Responsible Finance Forum

Building Customer Loyalty

Craig F. Churchill and Sahra S. Halpern
01 March 2001
Source:  Consultative Group to Assist the Poor (CGAP).

The importance of customer loyalty and customer satisfaction has become increasingly apparent to microfinance practitioners as the microfinance industry has matured during recent years. In the past three years, Centenary Rural Development Bank has grown by nearly 300% in terms of total assets and number of customers served. This dramatic growth has in part resulted from the use of many of the customer service oriented policies presented in this technical guide, Building Customer Loyalty.

Centenary conducted customer service surveys for the past two years in all of its branches and conducted an impact assessment in two of its branches in 1999. Despite the fact that the initial survey indicated that 85 percent of the Bank’s customers were satisfied with its services, Centenary launched an initiative to improve and expand satisfaction among its customers. To create customer loyalty through maximum customer satisfaction, Centenary instituted customer service desks, upgraded its software to enable it to serve depositors more quickly, hired additional cashiers and loan officers and introduced new loan products in response to customers’ recommendations. Centenary’s management has learned that listening to customers results in higher profits, which have actually improved at twice the growth rate of the Bank over the last three years.

As MFIs around the world face increased competition and move towards commercialization, the importance of Building Customer Loyalty is readily apparent. Competition and commercialization are forcing MFIs to become more efficient, and greater customer loyalty leads to lower operating costs and better financial performance for MFIs.

The publication demonstrates how customer loyalty improves profitability, and examines what factors contribute to improved customer loyalty. In doing so, it explores the importance of quality product design and development as well as the significance of good customer service. Additionally, the authors point out how an MFI’s structure can enhance customer loyalty, and that MFI staff members must be able to respond quickly to customers’ questions, complaints and credit applications if the institution wishes to promote customer loyalty. The guide is full of tools to help MFIs of various sizes and structures promote customer loyalty.