Customer satisfaction in microfinance institutions: insights from Ghana

Abstract

With increased competition in the microfinance industry in most African markets, customer satisfaction and retention are important issues for most microfinance institutions (MFIs) in the region. We rely on survey data from customers of MFIs in Ghana to examine the potential determinants of customer satisfaction in the microfinance sector. We find customer satisfaction to be significantly related to customers’ experiences and motivations such as the primary reason for associating with MFIs, and the size of credit they seek. We further find customers’ demographic factors such as educational attainment and household income levels to be related to customer satisfaction in the microfinance sector. Our results are largely consistent with the view that MFIs offer a valuable service by expanding access to small credits to poor households and microenterprises who are either denied credit by the formal banking sector or who are exploited by informal moneylenders. Further, our interviews with top managers of MFIs highlight various tactics utilised by MFIs in Ghana to manage their credit risks.