Epsilon Archive for Student Projects

Abstract

The bank market for farmers in Sweden is dominated by Swedbank and Landshypotek. One of the most aggressive challengers is Länsförsäkringar Bank, which in 2009 had seven per cent of the Swedish bank market for farmers, but 57 per cent of all new lending. This paper deals with the problem of new banks to break into the bank market where farmers are slow in terms of change in their attitudes and loyal to their banks. The study has been carried out in cooperation with Länsförsäkringar Gävleborg which is a new actor in the banking market and thus eager to take part in the outcome of the study. This essay thus seeks to examine the attitudes farmers have against bank switching and the factors that influence their choice of bank.

The theories used in the study are primarily behavioral theory but also transaction cost theory and decision models have been used. Based on these theories, a number of hypotheses have been formulated. From these hypotheses questions were derived and these were used in the interviews with the farmers.

The empirical data has been gathered through telephone interviews with 16 farmers in the county of Gävleborg. They constitute four groups according to their current banking situation. Group 1 consists of farmers who are loyal customers of Länsförsäkringar. Farmers in group 2 have recently switched to Länsförsäkringar while farmers in group 3 recently changed from Länsförsäkringar or have their mortgages with another bank. Group 4 consists of farmers who are customers of one of Länsförsäkringar´s competitors.

The findings show that there are some differences between the groups. Farmers in group 1 and group 2 value the skills they obtain from Länsförsäkringar very high. The skills of the staff were the key factor to the farmers in group 2 when they switched to Länsförsäkringar. Group 3 value the economic aspects most of all farmers in the study but they also value the skills. This is evidenced by the fact that they recourse several banks depending on the service needs of the personal relationship with the bank. For example, they consider that the mortgages does not require a deeper relationship with the bank and thus select which bank they use for this service based entirely on economic grounds. Farmers in group 4 do not value that the bank staff have expertise in agriculture; they see the bank only as a creditor.

Overall, the farmers report that repeated misconduct of their present bank is necessary before a change is considered. It is also very difficult to get a farmer to change his attitude toward a specific bank. The attitude towards bank switching, by contrast, changed in a number of cases after the farmers changed bank and discovered that it was not as complicated as they had expected.