Kampala International University School Of Business And Management

ABSTRACT

The banking sector has increasingly become competitive. A dwindling economy, increases in the number of banks, high interest rates have all led to a rise in operational costs and consequent reduction in profits. This has necessitated banks to develop strategies that enable them to provide superior service at minimum costs.

The objective of this study was to investigate the extent to which "Rubbing" (a process of reducing costs whereby banks are using remote locations where labour is cheaper or technical expertise more plentiful), as a strategy can be implemented to reduce costs as well as increase efficiency of the bank. The study was to further investigate whether the hubb (the central transaction office) was effective.

The study concentrated on one bank: Standard Chartered Bank. The tools used to carry out the study were both structured and open-ended questionnaires. The questionnaires were distributed to both the customers and staff of the bank. The questionnaires were administered through interviews. The variables used were cost and efficiency. The study sought to find out if the strategy (hubbing) was able to achieve the objective of increasing efficiency as well as reducing cost both to the customers and the bank. The study revealed that the hubb had resulted in a marked improvement in quality of service. Over 70% of the respondents agreed that services such as depositing, withdrawing and ATM services had improved. The cost of transactions had gone up as confirmed by 90% of the respondents. Much as the quality of cheque books had improved, 100% of the respondents felt that the turn around time for issuance of these accessories had increased. Loss of jobs was cited as a negative effect of automation. From the study, it can be concluded that the hubb has resulted in improvement on the overall quality of service. The bank has been rendered more efficient as evidenced by the fact that more than 70% of the respondents felt that the speed of transactions had increased. The study indicates that the hubb had indeed resulted in reduction in costs related to duplication of labour.

There are however a few areas that need improvement. The results indicate that there is a  need to improve the communication network in the bank. Only 21 % of the respondents felt