Abstract

The study set out to examine the effect of service quality on customer’s satisfaction” in the microfinance case of the NTACCUL Bamenda branch. Specifically, the study seeks to assess how reliability, assurance, tangibility, responsiveness and empathy affect customers’ satisfaction on quality service. In order to achieved these study objectives, the study employed Descriptive Survey Design using a structured questionnaire to sample 100 customers from NTACCUL MFI using convenience sampling techniques.

Data was analyzed using SPSS. 25.0, descriptive statistics, and regression test were used to test the relationship that existed between variables. Findings revealed that Tangibility, reliability, assurance, empathy and responsiveness have a positive and significant correlation on customers’ satisfaction. The results also indicate that generally, NTACCCUL customers are satisfied with the service quality performed by the MFI i.e. tangibility, reliability, responsiveness, assurance, and empathy.

In other words, NTACCCUL has successfully implemented their strategic improvement in service quality. It is important information to build a market positive perception of NTACUUL in serving its customers. It will leverage customers’ intention and brand awareness of NTACCCUL’s quality. The study recommends that the MFIs should rewards those satisfied customers who engage in attracting new customers through word-of-mouth.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

In the early years of the development of microfinance, the idea of providing microloans to the poor as a way to alleviate poverty mainly appealed to and attracted social investors and nongovernment organizations (NGOs). Yet, over the years’ microfinance has proven to be successful and even profitable as a model of financial intermediation. This has attracted increasing interest from commercially oriented providers of microfinance, among which are also international commercial banks (Hulme and Arun, 2009).

Profit oriented MFIs thus have become increasingly important, which according to some observers have also led to a change in the focus of microfinance from being a socially-oriented “poverty lending” approach focusing on reducing poverty through providing financial services and funded mainly by donors, government subsidies and other concessional funds to an institution oriented “financial systems” approach focusing on commercially viable financial intermediation to the poor with an emphasis on institutional financial self-sufficiency (Cull et al., 2009).

Increased competition among MFIs is one of the outcomes following the increasing role of profit-oriented institutions and the change of status by NGOs from non-profit to profit-making (commercialized) institutions.  One distinctive characteristic of the microfinance market is that transactions are based on the use of soft information and strongly depend on tight institution-customer relationships.

MFIs provide financial services to the poor who are usually not considered creditworthy by traditional banks. These institutions can solve problems of information asymmetry and provide loans without collateral requirements. They do so by establishing strong personal relationships with customers as well as by using other forms of collateral, such as group lending, which generates social collateral (Hermes, Lensink & Meesters, 2009).

Competition among MFIs may contribute to well-functioning markets, protection of consumers, promotion of allocative and technical efficiency, and the provision of incentives to develop new products (Motta, 2004). In particular, it may stimulate them to reduce costs and increase the efficiency of their operations by improving the quality of their services to retain customers. Moreover, competitive pressure from banks may stimulate MFIs to diversify their financial services to keep customers or attract new ones. In particular, it may stimulate MFIs to offer saving accounts, demand deposits and insurance

One of the main reasons for the successes of the Japanese industry in the 1970s and 1980s was that they realized that quality concepts should emanate from the requirements and expectations of the customers (Bergman and Klefsjo, 2003).

To realize the full benefits of customer satisfaction, managers must understand the difference between making more customers and making customers more satisfied. To maintain high levels of customer satisfaction and keep customers loyal, companies must continuously improve the services they deliver and finally leading to favourable customer satisfaction.

Kurtenbach (2000) explains that those who are successful in service quality rank their customer’s experience as the top priority. The quality of service provided determines the level of satisfaction of the customer even though what is seen as a customer service experience can change the entire perception a customer holds towards the organization. To make sure that investment attracts both existing and potential customers envisaged, knowledge of satisfaction and service performance should provide operational managers with valuable information.

A measure of how products and services supplied by a company meet or surpass customer expectations is known as customer satisfaction. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Customer satisfaction is an asset that should be monitored and managed just like any physical asset. In researching satisfaction, firms generally ask customers whether their product or service has met or exceeded expectations.

Thus, expectations are a key factor behind satisfaction. When customers have high expectations and the reality falls short, they will be disappointed and will likely rate their experience as less than satisfying. The relationship between customer service and customer satisfaction is a vital one. In a competitive marketplace, understanding customer needs become crucial, therefore companies, banks and micro-financial institutions, in this case, have moved from product-centric to customer-centric positions. Customer satisfaction is influenced by the type of service provided. Satisfaction is a challenge particularly in micro-financial institutions as customers can easily switch from one institution to another for a better service. Customer satisfaction has been a subject of interest to organizations and researchers.

Any organization that has satisfied customers is bound to increase its customer base and hence profitability. One of the factors that can help to increase sales is customer satisfaction, because satisfaction leads to customer loyalty (Wilson et al, 2008), recommendation and repeat purchases. Satisfied customers may sell your organization either consciously or unconsciously. It is therefore important that service industries provide quality service to customers to satisfy them, make them loyal and retain them in the end.

Express Union, like any other money transfer agency; Express Exchange, Emi money, has customer service as one of the pillars on which they operate and this research seeks to find out whether the service being provided meets customer expectations and whether customers are being satisfied by those services and also which other ways the service can be improved to satisfy the customers.

1.2 Statement of the problem and justification of the study

Cooperatives banks in Cameroon face stiff competition, first within themselves and secondly from non-banking financial institutions like ORANGE, and MTN and are constantly seeking new ways to add value to their services. In an increasingly competitive market where a rising number of players are spoiling customers for choices, banks must identify the factors that are best able to attract new customers and retain the existing ones. Since the nature of banking is such that product innovation is easy to replicate and therefore fails to offer any term benefits, it is the service quality that can act as the differentiator and will lead to satisfied customers who are likely to recommend the bank to others.

In Cameroon cooperatives, banks focused more on lending which is the most profitable function of a cooperative bank. As a result, less attention has been put on service quality (Ngu,2007). Nowadays, to be able to survive the prevailing intensive competition in the banking industry, service quality must be given great importance especially as banks offer similar products in a competitive environment.

To keep customers in the highly competitive and changing market arena, most companies are emphasizing maintaining and expanding their customer base by using customer acquisition marketing strategies for survival aimed at maintaining and enhancing the relationships with customers (Krishnamoothy and Srivasan,2013).

It must however be noted that the lifeblood of any business is its customers. The profit comes from sales minus cost. Sales must be realized first before the cost becomes relevant (Xu, et al. 2002). Customers decide on sales based on their perception of product and service quality. In short, service quality determines profits, and customers alone define and determine what that quality should be.

In every business organization, effective implementation of widespread customer satisfaction strategies ensures positive returns on investment with minimal wastage of resources and cost reduction. cooperatives lose the majority of their customers because the service rendered to them is not satisfying and sufficient, so they tend to switch from one service provider to another.

It is based on the above problem that the researcher decided to find out the effect of service quality on customer satisfaction in microfinance in the Ntarinkon cooperative union.

1.3 Research questions

The main research question here is to find out the effect of service quality on customer satisfaction in the micro Finance institution case of NTACCUL. The specific research questions in this research include;

1. Is there a significant relationship between service quality and customer satisfaction in the microfinance institution case of NTACCUL Bamenda?
2. What are the main dimensions of service quality in the NTACCUL Bamenda branch?
3. What dimensions of service quality should be improved to increase customer satisfaction in the NTACCUL Bamenda branch?

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