SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 CONFERENCE PROCEEDINGS CD-Rom Version Compiled by Zhooriyati Binti Sehu Mohamad Lai Kien Wee ISBN 978-967-11473-1-3 Pusat Pengajian Sains Kemasyarakatan, Universiti Sains Malaysia. SCHOOL OF SOCIAL SCIENCES 2014 SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 Copyright © 2014 by Pusat Pengajian Sains Kemasyarakatan, Universiti Sains Malaysia All rights reserved. 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SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 THEME: ANTHROPOLOGY AND SOCIOLOGY SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 BUILDING CUSTOMERS’ TRUST IN THE BANKING SECTOR OF SOKOTO STATE, NIGERIA Abdulrahman Bello Bada and Premalatha Karupiah, School of Social Sciences, Universiti Sains Malaysia, 11700 Minden, Penang. [email protected] or [email protected] Abstract Customers’ patronage in relation to banking sector, the use of its products and services are manifesting constant challenges for assessment of trust. Trust strongly depends on the level of improvement and banking commitment to customer satisfaction. However, trust is tied to some associated important dimensions which are: dispositional, institutional and interpersonal. Therefore, this article tends to highlight the need for management and policy makers in the banking sector to identify and understand the important of all the dimensions stated above in building customers’ trust on bank, its products and services. Further, this paper recommend the need for executive members of the banking sector to use any of the identified dimensions that strongly influence or predicts customers’ trust on banking sector to improve influential strategies for banking products and services. Key words: facework commitment, faceless commitment, the banking sector, dispositional, institutional, interpersonal INTRODUCTION The growth and development of trust in an organization is a complex task of both the management and employees (Holland, 2008). Trust is one of the most important component that hold different kind of organization together (Tariq, Aslam, Habib, Siddique, & Khan, 2012). The issue of trust is critical for the attainment of profit, market and objectives of the organization (Poppo & Schepker, 2010). Moreover, trust help in maintaining and improving cordial relationship that exist between customers and the organization (Shams-Ur-Rehman, Shareef, & Ishaque, 2012). Issues surrounding trust can benefit organization by reducing their transaction costs, increasing their flexibility, efficiency and helping them to design their future marketing plans or strategies more accurately (Chen & Dhillon, 2003; Nooteboom, 2003). Therefore, it is imperatives for the management and employees in an organization to build trust in their relationship with customers or external environment. Moreover, trust help in changing clients perception and increases his ability to patronize organization and its products and services (Semerciöz, Hassan, & Aldemır, 2011). The objectives of most business organization are to provide conducive atmosphere for their esteem customers, thereby increasing their level of SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 confidence so as to create positive perception towards their products and services (Simpson & Cacioppe, 2001). Hence, building trust in an organization such as the banking sector is classified into three dimensions: dispositional, institutional and interpersonal (Tan & Sutherland, 2004). These dimensions help in explaining the kind of confidence and business relationship or interaction that exists between customers and the banking sector (Knoll & Gill, 2011). These dimensions emerge as separate components over time, unique and distinct predictors which positively or negatively determine customers trust in the banking sector, its products and services. Therefore, this article aim at providing insight on different perspective on the dimensions (dispositional, institutional and interpersonal trust) of customers’ trust in relation to banking sector, its products and services. Background of the study area Nigerian banking sector was introduced in 1892 with the establishment of the African Banking Corporation with headquarter in South Africa (Alao, 2010; Somoye, 2008). This was subsequently acquired by the Bank of British West Africa in 1894 and Barclays Bank in 1925, but all these banks were owned and managed by foreign nationals (Fadare, 2011). Further, National Bank of Nigeria Limited was established in 1933 as the first indigenous bank, later Agbonmagbe Bank Limited and African Development Bank in 1945 and 1948 respectively (Abdulrahaman, 2013). Furthermore, there was a major development in Nigerian banking sector from 1977 to 1991. These periods witnessed the development of Rural Banking, Peoples bank and Community banking, thereby raised the total number of Nigerian banks to 120 banks (Alao, 2010; Uchenna & Okelue, 2012). However, from 1991 to 2006, the Nigerian banking institution witnessed illiquidity, insolvency and many of them became distressed (Uchenna & Okelue, 2012). Though, as at 2004 there were 89 banks in existence, which are badly shaped with the exception of few (Gunu & Olabisi, 2011). To address the issue of insolvency and protect shareholders funds, these banks were consolidated to 25 banks as at December, 2005. But, in 2006 the number of banks reduced to 24 banks and by the end of 2011, the surviving banks in Nigeria were reduced to 21 banks (Abdulrahaman, 2013). These 21 banks are featured around in all the 36 states in the country including the State Capital (Abuja). These trends of events show the lack of adequate policies, problems and issues surrounding the banking sector since its establishment. Sokoto state is positioned on latitude 400 to 600 North and longitude 110 300 to 130 500 East and North (SSG, 2009). Sokoto state is located at the extreme North-western part of Nigeria, a centre for Islamic learning and jurisprudence. Predominantly it is a Muslims community and former headquarter of defunct Sokoto caliphate of 1804 historical Islamic jihad. Sokoto state was transformed into Northern region of Nigeria in 1903, subsequently, North western state in 1967. Later, it was divided into Sokoto and Niger state in 1976 correspondingly. Likewise, Kebbi and Zamfara state were carved out in 1991 and 1996 respectively. Presently, it has 23 local government areas within it domain and part of it source of economic activities include banking sector. Therefore, there are 21 branches of the main banks currently operating in Sokoto state. But, the performance of some banking sector in Nigeria and Sokoto state in particular from 2006 upward is less qualitative than expected. It is characterize by poor and inefficient services, poor SOCIAL SCIENCES POSTGRADUATE INTERNATIONAL SEMINAR (SSPIS) 2014 ISBN 978-967-11473-1-3 management, limited number of branches, lack of liquidity, insolvency and lack of customers trust (Isimoya, 2014). Thus, the above mentioned problems leads to closure of so many banks, making a great loss to the economy of both state and federal level, leads to unemployment, customers losing their money and at the same time making investors to lose confidence. This attitude exhibited by the banking sector in Nigeria and Sokoto state in particular prompt the research on customers’ trust. The concept of trust is too complex when operating in a modernize society (Giddens, 1990). Trust is a central component that produces cohesion within the social networks that compose the structure of society (Simmel, 1964). But, the argument of the paper is that, Sokoto state is predominantly Islamic and conservative society that is still backward when it comes to the issue of modernization. Hence, the modernization and complexity of the banking sector make the concept of trust a mediating factor between Sokoto state bank customers and the banking sector, its products and services. The growth and development of the banking sector (electronic banking) make it hard for a layman to understand due to the fact that, trust in expert system is not the only aspect that customers needs to know (Giddens, 1990). THEORETICAL FRAMEWORK Giddens: Trust as a Commitment Giddens (1990)