DOI: 10.1002/jsc.2168
RESEARCH ARTICLE
Customer satisfaction with the services of microfinance institutions: Scale development and validation* Eddy Balemba Kanyurhi
Catholic University of Bukavu, Bukavu, Democratic Republic of the Congo; Laboratoire d’Economie Appliquée au Développment (LEAD) Correspondance: Eddy Balemba Kanyurhi, Catholic University of Bukavu, 2 Mission Street, Bugabo, Kadutu, Bukavu, Democratic Republic of the Congo E‐mail:
[email protected];
[email protected] Funding information Academie de Recherche pour l’Enseignement Supérieur, ARES‐CUD Belgium
Abstract Customer satisfaction is a multidimensional construct with five factors: price, reliability, accessibility and flexibility, appearance, social and enhancement of customers. The presence of social inclusion and customer enhancement, accessibility, and flexibility dimensions reveals that a scale measurement should be specific both to a context and to a sector. The value attached to the appearance factor confirms that microfinance seriously tends to “mission drift” which means targeting less poor customers. The simultaneous occurrence of appearance and social dimensions in the same scale is proof that the social and financial goals should coexist in all stages of the development of microfinance institutions. As long as the social funds do not substitute market funds used in financing poor microborrowers, the share of poor clients served increases. So does financial inclusion of the poor.
1 | INTRODUCTION
institutional development approach. MFIs were slow to further moni-
Over the past three decades, several studies have been devoted to
and the total number of customers and did not really worry about
microfinance. However, studies that focus on marketing and customer
quality and delivered value (Datar et al., 2008). MFIs offered standard-
satisfaction in microfinance institutions (MFIs) are rare (Cohen, 2002;
ized loans with little or no difference based on customer needs and
Woller, 2002). This scarcity contrasts with the recent development
specificities (Brand, 1998). Although this institutional approach has
of the microfinance sector. Microfinance has entered a critical phase
its merits, it nevertheless leads to negative results for both MFIs (low
of its development that is characterized by strong competition, the
growth and low reimbursement rate) and customers (over‐indebtedness
desertion of clients, and stagnation in MFIs’ growth rates. To address
and dropouts) (Guerin, 2013; Gul, Bashir, & Lal Rohra, 2011; Kim,
these problems, MFIs have to adapt their services to customers’ needs
1999). The combination of all these factors eventually ruled in favor of
and to recognize that the markets in which they are deployed can also
a market‐oriented approach (Brand, 1998) allowing MFIs to put cus-
be saturated (Schicks, 2013). Such an argument puts customer satis-
tomers at the heart of all their activities (Heckl & Moormann, 2007) to
faction at the center of the strategy of MFIs that are now known to
maximize their chances of survival in a competitive market.
tor financial indicators such as loan repayment rates, the loan amount,
Studies that aim to develop scale measurement and assess cus-
survive in a competitive environment. Studies that aim to develop scale measurement and assess customer satisfaction and service quality in the microfinance sector are almost nonexistent.
tomer satisfaction and service quality in the microfinance sector are almost nonexistent. Existing ones attempt to adapt ServQual to the microfinance sector (Islam et al., 2013; Rahman, 2006) or to measure customer satisfaction using several unstructured items (IFAD, 2007;
The interest in customers and their satisfaction has evolved over time in the microfinance industry. During their early years of development, MFIs considered clients as given, acquired, and unlimited (Cohen, 2002). Financial services were provided based on a largely
Muray, 2001). The other studies are more general and concern the market orientation concept and its application in the microfinance sector (Ghani & Mahmood, 2011; Woller, 2002), MFIs’ marketing strategies (Brafu‐Insaidoo & Ahiakpor, 2011; Cohen, 2002), and relationship marketing and its impact on social performance (Jayashankar & Goedegebuure, 2011), and do not aim to build a reliable and valid
*
JEL classification codes: G21, M31.
Strategic Change. 2017;26(6):563–574.
scale measurement specific to microfinance. wileyonlinelibrary.com/journal/jsc
© 2017 John Wiley & Sons, Ltd.
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This study aims to fill this gap and pursues two objectives: (a) to develop a scale for customer satisfaction in the microfi-
gives the main conclusions, implications, and limitations of the study and the prospects for future research.
nance sector and discuss its psychometric properties, and (b) to determine the dimensions and attributes that customers value in MFIs. Customer satisfaction is approached from the dimensions and specific attributes, overall customer satisfaction being
2 | WHY DEVELOP A NEW SCALE MEASUREMENT?
understood as a linear function of these latent variables (Gomez, Edward, McLaughlinb, & Wittink, 2004; Hallowell, 1996; Wirtz &
Customer satisfaction has been extensively defined (Churchill & Sur-
Chung, 1998). Such operationalization of customer’s satisfaction
prenant, 1982; Halstead, Hartman, & Schmidt, 1994; Oliver, 1981,
concept is supported by three complementary arguments. Firstly,
1997; Swan, Trawick, & Carroll, 1982; Tse & Wilton, 1988; Westbrook
“it is consonant with consumers’ representations of consumption
& Oliver, 1991). Three main features emerge from the critical analysis
experiences in memory” ( Mittal, Kumar & Tsiros, 1999; Gardial
of previous (Cengiz, 2010; Giese & Cote, 2000) definitions: (a) it is an
and Colleagues, 1994). Secondly, a multiattribute model allows to
emotional or cognitive response, (b) such a response is related to a
identify factors that may contribute more to the overall consump-
particular object that can be manifested to an expectation of a prod-
tion. Thirdly, “an attribute level analysis provides higher specificity
uct, the consumption experience formulated on the basis of an assess-
and diagnostic usefulness by enabling to ask specific questions
ment comparing a product to certain standards, and (c) the response
about antecedents of satisfaction” (Mittal, Kumar & Tsiros, 1999).
comes after purchasing the product.
Thus, the multiattributes approach is an useful tool for making
In this study, the customers satisfaction is addressed at the horizon-
relevant resource allocation decisions (Liberati & Mariani, 2012;
tal level, underlining the consumer experience stage to which satisfac-
Cengiz, 2010).
tion judgment is related (Vanhamme, 2002). According to Vanhamme
This study contributes to the advancement of marketing the-
(2002) and Oliver (1997), satisfaction is considered on the basis of dif-
ory and microfinance at three levels: first, it develops a reliable and
ferent elements involved in the production and supply of financial and
valid scale measurement capable of measuring customer satisfac-
nonfinancial services to the Kivu customers of MFIs (satisfaction in
tion in a sector where marketing aspects have so far been little
respect to the cost of financial services, welcome of loan officers and
studied. The study identifies the dimensions and attributes that
cashiers, rapidity of services, cleanliness of infrastructures, customers
MFI managers can use to evaluate and increase the satisfaction of
participation in the governance of the MFIs, adaptation of services to
their customers and differentiate themselves from their competi-
the conflicts context, etc.). All these elements are related to the experi-
tors. Second, the study confirms that the development of a scale
enced service described as a set of customer encounters (Llosa, 1997).
measurement should be context‐ and sector‐specific. The appear-
Such experience suggests that MFIs customers evaluate their institu-
ance of the dimensions, social inclusion and customer enhance-
tions according to the outcome of the service (the what) and also the
ment and accessibility and flexibility reflects both the specificity of
process (how) that led to the production of the service (Grônroos, 1993).
microfinance and the context of a postconflict region (Kivu) used
Customer satisfaction is measured using specific aspects (Atha-
as an empirical case. Third, the study leads to some conclusions
nassopoulos, Gounaris, & Stathakopoulos, 2001; Oliver, 1992, 1997,
that differ from some fundamentals of microfinance. Indeed, the
Gomez, Edward , McLaughlinb & Wittink, 2004; Homburg & Rudolph,
basic premise that argues that microfinance clients are wary of
2001; Singh, 1991). Thus, each component of the service experience
well‐dressed bankers sitting in big air‐conditioned offices, etc.,
contributes linearly to global satisfaction (Llosa, 1997). Normally, cus-
was not confirmed in this study. This confirms that microfinance
tomers are supposed to take into account the specific aspects of the
seriously tends to “mission drift” which means targeting less poor
transaction, such as product features (environment), service features
customers. However, the simultaneous occurrence of appearance
(customer care), and price of the service, among other things in order
and social dimensions in the same scale is proof that the social
to express their global level of satisfaction to their MFIs (Andaleeb &
and financial goals should coexist in all stages of the development
Conway, 2006; Parasuraman, Zeithaml, & Berry, 1994; Teas, 1994). In
of MFIs.
this case, “perceived service quality is a component of customer satis-
The development of a new scale is justified by the need to have
faction” (Wilson, Zeithaml, Jo Bitner, & Gremler, 2012).
a measuring instrument that is tailored to microfinance and to Kivu
Customer satisfaction has already led to several studies and scale
customers because global scales developed elsewhere would be
measurements. Existing scales focused on customer satisfaction in the
difficult to adapt to the culture and context of MFIs and their cus-
health sector (Singh, 1991; Sower, Duffy, Kilbourne, Kohers, & Jones,
tomers (Karapete, Yavas, & Babakus, 2005). The target population
2001) and in the industrial sector (Gomez, Edward, McLaughlinb
consists of 1,293 clients from 53 MFIs in Kivu in the Democratic
& Wittink, 2004; Homburg & Rudolph, 2001). Some of those stud-
Republic of Congo (DRC).
ies develop scale measurement and measure customer satisfaction
This study is divided into five sections. Section 2 aims to justify
directly in banking (Athanassopoulos, 2000; Athanassopoulos, Gouna-
the need to develop a specific scale measurement in microfinance.
ris & Stathakopoulos, 2001; Liberati & Mariani, 2012). Other studies
Section 3 describes the process of development and validation of
indirectly assess customer satisfaction through service quality (Atha-
scale measurement. Section 4 discusses the results, while Section 5
nassopoulos, 2000; Fonseca, 2009; Fornell, 1992).
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Most of these studies used ServQual and ServPerf to evaluate ser-
Microfinance is also a specific sector based on the type of custom-
vice quality in service sectors including banking (Homburg & Rudolph,
ers it targets. If in the early stages of development of MFIs, customers
2001). The aggregated results of these studies make the dimensional-
were relegated to the background (Rahman, 2006), the transforma-
ity of those scales unstable and make it advisable for companies to
tion of MFIs into regulated units has changed the nature of their rela-
account for differences in each country and sector when they want
tionships with customers. Increased competition is accompanied by
to develop and implement a global marketing strategy (Bick, Abratt, &
increased customer bargaining power. The increase in the number of
Möller, 2010). The underlying argument is the fact that economic and
MFIs gives more freedom to customers, who will be able to leave an
social development profoundly affects the design that customers have
MFI if they are not satisfied with its services (Kaura & Datta, 2012).
for service quality (Korda & Snoj, 2010). There does not exist a scale
In some categories of MFIs (cooperatives), customers enjoy strong
measurement for service quality and customer satisfaction that would
bargaining power in that they are “cooperative members,” that is to
have universal scope (Hart, Lopez, Jalbert, Jalbert, & Rampersad,
say the owners who hold a significant share of the MFI’s capital. In
2007). Any scale measurement needs continual validation every time
fact, the savings of members are an important part of the available
it would be used in different countries and different cultural con-
funds at lower cost compared to other sources of funds (Armandariz
texts (Asubonteng, McCleary & Swan (1996); Ladhari, 2010; Malik &
& Morduch, 2010). The confidence that savers have in their institution
Naeem, 2011). In recent years, some authors have incorporated the
will increase the savings rate and thus make a difference in terms of
criticism above and begun to develop scales specific to the banking
financial costs compared to competitors. Consequently, customer sat-
sector and the cultural context of the regions in which they are tested
isfaction is no longer limited only by the supply of services and tailored
(Akvrian, 1994; Bahia & Nantel, 2000; Bridge & McQuilken, 2002;
financial products. It also extends to more member participation in
Karapete et al., 2005; Korda & Snoj, 2010; Othman & Owen, 2001).
decision making, in access to information, the return on savings, and
The existence of other scales could cast doubt on the need to
especially in access to dividends if net positive results are reached.
develop a new one to assess customer satisfaction in MFIs (Churchill,
This leads to a new dimension ownership of customer calling for the
1979). The arguments for the proposal of a new scale are based on the
construction of a particular scale measurement that integrates the
specifics of the microfinance sector and the specifics related to the
dual status meaning of members as customers and owners.
specific context of this study, the Kivu (Greenland, Coshall, & Combe, 2006; Karapete, 2011). In so basing them, we intend to develop an
The underlying argument is the fact that economic and social
endogenous scale measurement, specific to an industry (microfi-
development profoundly affects the design that customers
nance), a culture and a particular context (post‐conflict context in
have for service quality
Kivu) (Karapete et al., 2005; Mohsan, Nawaz, Khan, Shaukat, & Alsam, 2011; Ziaul Hoq & Amin, 2010).
The last specificity of MFIs is their logic of intervention. At first,
Microfinance is defined as the provision of financial and nonfinan-
microfinance offered financial services to people excluded from con-
cial services to those excluded from the traditional banking system
ventional banks. This was made possible by the use of the group
(Labie, 2006; Morduch, 2000). Microfinance is a financial sector in
lending methodologies adapted to those people who cannot provide
which the social mission is intimately linked to the financial goal (Rah-
physical collateral (Armendariz & Morduch, 2010). Although this tech-
man, 2006). Therefore, microfinance is a banking sector that may also
nique has evolved over time, first giving rise to a personal liability on
contribute to the fight against poverty (Rahman, 2006). MFIs should
the part of each member within the same group, and then to indi-
begin their growth by adopting a social market approach that values
vidual lending, it appears that group lending remains a major feature
customers and creates value for all delivered services and products.
of the methodology of MFIs. MFIs use progressive lending incentives
MFIs have to assess customer satisfaction (Pawlak & Szubert, 2004)
to encourage individuals to repay. They promise to increase the loan
and adjust services according to identified needs. This is justified by
amount for each loan cycle, they offer nonfinancial services, and they
the fact that a good customer is a valuable asset for the MFIs (Counts,
make visits to customers’ homes or places of work. The MFIs and
2008). Therefore, MFIs are forced to build a long‐term relationship
customers begin a long‐term relationship, and the loan amount may
with customers to generate the desired impact. The underlying argu-
increase gradually as confidence builds (Humbourg & Rudolph, 2011).
ment is that a customer becomes profitable after the fourth or fifth
Studying customer satisfaction with MFIs means reviewing in a com-
credit in microfinance (Brand & Gershick, 2000). The importance of
prehensive framework their loans and savings policies, their collection
the MFIs’ social mission is related to a specific dimension social inclu-
policies, and other variables that come into play in the lending rela-
sion and enhancement of customer, components that rarely or never
tionship (Mihelis, Grigoroudis, & Siskos, 1999; Wirtz & Chung, 1998).
end up in a general scale for assessing customer satisfaction in com-
The above elements are reminiscent of accessibility and flexibility of
mercial banks. The importance of this dimension is related to the
services in MFIs, a dimension that would rarely be found in a general
fact that the activities of MFIs must be developed while taking into
scale measurement.
account the specific needs of customers. This drives MFIs to think
The development of a new scale also corresponds to the specific
more about their social responsibility (Prior & Argandona, 2009) and
characteristics related to the context of the study. The Kivu is a post-
to recover their credibility and reputation to win the trust of custom-
conflict region with manifest conflicts. Repeated wars have caused
ers (Perez & Del Bosque, 2012).
huge losses to human, social, and physical capital and have resulted in
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negative impacts on development prospects (Fraser & Candido, 2001).
studies on customer satisfaction or service quality in the banking sec-
These wars have negatively affected borrowers’ repayment ability. This
tor. In reading these articles, we identified an initial pool of 24 special
context puts pressure on MFIs, which have to adapt with innovative
items that were consistent with the microfinance sector. The aggrega-
policies and products that take into account both their own interests
tion of items from the literature and those from interviews gave us a
and those of customers. Therefore, the survival of MFIs in such a con-
first complete list consisting of 157 items divided into 12 dimensions.
text is related to their ability to provide flexible products that adapt
Although the number of these items seemed high, we preferred to
to the new life of active borrowers, from providing housing loans to
adhere to the recommendations of Bahia and Nantel (2000), who sug-
those who lose their homes, to rescheduling loans for those whose
gested that “in the early stages an over‐inclusive scale was considered
goods were stolen or looted by armed gangs. In short, only MFIs that
to be preferable to a truncated one.”
adapt their lending strategy will be able to operate effectively in this context and continue to provide financial services that meet the needs
The inclusion of a dimension related to conflict adaptation
of households (Venkatachalam, 2006). Such innovations will enhance
in a scale measurement makes it special compared to standard
the reputation and credibility of MFIs and could give them a competi-
scales.
tive advantage. Thus, the legitimacy of the MFIs in this environment is related to providing financial services when other operators are no
The items’ list was then sent to four professors involved in mar-
longer able to act, thereby allowing customers to access cash and to
keting and microfinance research and teaching and two microfinance
finance their business again (Fraser & Candido, 2001). The inclusion
managers in South Kivu in order to ensure reliability and content valid-
of a dimension related to conflict adaptation in a scale measurement
ity (Neuman, 2010). The list was finally submitted to the judgment of
makes it special compared to standard scales.
30 customers through a pilot survey in South Kivu. The synthesis of
The Kivu context can also be analyzed in terms of sustainability,
perspectives from professors, MFIs’ managers, and customers gave us
the solvency of MFIs, and their ability to withstand recurrent macro-
a scale consisting of 124 items divided into 12 dimensions: accessi-
economic shocks. Kivu is known as much for its fragile security envi-
bility and flexibility (15), location (4), insurance (11), communication
ronment as for its entrepreneurial spirit. The first MFIs in the Congo
(8), appearance of the building (14), helpfulness and hospitality (8),
took root in Kivu in the 1970s. These institutions enjoyed a period
empathy (6), price (15), reliability (7), social, valuation of customer and
of excellent growth up until the 1990s before being completely shat-
context of conflict (16), product range (7), ownership and participation
tered by the banking crisis in 1993 (Kalala, 2006). Although the Kivu is
in the MFIs’ governance (11).
currently witnessing a strong revival of MFI cooperatives, the specter of seeing the entire cooperative system collapsing is still alive in the minds of savers. These failures raise the issue of risk management on
3.2 | Study 1. Scale refinement
the part of MFI leaders pushing them to be more focused on reputa-
Data were collected from a sample of 270 customers in 19 MFIs in
tion problem and sustainability of the MFIs. Having those elements in a
South Kivu. Market share and customer gender were used as the
scale measurement makes it more specific to the context.
stratification variables. MFIs with the largest market share were also over‐represented in the sample. Women were also over‐represented
3 | THE SCALE DEVELOPMENT PROCE SS AND VALIDATION 3.1 | Scale generation
in the sample in line with the MFI population in DRC, which is 60% for women and 40% for men. The survey took place within the precincts of MFIs, or in the vicinity, or at customers’ home or work location. We used the first strategy for clients for whom we received formal permission from managers to
The first pool of items was generated both by individual interviews
be able to survey them. In the absence of a formal agreement by the
with customers and by a review of the literature. Interviews were
manager, the latter two strategies were directly implemented. In that
conducted with 155 customers in 26 MFIs. Customers expressed
case, enumerators were stationed around the MFIs and approached
their views (a) on the strengths of their MFI, (b) on their weaknesses,
customers after they left the MFI’s premises. When customers agreed,
and (c) how attractive the services and products are that meet their
the survey took place either on site or at another location suggested
needs (Mittal et al., 1998; Sower et al., 2001). The interviews took
by the customers or at an appointment arranged with them. In extreme
place within the precincts of the MFIs as customers came to com-
cases, the questionnaire was distributed to clients for them to com-
plete a transaction, or at their home when they had some affinity
plete at home. The survey lasted 15 days. A total of 300 questionnaires
with surveyors.
were distributed, 295 questionnaires were returned, and 25 were
Data coding and processing were obtained through content analysis (Karapete et al., 2005; Neuman, 2010). This yielded a list of
poorly completed. After removing all the unusable questionnaires, we kept 270 questionnaires, which represent a response rate of 90%.
272 items. This list was then subjected to a second coding using two
The majority of surveyed customers were women: 59% against
independent coders and in a provisional list consisting of 133 items.
41% of men. Customers had an estimated average age of 35. Custom-
Identification of items through the literature search almost followed
ers’ average household size was estimated as 7 people. The majority of
the same logic. The choice was confined to 11 recently published
customers, 64%, had achieved university‐level education. Customers
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were traders in 30% of case traders. Customers attending had been
of surveyed clients were women against 61% men. The majority of
dealing with MFIs for 3 years and 4 months on average, and accessed,
customers (85%) have completed secondary education (44%) and uni-
on average, two products. A total of 50% of customers had already
versity (41%). Thirty‐eight percent of customers are traders. The aver-
asked for credit against 50% who did not make a request.
age age of clients is 36. Customers on average attend only one other
Data were subjected to an exploratory factor analysis to reduce
institution in addition to their main MFI. Customers attend MFIs for
the items and to refine the scale measurement (Carricano, Poujol, &
4 years on average. Customers visit their MFI nine times on average
Bertrandias, 2011; Hair, Black, Babin, & Anderson, 2010). Items that
per semester. Customers access two products in their MFI on average.
did not have significant factor loadings on any factor (
