Interest free banking (IFB) system is an Islamic banking system that operates through pricing of goods and services instead of pricing of money in the economy. Althouth there are different determinant factors which have contributed to the acceptance of the IFB, still there is very much limited published works that investigate the determinants of IFB from the viewpoint of customers in the context of developing countries like Ethiopia. Therefore, the objective of this study was to identify factors affecting IFB service customer satisfaction in Bale zone with specific reference to Commercial Bank of Ethiopia (CBE). A crossectional study design was employed. Both quntitative and qualitative approaches were also used to enrich data. Cluster method and systemic random sampling was used to select IFB account holders and, a total of 335 study participants were included. Ten branch bank managers and selected window IFB service providers were seleced purposefully. The data collected through questionneir and interview guide were analysed and presented using both descriptive and analytical methods.The study showed that mean difference of IFB service satisfaction among age category of the study participants and the difference was attributed to in age group of 21-30 years and 31-40 years (P=0.028).The study also revealed as there is no variation in satisfaction with IFB service across different study participants’ occupation (F=1.374 and P-value =0.243). Socio-cultural factor was also identified to have significant positive influence on IFB customer satisfaction. Governmental policy and regulation was found to be negatively significant predictor of IFB service (unstandardized beta coefficient = -.229). As to conclusion of the study, relatively good progress in trends of customer frequency, significant mean variation of IFB service customer satisfaction was seen across different age group of the respondents. It was observed that IFB service customer satisfaction have significant strong negative correlation with governmental policy and regulation. Governmental policy as well as regulation and weighted socio-cultural factors were found to be independent and significant predictors of IFB service customer satisfaction. Based on the above rsults theneed to improve the knowledge of community, expansion and sustaining of IFB service for the larger nation were forwarded as a recommendation. In addition, governmental policy and regulation with regard to IFB service need to be revisd by considering the principle of Islamic financial activities.
Keywords: Bale, Determinants, Interest free banking