Factors Influencing Microfinance Customer Retention: The Case Of Bright Enriched Empowerment Programme In Nairobi County, Kenya
Customer retention in the banking and microfinance sector has, for long, been a difficult goal for the players to attain. In addition the recent microfinance crises, most of which occurred between 2008-2010 in several countries around the world, and the emergence of new research findings exposed gaps in previous microfinance studies. Two of these gaps included how customer shareholding and customer service recovery affects customer retention in microfinance. To fill these gaps this research conducted an in depth study on the role that these two factors, together with accessibility to financial services and credit recovery, played in influencing microfinance customer retention. The key purpose of this study was to establish how accessibility to financial services, customer service recovery, credit recovery and, customer shareholding affected customer retention in Bright Enriched Empowerment Programme (BEEP), a Non Governmental Organization dealing in microfinance in Kenya. The location of the study was Nairobi County. The study was guided by the following objectives: To assess how financial services accessibility influence customer retention in BEEP; to establish the influence of customer service recovery and customer retention in BEEP; to assess how credit recovery affected customer retention in BEEP and; to determine how customer shareholding affected customer retention in BEEP. A review of related literature revealed that previous studies on MFI customer retention had not adequately focused on the customer’s perspectives and those customer retention factors that are endogenous to the firm. The research used a descriptive cross-sectional survey design. The sampling unit involved client members of selected groups within Nairobi County that were served by BEEP. Stratified sampling technique was used and data was collected using structured questionnaires. The dependent variable was customer retention while the independent variables were accessibility to financial services, customer service recovery, credit recovery and, customer shareholding. Statistical package for social sciences (SPSS) was used to analyze data which was then be presented in frequency tables, percentages, and cross-tabulations. The study found that each of the independent variables: accessibility to financial services; customer service recovery; credit recovery and; customer shareholding had a significant and positive relationship with customer retention in BEEP at Nairobi County. In order for BEEP and other related MFIs to enhance customer retention the study recommended formulation of financial services policies based on carefully assessed customer needs, implementation of effective quality and credit management systems and, innovative customer retention practices like the unique BEEP customer shareholding practice. The study suggested further studies to be carried to investigate the influence of customer shareholding on credit recovery in MFIs so as to obtain a deeper comprehension of the influence of customer shareholding on customer retention in MFIs. Further studies should also be undertaken to explore on how customer shareholding can be employed to enhance customer retention in MFIs.