 4.389 -0.71
Source: Researcher’s Field Work, Nov, 2022.

Evidently, all the mean score for the expectation and perception were recorded with a mean
indicating 4.0, which shows the seriousness of which the company deals with its responsiveness
dimension. Out of the four items, the item ‘employees give prompt service’ gave the highest
mean score of 4.44 for its perception, however it was relatively lower than the expectation of the
customers. This means that customers waiting time is minimal at the banking hall. The grand
mean yielded 4.138 for its perception indicating that customers agree that ECoBank is responsive
to its services.

60
Figure 4.5: Analysis of service dimension gap for Responsiveness
Responsiveness Gap

4.6
4.565

4.55

4.5

4.45

4.389
4.4

4.35

4.3
Expectation Perception

Source: Researcher’s Field Work, Nov, 2022.

By and large, the total service quality level of the responsiveness fails to meet the expectation of
the customers of bank as well. As shown in Figure 4.5, as they were expecting a service quality
level of 4.565 (91.30%), the bank was delivering a service quality level of 4.389 (87.78%) which
falls short of 0.178 (3.56%) on the expectation of the customers and represents an unsatisfactory
level of service delivery for the dimension on the descriptive analysis.

61
4.5.4 Assurance Dimension
Assurance Dimension is the knowledge and courtesy of employees and their ability to inspire
trust and confidence.

Table 4.10: Descriptive Statistics on Assurance Dimension

Assurance Expectation Assurance Perception
Item Mean Std Item Mean Std
Dev Dev
The behaviour of 4.68 .513 The behaviour of 4.34 -0.34
employees should instil employees inspires
confidence in customers confidence in customers
Customers should feel safe 4.60 .492 Customers feel safe in 4.30 -0.3
in doing business with the transacting business with
bank the bank
Employees should be 4.66 .506 Employees are polite to 4.29 -0.37
polite to customers customers
Employees should be 4.54 .555 Employees are 4.31 -0.23
knowledgeable to answer knowledgeable to answer
your questions your questions
Average 4.620 Average 4.310 -0.64
Source: Researcher’s Field Work, Nov, 2022.

The descriptive statistics on the assurance shows that, the expectation of the customers as well as
its perception was all recorded a mean far above 4.0, this show that customers agree that there is
an assurance to transact banking business with ECoBank S/L Limited. An item the behaviour of
employees inspires confidence in customers’ yielded the highest mean score of 4.34 for the
perception factor. Meaning employees of ECoBank exhibit professionalism in their dealings with

62
customers, because they know their work. The grand mean score of 4.31 is also an indicator of
customers having assurance in ECoBank S/L.

Figure 4.6: Analysis of Service Dimension Gap for Assurance

Chart Title

4.625

4.575

4.525

4.475

4.425

4.375

4.325

4.275

4.225

4.175
Expectation Perception
Assurance Gap 4.62 4.31

Source: Researcher’s Field Work, Nov, 2022.

On the gap analysis for satisfaction, respondents were expecting a service quality level of 4.62
(92.40%); they were of the opinion that, they were receiving a service quality of 4.31 (86.20%),
a service quality gap of 0.310 (6.20%) lower than their expectation. This shows a general
dissatisfaction on the assurance dimension.

63
4.5.5 Empathy Dimension
Empathy Dimension deals with the caring, individualized attention the firm provides to its
customers.

Table 4.11: Descriptive Statistics on Empathy Dimension

Empathy Expectation Empathy Perception
Item Mean Std Item Mean Std
Dev Dev
The bank should give 4.48 .529 The bank gives individual 4.24 -0.24
individuals customers customers attention
attention
The employees should 4.53 .555 The employees offer 4.39 -0.14
offer customers personal customers personal
attention attention
Banking hours should be 4.40 .666 Banking hours are 4.28 -0.12
convenient to all convenient to all
customers customers
Employees should 4.44 .590 Employees understand 4.26 -0.18
understand the specific your specific needs
needs of customers
The bank should have 4.31 .624 The bank has customers’ 4.19 -0.12
customers’ best interest at best interest at heart
heart
The bank should have 4.34 .630 The bank is conveniently 4.11 -0.23
convenient branch located
locations
It is very easy to get in and 4.47 .651 It is very easy to get in and 4.23 -0.24
out of the bank quickly out of the bank quickly
Average 4.424 Average 4.243 -1.27
Source: Researcher’s Field Work, Nov, 2022.

For empathy dimension, seven items were used. Generally, the results shows a higher mean
score for perception and expectation which indicate that customers are treated as ‘king’.
ECoBank understands the needs of its customers and tries all effort to give equal attention to all

64
customers without any partiality as shown by the item ‘employees offer customers personal
service’ with the highest mean score of 4.39 for its perception. By aggregation, the grand mean
4.24 also confirms that customers agree that ECoBank has its customers at heart.

Figure 4.7: Analysis of service dimension gap for Empathy

Empathy Gap

Perception
49% Expectation
51%

Source: Researcher’s Field Work, Nov, 2022.

As indicated in Figure 4.7, customers were expecting a service quality level of 4.424 (88.48%),
they were rather giving a service quality level of 4.243 (84.86%), falling short of 0.181 (3.62%)
of their expectations.

Comparison of Overall Service Delivery Gaps of Service Quality to obtain one of the objectives
for the study, it was the need to find the service delivery gaps of both the expectations and the
perceptions of the respondents in the bank in order to establish the trend of the gap analysis for
each of the service quality dimensions.

65
Figure 4.8: Comparison of General Expectations and Perception of
Customers
4.7
4.65
4.62
4.6
4.554 4.565

4.5

4.424
4.396 4.389
4.4

4.325
4.31
4.3
4.243

4.2

4.1

4
Tangibility Reliability Responsiveness Assurance Empathy

Expectation Peception

Source: Researcher’s Field Work, Nov, 2022.

The service delivery gaps for the perception and expectation of service delivery among the
dimensions were somehow significant by the use of the pictorial representation but such
significance can only be established with a statistical method. As shown in Figure 4.8, the gap
for tangibility, reliability, responsiveness, assurance, and empathy were insignificant since all
dimensions were having a perception mean value more than an average of 4.0. This performance
of the service quality by the measuring of the perception indicates the seriousness of which the
bank attached to its service delivery to be able to compete keenly in the market for expansion of

66
customers which agrees with Beerli et al. (2004) which describes customer satisfaction as the
measure of the extent a bank fulfils the general expectations of a customer and how far and/or
close does the existing bank come to the customers’ ideal bank in his mind.

4.6 Summary
This chapter provides a comprehensive presentation, analysis and interpretation of both empirical
and theoretical data accumulated from the field. Generalizations were made regarding findings
emerged in the course of the data analytical process. The subsequent chapter, which is the final
chapter of this study, will provide the abridged findings and conclusion of the study, from which
recommendations and summary of all the findings emanated from the data analysis and
interpretations will be highlighted.

Chapter Five
Summary of Findings, Conclusion and Recommendations
5.0 Introduction
This is the final chapter of this study and is a composition of summary of all the major findings,
conclusion drawn on all that have been unveiled from the study, and the relevant
recommendations made that would lead to policy formulation and further research work in the
field by future researchers. The study seeks to critically examine financial intermediation
challenges through a customer satisfaction survey stand point, a case study of EcoBank (S/L). It
should be indicated that conducting this kind of research where there is inadequate availability of
primary data on the topic was a very herculean task. It was discovered that some of the key
respondents such as EcoBank (S/L) management staff, Bank of Sierra Leone (BSL) officials, and
selected EcoBank customers, were very uncooperative in responding to interview questions and
filling out the research questionnaires, partly as a result of their busy schedules, which resulted in
some appointments being canceled. Despite all these inherent challenges, the researcher
managed to come up with critical findings, conclusion, and relevant recommendations to serve as

67
a set of tools that would be used to formulate policies in order to enhance knowledge on financial
intermediation challenges in Sierra Leone and also inspiring further research in the same field.

5.1 Summary of Major Findings

This section of the chapter reveals critical findings from the entire study which is the direct
aftermath of both empirical and theoretical analysis and interpretations. This study postulates
that there is a correlation between efficient financial intermediation and sustainable customer
satisfaction from the stand point of commercial bank operations. The major findings that
emerged from the study are highlighted below:

5.1.1 Weak Regulatory and Legal System:

Based on the responses obtained from the questionnaires distributed and personal interviews
conducted, it became evident that the banking sector in Sierra Leone is operating in a weak
regulatory and legal system. The current state of banking supervision is rudimentary. One
certainly does not see any attempt to explicitly organize the approach to assessing the soundness
and management of a financial firm in light of risks and risk management. This would emphasize
the importance of a clear understanding of financial risks and optimal assignment of the
responsibility for managing different types of risks (namely, liquidity, credit, interest rate,
market, foreign exchange, operational, sovereign, legal, and fraud risk). These coupled with
other micro economic factors constitute major financial intermediation challenges faced by
commercial bank institutions. The following are the key findings relating to the regulatory and
legal environment of Sierra Leone:

 Weak judiciaries which call into question the ability of the judicial system to enforce
creditors’ rights in the event of default.
 Lack of independent operations of the Central Bank. The Bank of Sierra Leone leadership
is politically determined and the institution itself lacks effective autonomy. The
unfortunate result is that its ability to supervise the financial system coherently is most
times compromised.
 Compounding the above, over-regulation can emerge, for instance, preventing foreign
players in local markets (Conning and Kevane, 2002). Further, most financial regulations
were scoped for large players with sizeable deposits, and prudential requirements that

68
 focus on protection of depositors restrict banks’ ability to cater for the poorer segment of
the population.
 Often, legislation is complex and difficult to administer. Interest rate caps are prevalent
and these are distortionary. Contrary to popular expectations, research suggests that the
poor are willing to pay market rates for productive uses of borrowed funds (Nelson,
1999).
 Problematic legislation leads to fragmentation whereby no operational or strategic
linkage among formal, semi-formal and informal micro-finance institutions exists. This
leads to a failure to tap into synergies – where some are good at collecting deposits but
lack local knowledge and information and vice versa.

5.1.2 Inherent Institutional Problems:

It was discovered from the study that the commercial bank institutions themselves are faced with
inherent challenges in their operations. Most commercial bank institutions including EcoBank do
not have the risk analysis expertise or the familiarity with rural, poor potential clients. Moreover,
lending system is highly collateralised rendering it inappropriate for the poor. While informal
organisations and NGOs are more familiar with these markets, they lack the resources of the
formal lending institutions to adequately serve the poor. A lack of familiarity with potential
clientele often leads to inappropriate instruments when the formal institutions dare to delve in
low-end markets. Research suggests that such players sometimes cannot distinguish between
liquidity and credit needs among the poor. Micro-credit institutions have a tendency to be
supply-driven and do not match specific needs (Rosengard, 2001). Because the small, low-end
market lacks depth and liquidity, formal players find it difficult to exploit economies of scale in
service delivery. The added problem of lack of physical and technical infrastructure exacerbates
the problem of delivery.

5.1.3 Large Bureaucracy:

Bureaucracy slows down the degree of changes of the organisation, and therefore it is too
cumbersome to control. The findings of the study unveiled that EcoBanks including other
commercial bank institutions observe a lot of bureaucracies in their operations. Documents need
to pass through series of points which most times are not necessary and as such retard vital

69
operations. Sometimes there is sudden blockage on the passage of document and therefore will
slow down transaction processes. Many signatories to a cheque may be good but it is a waste of
time and disruption of essential banking functions.

5.1.4 Poor Information Technology and Ineffective Internal Controls

Internal controls are processes put in place to prevent wrong doing. These monitor and reduce
risk occurrence in organization’s financial and operational activities. It is discovered from the
research that EcoBank and other commercial banks lack advanced information technology
infrastructure and effective internal control system. It was obvious in the customer survey that
most times customers go to the banks and spend almost a whole day just to make deposits or
withdrawal by cheque or ATM card; it is really an alarming situation especially in EcoBank,
mostly due to poor internet connectivity and weak internal control system. This is a major cause
of customer dissatisfaction.

5.1.5 Poor Corporate Governance:

The output or derivative of poor governance in any organization is imminent liquidation.
Indigent management methods are a serious menace to the growth of financial institutions,
especially banks. It should be understood that financial resources cannot manage themselves
except well-coordinated following the structures and mechanisms put in place by a diligent
human resources manager/director. It was found out in the study that EcoBank and other
commercial banks practice poor corporate governance which consequently causes huge financial
intermediation challenge and apparent customer dissatisfaction.

5.1.6 Endemic Corruption:

This is a sickness that is seriously affecting many organisations and very alarming the banking
institutions. A corrupt system does not respect merits and as such many management positions in
the commercial bank institutions are observed to be handling by people who got into the
institutions via the back doors. In this case their managerial delinquencies have the potential to
cause limitation in the smooth operations of the financial institution and hence a serious financial
intermediation challenges and customer dissatisfaction.

5.2 The Study Limitations

70
It is almost impossible to undertake research of this nature without being faced with some
amount of limitations. This study is of course no exception. The researchers encountered certain
limitations in the course of undertaking this study. Key among these includes:

 Scarcity of data: - collecting primary data was not an easy task. Fieldwork was conducted
during festive season, that is, November/December. Sometimes the heavy vehicular
traffic within town would prevent me from arriving at my destination in time to catch up
with interview appointments. In effect, most of the appointments had to be rescheduled
sometimes more than twice. However, to curb this shortcoming, published reports
reading and internet searching on the topic area were used to complement fieldwork.
 Resistance of respondents: the researcher was also restricted by the reluctance of some
respondents, especially EcoBank management executives. Most of them since they work
for the bank they may not want anybody to know their identity and thought that the
answers they provide might be used against them. As a result, we had serious difficulties
talking with them to help with much relevant information, despite my politeness in
explaining to them that the research was for academic purpose. I overcame this problem
by not mentioning their names or trying to know their identities. In addition to this, most
of the EcoBank’s customers interviewed were unable to provide me an articulate
information with regard their perceptions of the bank’s service delivery. This thus limited
the magnitude of raw data utilized in the study.
 Time and funds: another serious limitation of the study relates to time and lack of
financial resources. Thus, the research was exclusively concentrated on EcoBank’s head
office and customers within Freetown. I acknowledge the narrow viewpoint of the study
and recognize that sample size may not be exact representative of the study population.
There is possibility of some errors to a limited extent. However, to overcome the
limitations and maintain the effectiveness of the research work sincere efforts were made.
This work could be developed further in the light of future research work in the same
fields.

5.3 Conclusion
The study investigates financial intermediation challenges with respect to the banking industry in
Sierra Leone. The research work covers a survey of EcoBank (S/L) executives and customers in

71
Freetown by the use of focused group discussions and questionnaires administered to find out
opinions of EcoBank management staff and customers on financial intermediation challenges
and commercial banks’ customer satisfaction. The study unveils that the extent to which
commercial banks perform their financial intermediation functions has an important effect on
customer satisfaction. The availability of credit facility with affordable loan condition is
particularly crucial, as majority of commercial banks customers normally seek for loan and
overdraft facilities. Financial intermediation challenges in the context of commercial banks,
especially for the poorer segment of the Sierra Leone population range from macroeconomic and
political to micro factors, such as regulation and institutional arrangements. The poor have
diverse credit and saving needs and are willing to pay market interest rates, but the regulatory
environment is typically not conducive to inter-sectorial linkages to allow the banking
institutions to respond more flexibly to the needs of the poor.

What is clear is that financial intermediation for the poor requires dedication, innovation, and
ongoing research to identify the services that best respond to the needs of the poor while
benefiting the institutions that serve them. Formal, semi-formal and informal sectors all have a
role to play. An enabling and flexible regulatory environment will foster stronger linkages
amongst the sectors. Incentive structures and new technologies are also important in the design
of sustainable and efficient financial intermediation to meet the needs of the poorer customer
population. Commercial banks primary function is moving funds from surplus economic units to
deficit economic units (financial intermediation) in order to produce goods and services and to
make investment in new equipment and facilities so as to facilitate the growth of the economy
and improve the standard of living of its citizens. It is generally recognized that commercial
banks play a catalytic role in the process of economic development.

The study was basically aimed at examining the correlations between financial intermediation
and customer satisfaction in the context of commercial bank operations. “Customers are at the
center for all banking activities due to increased competition for greater market share. Focusing
on customer satisfaction has been the key to increasing service quality according to customers’
expectations in the banking sector.” This suggested that the level of service quality is an
indication of the organization's ability to meet customers' desires and demands. Therefore,
organizations must become better in their services to meet the customers' needs and

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requirements. Managers depend on customers’ anticipation of service quality for the competition
in the market. When customers are satisfied, they remain loyal to the bank and stayed there for
long. For bank to effectively compete in the environment in which they operate, banks should
analyse their market in order to gain a real understanding of what their customer needs. Banks
need to diagnose the customer needs and wants and design method to satisfy them. Furthermore
banks must analyse the strength and weaknesses of their competitors, they must exploit the
weaknesses and try to second guess the competitors strategies.

5.4 Recommendations
From this study it has become apparently clear that the banking sector in Sierra Leone is confronted
with immense financial intermediation challenges, mostly attributable to weak regulatory and legal
environment, absent of advanced modern information technology infrastructure, weak internal
control system and poor human resource capacity etc. These challenges have huge impact on the
operations of commercial banks in particular and the financial system in general. The following
recommendations are propounded to commercial banks and the entire financial institutions to
overcome their challenges and ultimately achieve their customer satisfaction objectives.

5.4.1 Improvement in Information Technology Infrastructure

We are now in a new era of technological revolution. Countries are beginning to compete and
fight over control of information rather than natural resources. The vogue today is E-platform
which implies offering financial services through electronic media to various customers
irrespective of place, time, and distance. A customer friendly environment with high quality
service delivers needs to be created in order to enhance satisfaction and high patronage. To this
end, improvement in banking technology and institutional arrangements for transmission
mechanism as well as other operational areas of commercial banks operations to ensure
operational efficiency and improved customer satisfaction has become a compelling necessity.
This encompasses electronic money, internet banking, telephone/mobile banking, reduction of
cash transaction, smart card. ATM transactions, and capacity to process high volume of
transactions among others.

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5.4.2 Government Should Strengthen the Regulatory and Legal
Environment
In terms of the regulatory and legal environment the following recommendations are pertinent:
 The judiciary must be given sufficient teeth to ensure the credibility of the property rights
regime that creditors can trust. Political interference must be discouraged. It would be
imperative to carry out a formal review of the legal system in light of the experience of
the top international financial centers to ensure that the legal framework is adequate.
Even a casual observation reveals that the regular courts in Sierra Leone are way below
the normal level of efficiency of operations required to support the financial system
instead of representing an obstacle to the system’s development. The evidence on this
score must be clear, since the courts have been handling cases in which the financial-
services sector has been involved. If the hard evidence indicates that the court system is
not up to the task, especially in terms of speed and decisiveness, then thought must be
given to creating a special court system for the financial sector.
 Bank of Sierra Leone (BSL) autonomy must be constitutionally guaranteed and top
leadership must be selected on the basis of a meritocracy.
 Financial legislations and regulations must be revisited to cater for hybrid institutions (for
instance, community banks and micro-finance institutions) that are needed to be more
responsive to the needs of the poor. This is particularly pertinent as it relates to macro
prudential requirements such as capital adequacy, as well as to the ability to accept
deposits. Usury laws must be equally revamped in light of research findings that the poor
are willing to pay fair market value for their borrowed funds. New legislation must be
simplified and mindful of business imperatives.

5.4.3 Human Resource Development

The centrality of the human resource in enterprise management is a generally accepted dictum. It
is in this light that management needs to make adequate investment in human factor. The
technical capability, innovative ability and integrity of the human beings operating in the system
and overseeing its markets and organizations are important dimensions of this quality. Indeed,
many of the policies being implemented to boost the development of the financial system should

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be designed with the attraction of high-quality personnel in mind. The indispensability of high-
quality people for creating a high degree of competitiveness has forced all financial institutions
seeking to compete on the international stage to be open in their recruitment policies, acquiring
people from wherever they can be found. Sierra Leone would no doubt benefit from adopting
such an attitude.

It should be noted that there is no competitive weapon more potent and effective in a financial
market than the quality of its human resources. As remarked by Sanusi (1995) machines and
advanced technology can provide informational and transactional convenience but only
manpower can provide the credibility, creativity and care that can build long-term customer and
client relationships. In other words, there is need for capacity building in the commercial banking
system to enable it copes with the wind of technological development. Besides, no matter how
accurate or competent a computer is, it cannot feed itself with input and it can neither offer a
welcoming smile nor a warm handshake (Ochejele, 2000). Banking (and indeed the entire sectors
in the financial markets) is people-related and the quality of personnel will make the vital
distinction between what constitutes a good bank and a bad one. Consequently, of all the
challenges facing the Sierra Leone banking sector, human capital development is the most
daunting.

5.4.4 Improvement in Infrastructure and Public Services:

The physical and technological infrastructure is important elements of the capacity to perform
financial services tasks, including the ability to innovate. These infrastructures include:
 Transport and communications networks,
 Basic utilities such as electricity, water, sanitation and the postal system,
 Financial-system-related infrastructure (e.g. trading facilities, clearing and settlement
systems for money and securities, other electronic linkages among participants).

Some of the decisions and investments regarding infrastructure are, of course, left with the
financial services markets and firms themselves. In regard to public sector organization, the
central and local governments should formulate policies regarding the provision of infrastructure
and other public services. It would seem that the effectiveness and efficiency of the public sector
could be enhanced if explicit coordination is arranged within the public sector to focus on the

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requirements of the financial system. In the case of Sierra Leone, this could be one of the tasks of
the Financial Sector Steering Committee that has been proposed to oversee the implementation
of the FSDP.

5.4.5 Recommendation for Future Research Works

Considering the limitations highlighted above, it is very obvious that this study is by no means
exhaustive. There are obviously rooms for conducting future research works in the same field for
more extensive coverage of the sample size and generalization of the study findings. The
research was exclusively conducted in Freetown with fundamental focus on EcoBank as it was
used as the research case study. Other commercial banks including their wide branch network in
the provinces and across Freetown were not covered as a result of fund and time constraint.
Adequate knowledge and data could be generated if this research can be extensively undertaken
inclusive of large sample size beyond Freetown. Furthermore, it is obvious that various financial
sector reform policies have been formulated by the previous government to strengthen and
enhance the overall performance of the financial sector. Reform such as licenses and capital
adequacy requirement by commercial banks may need empirical investigation by other
researchers in the future.

5.5 References
1. Bank of Sierra Leone –guide for reporting institutional banking supervision (2005)
2. Journal of financial economies 19, pp. 217-235
3. Halberg, k.(2000) “a Market oriented strategy for business administration,” international
financial corporation (IFC), World Bank, Washington D.C . Discussion Paper No 40.
4. Africa Development Bank (ADB). Sierra Leone completion report, 2009.
5. Aryeetey, E (1992), the relationship between the informal research consortium, research
paper No.10
6. Ayadi, F.O and Hyman l,(2006), financial liberalization and price rigidity in the Nigeria
banking system.
7. Beck, Thorsten, and Ross Levine. 2004. _Stock Markets, Banks, and Growth: Panel
Evidence,_ Journal of Banking and Finance 28: 423_442

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8. Beck, Thorsten, Asli Demirgüç_Kunt, Luc Laeven, and Ross Levine. 2005. Finance,
Firm Size, and Growth,_ World Bank Policy Research Working Paper 3485
9. Beck, Thorsten, Ross Levine, and Norman Loayza. 2000b. _Finance and the
10. Sources of Growth,_ Journal of Financial Economics 58(1): 261_300
11. Arestis, Philip, and Panicos O. Demetriades. 1997. _Financial Development
12. and Economic Growth: Assessing the Evidence,_ The Economic Journal 107 (442):
783_799
13. Allen, Franklin, and Douglas Gale. 1997. _Financial Markets, Intermediaries, and
Intertemporal Smoothing_, Journal of Political Economy 105: 523_546
14. Al_Yousif Khalifa. 2002. _Financial Development and Economic Growth Another Look
at the Evidence from Developing Countries,_ Review of Finan-cial Economics 11(132):
131_150.
15. King, Robert G. and Ross Levine. 1993a. _Finance and Growth: Schumpeter might be
right,_ Quarterly Journal of Economics 108: 717_38.
16. Organization for Economic Co-operation and Development (1996). Networks of
Enterprises and Local Development: Competing and Co-operating in Local Productive
System. Paris, France: OECD.254pp http://catalogue.nla.gov.au/Record/3014329
17. Bandier a, O et al, (1999), -the global financial crisis and sub suharan Africa. The effects
of showing private capital inflow on growth, ODI working paper 304,oversea
development institute.
18. Rosengard J.K. 2001. Kinks in the Links: Financial Intermediation for Africa’s Poor.
Washington DC: USAID.
19. World Bank. 2003. Global Economic Prospects. Washington: World Bank. Online:
http://www.worldbank.org/prospects/gep2003
20. World Bank. 2004. Global Development Finance 2004 – Harnessing Cyclical Gains for
Development. Washington: World Bank.

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