The Role of Social Networks in Economic Decision Making Processes: The Case of Customers in Selected Banks of Shashemene Town, Oromia, Ethiopia

Bewunetu Zewude


The aim of this research was to assess the role of social networks (circles of friends, family members, close relatives, members of an ethnic group, congregates of a certain religion, etc) in peoples’ economic decision making endeavors, focusing on how these variables influence customers’ choice of banks in Shashemene town, Oromia, Ethiopia. Oromia International Bank and Cooperative Bank of Oromia were purposively selected as case studies with the intention that the nomenclature of the organizations is associated to the largest ethnic group in the study area (oromo). A descriptive survey research design was used in which quantitative data were collected from 237 samples selected based on convenience sampling technique. Data were then inserted in to SPSS version 20 for further analysis and presented using descriptive statistical tools. It was found that 79.3% of customers belong to the dominant ethnic group in the study area (Oromo). Respondents’ decision of becoming customers of the current bank was made because there were employees in the bank with whom they had personal relationships, realizing that they can make transactions using their mother-tongue language, the nomenclature of the bank is associated to their ethnic identity, and due to recommendations from close relatives and friends that have been using the bank (8%, 5.1%, 25.7%, 5.5%, respectively). In addition, social networks also play the role of serving as sources of information for customers during the process of bank selection. Findings suggest that social networks influence individuals’ economic behavior by supplying information, serving as role models, and recommending others to join an economic behavior similar to their own. Above all, people do not always behave after rational calculations of the costs and benefits of an economic action; instead, they also act according to the social setting in which they live, often in an attempt to comply with existing norms.

Keywords:- economic behavior, bank selection, social networks, rationality, ethnicity

DOI: 10.7176/JCSD/52-02

Publication date:October 31st 2019

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