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2016 November/December Examinations




Duration: 3 HOURS

Examiner: DR M. SANDADA

Authorized Materials: Non Programmable Calculator

1. This paper contains Six (6) Questions
2. Answer Question One (40 marks); and Any other Three Questions (20 marks each)
3. Start each question on a new page
4. This question paper comprises Six (6) printed pages



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QUESTION 1 (Compulsory – 40 Marks)

Mr Magobeya A, a former MBA student with the Graduate School of Management

(GSM) carried out an investigation of the factors account for the low customer trust in
Zimbabwe’s banking sector. The case below summarises the background to the study
and the statement of the problem.

Restoration of trust and confidence in the banking sector in Zimbabwe

Research has shown that only 30% of Zimbabweans are banked-Finscope (2014) and
the majority of those prefer a foreign owned bank rather than an indigenous bank, just
24% want to stay with their current banks - IPC (2014). The need to address low
consumer trust in the banking industry has become an imperative if banks are to
properly execute their financial intermediation role. The issue has attracted specific
attention with the Bankers Association of Zimbabwe having the strategic goal to “Lead
the transformation of the banking sector landscape through restoration of trust and
confidence in the banking sector in Zimbabwe” (BAZ, 2015). This research
endeavoured to explore the factors that banks, the Reserve Bank as the regulator and
government at large can address in order to improve the levels of trust afforded to the
banking industry in Zimbabwe by consumers.

The issue of low public trust in the banking industry is a global phenomenon. A YouGov
SixthSense survey in the United Kingdom in 2012 showed that “only 53% of
consumers were willing to trust any bank or building society. Worryingly for the financial
services industry, 63% of consumers cannot trust any bank and 57% cannot trust any
building society”. According to the Edelman Trust Barometer (2015), since they started
tracking trust in financial services in 2011, there has been a modest increase from 48
percent to 52 percent on a global basis and between 2014 and 2015, trust in banks
declined in two thirds of countries surveyed. According to the Chicago Booth/Kellogg
School Financial Trust Index, the American public’s trust in banks reduced to 35 percent
in first quarter 2015 from 38 percent in last quarter 2014.

In Zimbabwe, the issue of low public confidence in the banking sector is well
documented. According to the Banking Sector Customer Engagement Report (IPC,
2014), only 24% of the surveyed population wanted to stay with their current banks and
more customers wanted to switch to international banks (Stanbic Bank, Standard
Chartered Bank and Barclays Bank) in 2014 than they did in 2012. According to
KPMG’s (2013) Africa Banking Industry Customer Satisfaction Survey, “ with only a third
of customers indicating that they would absolutely repeat business with their bank and
just 32 percent saying they would absolutely recommend their bank to others, customer
loyalty and advocacy in Zimbabwe is rather low.”

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There is an urgent need to address low consumer confidence in banking as the country
is even lagging behind regional peers. According to the KPMG (2013) study, Zimbabwe
had a customer satisfaction index of 49.6 for products and services which was the worst
of the 13 countries surveyed, the study also revealed that the country had a customer
satisfaction index of 51.7 for pricing which again was the worst of the 13 countries
surveyed whilst the customer satisfaction index of 65 for customer care was fifth bottom
of the 13 countries surveyed. This makes very sad reading when the list of countries
surveyed reads as follows: Angola, Botswana, Cameroon, Chad, Côte d’Ivoire, Ghana,
Kenya, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda and Zimbabwe.

As stakeholders battle to improve financial intermediation in Zimbabwe, they have had

to grapple with a serious impediment of low consumer trust in the banking industry. The
low trust has manifested itself in a number of ways: 1) Just 30% of the population are
banked (have/use financial products/services provided by a bank, regulated by the
Reserve Bank of Zimbabwe) – (Finscope, 2014). 2) High ratio of transient deposits
rather than long term deposits. According to the RBZ Monthly Economic review of April
2015, “the structure of deposits remained largely the same, with demand deposits
accounting for 46.29%; long term, 22.23%; short term, 17.95%; and savings deposits,
13.50% of total deposits” 3) Low uptake and usage of electronic banking offerings
(mobile and internet) in favour of non-bank alternatives like telecommunications
companies’ money transfer products for example Ecocash (Demirguc-Kunt, Klapper,
Singer, and Van Oudheusden, 2015).

Put simply, Zimbabweans just do not have confidence in the banking industry. Efforts
have been made to address low consumer confidence and these include: 1) RBZ in
January 2013 signed a Memorandum Of Understanding(MOU) with banks to lower
charges and loan interests whilst offering interest on deposits. This was never fully
implemented and the MOU expired after a year without any tangible benefits recorded.
2) The ongoing demonetisation of the Zimbabwean dollar to compensate all
Zimbabwean dollar account holders. However, the problem of low consumer trust in
banks persists.
Tables 1 to 3 overleaf summarise the results of the data analyses of the research. The
number of customers sampled for the study was 240.

Table 1: Results of Model Summary

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .833a .694 .686 .41798

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Predictors: Service recovery, ability, structural
assurance, integrity, benevolence

Table 2: Results of one-way ANOVA

Sum of
Model Squares df Mean Square F Sig.
1 Regression 78.399 5 15.680 89.751 .000b
Residual 34.591 198 .175
Total 112.990 203

a. Dependent Variable: Trust

a. Predictors: Service recovery, ability, structural assurance, integrity,

Table 3: Regression analysis results

Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics
Model B Error Beta t Sig. Tolerance VIF
1 (Constant) -.233 .166 -1.41 .161
ABILITY .092 .058 .083 1.600 .111 .580 1.726
INTEGRITY .104 .060 .101 1.736 .084 .457 2.187
BENEVOLENCE .312 .066 .281 4.693 .000 .432 2.314
.270 .051 .286 5.328 .000 .537 1.862
.269 .062 .254 4.358 .000 .456 2.195

a. Dependent Variable: TRUST

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(a) Interpret the information contained in each of the tables. (8 marks)

(b) Summarise the results for the managers of commercial banks. (12 marks)

(c) Make recommendations based on your interpretation of the results. (8 marks)

(d) If Mr Magobeya had conducted a qualitative study, discuss the six strategies that
he would have employed to ensure its quality/trustworthiness. (12 marks)

A colleague of yours wishes to generate a research topic in the area of corporate
finance. Although he has read several journal articles, he is not sure about the criteria to
use in formulating the research title. He comes and asks you for advice.

(a) Suggest the criteria that your colleague could use to formulate a research title.
(15 marks)

(b) Why is it necessary for him to carry out the current literature review? (5 marks)

(a) Discuss the view that validity is a necessary but not sufficient condition of the test
of goodness of a measure. (15 marks)

(b) Describe the three options that a researcher has in developing a data collection
instrument and link each option to validity concerns. (5 marks)

‘Despite all its strengths, survey research is generally notorious for its low response
rates and is often tainted with systematic biases that may invalidate some of the
findings from such surveys’. In the light of this statement

(a) Discuss the five biases associated with survey research. (10 marks)

(b) Suggest five strategies that may be employed to improve response rates in
survey research. (10 marks)

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You intend to investigate the reasons for the poor performance of Zimbabwean public
enterprises. Suggest possible barriers to your gaining access to data and how these
might be overcome. (20 marks)

As part of your MBA dissertation, you intent to determine the attitudes of the UZ
students towards various aspects of the university. The institution is a state university
with approximately 13000 students and 10 faculties. The Council has asked you to
come up with a sampling plan.

(a) Develop a probability sampling plan paying particular attention to the key aspects
of the sampling process. Justify your choices. (10 marks)

(b) Explain five key ethical issues that can be anticipated and dealt with during the
data collection stage. (10 marks)


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