Service Quality and Customer Retention: A Study of Microfinance Customers in Kaduna North Local Government Area, Nigeria

The study examined the effect of aspects of service quality (Tangibility, Reliability, Responsiveness, Assurance and Empathy) on customer retention among customers of Microfinance Banks (MFBs) in Kaduna North Local Government Area. Data was collected by means of a questionnaire administered on the 378 sampled respondents in the study area with a total population of 25,000 customers. Area random sampling technique was used in the selection of sample subjects across the local government area. Descriptive statistics in the form of frequency and percentage was used to analyze the demographic data about the respondents. Inferential statistics in the form of multiple regressions was used to determine the effect of service quality on customer retention in MFBs. The findings of the study reveal that among the aspects of service quality, empathy has the highest effect on customer retention in MFBs. Based on the finding, it is recommended that the various Managements of the MFBs in the study area should pay much attention on aspects of empathy comprising individualized attention, show of care, show of respect, show of love and friendliness to customers by staff of the MFBs.

increasing importance of the service sector in the economy, Researchers have developed models or tools that can be used in measuring service quality in respect of intangible products like that of banking services. This study will adopt the SERVQUAL model, developed by Zethaml (1985:1988) in measuring service quality of Microfinance banks in Kaduna North local government area, as perceived by customers. The model is based on five service quality areas, namely, tangibility, reliability, responsiveness, assurance and empathy. The model have been adopted by many scholars in the study of quality service in respect of commercial or money deposit banks in Nigeria but there are few studies in respect of Microfinance banks as they are relatively young and are still passing through developmental challenges (Ibok and Udofor, 2012). This is the gap this paper intends to fill.
The general objective of the paper is to determine the effect of service quality on retention of customers by MFBs operating in Kaduna North Local government Area. The specific objectives of the study are (i) to determine the effect of tangibility on customer retention by MFBs (ii) to determine the effect of reliability on customer retention by MFBs (iii) to determine the effect of responsiveness on customer retention by MFBs (iv) to determine the effect of assurance on customer retention by MFBs and (v) to determine the effect of empathy on customer retention by MFBs.

Literature Review 2.1 Conceptual Review 2.1.1 Service Quality
Service quality is defined as the customer's overall impression of the relative inferiority or superiority of the service being provided ( Bashir, Machali and Mwinyi, 2012). Lewis and Booms (1983) define Quality Service as a measure of how well the services rendered meets the expectations of customers. The areas of expectations constitute dimensions of quality service. Arlen (2018) described the five SERVQUAL dimensions of quality service as follows: tangibles; this entails appearance of physical facilities, equipment, personnel and communication materials; reliability; this entails the ability of the service provider to provide service dependably and accurately which involvesprompt service delivery, provision of wide range of value added products, security of transactions and customer information; responsiveness; this involves willingness to help customers and provide prompt service which is manifested in staff willingness to assist customers promptly, answering customers enquiries on time, provision of correct service at the first time and provision of fast and efficient service at the counter: assurance; this refers to knowledge and courtesy of staff and their ability to convey trust and confidence to customers: and finally empathy; this entails the caring and individualized attention the staff provide to customers If the services being rendered are able to meet up with the customers' expectations in the five dimensions then the customers are satisfied and can be retained by the service provider, in our own case the MFBs.

Customer Retention
Customer retention comprises measures taken by business organizations to ensure persistent patronage of a product or service by customers over a long period of time (Gbolagade and Abubakar, 2018). Customer retention is also defined as the activities and actions business organizations take to reduce the number of customer defections (https://www.ngdata.com). According to Roking (2005), Customer retention involves measures adopted by organizations to minimize customer defections, which normally start from initial contact with a customer and continue throughout the entire lifetime of a relationship. The goal of customer retention policy is to help business organizations retain as many customers as possible, over a long period of time, mainly through customer loyalty and brand loyalty programmes ((https://www.ngdata.com). The relationship between the five service dimensions, customer satisfaction and retention can be depicted as follows: Figure 1 Source: Authors depiction, 2019 2.1.3 Microfinance Banks Microfinance Banks (MFBs) are financial institutions licensed by the CBN to provide credit, savings and other essential financial services that are needed by the economically active poor, micro, small and medium enterprises European Journal of Business and Management www.iiste.org ISSN 2222-1905(Paper) ISSN 2222-2839(Online) Vol.12, No.14, 2020 that cannot be efficiently served by regular commercial banks because their activities and volumes are too low to warrant the high cost of services by these big banks (Ibok and Udofor, 2012). According to Obokoh, Jegede, Akinlabi and Olajide (2012), the development objectives of the MFBs generally include to reduce poverty, empower women and more rural entrepreneurs, create employment, help existing business grow or diversify their activities, encourage the development of a new business. Abiola, (2012) agree that microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions. Microfinance is mostly used in developing economies where micro enterprises do not have access to other sources of financial assistance (Bashir et al, 2012). MFBs recognize poor and micro entrepreneurs who are excluded or denied access to financial services on account of their inability to provide tangible assets as collateral for credit facilities (Taiwo, 2012). As at 30 th September, 2018 the CBN has licensed a total of 882 MFBs out of which eight (8) are located in Kaduna North Local government area. Bashir, et al (2012) conducted a study on the effect of service quality on customer satisfaction in respect of MFBs customers in Kenya. The study revealed a positive relationship between service quality and customer satisfaction and by implication customer retention Ojo (2010) investigated the relationship between service quality and customer satisfaction in the Nigerian telecommunication industry and he also found positive relationship between service quality and customer satisfaction and retention.

Review of Empirical Literature
Ihaamie (2010) employed the SERQUAL model developed by Parasuraman et al, 1988 with five dimensions to examine the level of service quality, expectation and perception of customers about the Malaysian public services. The study discovered that among the five dimensions, customers perceived tangibility as the most important in service quality, customer satisfaction and customer retention.
Using the SERQUAL instrument, Kheng, Muhammad, Ramayah and Mosahab (2010) evaluated the impact of service quality on customer loyalty among bank customers in Penang, Malaysia. The findings of the study revealed that the service quality dimensions of reliability, empathy and assurance (in order of priority) play a significant role in customers' perception of service quality, loyalty and retention. Harr (1982) conducted an exploratory study of customer satisfaction of fine dining restaurants in in Singapore. The study discovered that the service dimensions of assurance, empathy and tangibles (in order of priority) are the most critical to customers' evaluation of service quality and by implication customers' satisfaction and retention. Ibok and Udofor (2012) analyzed the drivers and inhibitors with regard to customer retention by MFBs in Akwa Ibom State, Nigeria. The study found that among the five service dimensions, tangibility has the highest positive effect on customers'perception of quality service, customer satisfaction and retention. Kanyurhi (2013) evaluated customer satisfaction with the services of MFBs in Togo and the finding of the study revealed that the service dimension of responsiveness remain the most important determinant of customer satisfaction and retention.

Methodology 3.1 Research Design
The general objective of the study is to determine the effect of service quality on retention of customers by MFBs operating in Kaduna North Local government Area. To achieve this objective the survey research design was adopted. The survey was conducted by means of administration of questionnaires on respondents and collection of data using the cross-sectional method in which data was collected once during period of the study.

Population of the Study
The target population of this study includes customers of selected MFBs operating in the Kaduna North Local Government Area. The three selected banks have a total customer population of 25,000 (Kaduna North Association of MFBs, 2018).

Sample Size and Sampling Technique
Based on the formula given by Krejcie and Morgan, (1970) a sample of 378 was arrived at as follows: s = X 2 NP (1− P) ÷ d 2 (N −1) + X 2 P (1− P). s = required sample size. X 2 = the table value of chi-square for 1 degree of freedom at the desired confidence level (3.841). N= the population size. P= the population proportion (assumed to be .50 since this would provide the maximum sample size). d= the degree of accuracy expressed as a proportion (.05

Method of Data Collection
The instrument for measuring quality in service referred to as SERVQUAL, developed by Zethaml (1985:1988) was used in generating primary data for the study. The items in the instrument reflect five service quality areas, namely, tangibility, reliability, responsiveness, assurance and empathy measured on the five point Likert scale of "Strongly Agree" "Agree" "Undecided" "Disagree" Strongly Disagree". The level of customer retention due to quality service was also measured using the same five point Likert scale from "Strongly Agree" to "Strongly Disagree"

Method of Data Analysis
The study employed descriptive and inferential statistics in analyzing the data collected. The descriptive statistics was used in analyzing the demographic data of respondents. Inferential statistics in the form of multiple regression technique was used to determine the effect of quality service on customer retention. The dependent variable (customer retention) was regressed on the independent variable (service quality that comprises the five services dimensions of tangibility, reliability, responsiveness, assurance and empathy) using regression model as follows CR = αo + αtosXtos +αrelXrel +αresXres + αassXass+ αempXemp + ∂…

Factors Management
For easy data analysis, factor analysis was used for data reduction as well as structure detection. This is to forestall the challenge of data management and utilization, through the removal of redundant (highly correlated) variables. In all cases and on the basis of Kaiser's criterion (1958) of Eigen value >1, factors with Eigen value of 1.0 and above were selected.            For customer retention (CR) only one factor with eigen value of 2.996 was selected as it represents about 59.666% of the total variance within the variable. All the other factors have less than 1.0 eigen values and so were discarded with. In table 3.2, the factor CR5 was confirmed to be the chosen factor as it has the highest component score of 0.839.

Validity and Reliability of Research Instrument
The instrument of this research work, being adapted from SERVQUAL as developed by Parasuraman and Zethaml (1988) and modified to reflect customer retention contains 34 items divided into 6 sections. This was tested for reliability and validity and scored 0.89 on the Cronbach's Alpha scale (see Table 3.13). It is noteworthy to point out that the instrument had about 91% (0.911) Cronbach's Alpha score when standardized items are used.  The cross-tabulation of the age of the respondents and length of patronage revealed that the highest proportion of patronage comes from the above 50 age bracket especially over a period of 5 to 20 years with more than 50% of the age range. They constitute 54.26% of the entire respondents. Crosstab Table 4 The type of account operated by each respondent is categorized under four headings: Savings, Current, Deposit and others. when cross-tabulated with Age of respondents it revealed that bulk of respondents operate savings accounts; constituting about 58.33% of the entire responses. Likewise, the over 50 years age bracket constitute the bulk of the savings account operators (about 72%). Also people within this age bracket are the ones requiring specialized banking service as about 5% of them are the only utilizers of these kinds of services. Crosstab Gender and patronage was cross-tabulated to see the trend of gendered interest in community banking. Table  4.3 indicated that most women are new to community banking or rather men have longer period of patronage compared to women. Most of the female respondents (85.18%) are relatively new patrons of community banking compared to the male respondents (71.43%).
European Journal of Business and Management www.iiste.org ISSN 2222-1905(Paper) ISSN 2222-2839(Online) Vol.12, No.14, 2020 Crosstab Cross-tabulation of gender of respondents and account type operated revealed that 29 (54.17 %) of the female operate savings account while it is 56.52% of the male sampled.

Regression Results
In table 4.5, the multiple correlation coefficient R indicates that there is a slightly obvious relationship between the model-predicted and observed values of the dependent variable while the coefficient of determination, R 2 , indicates that only about 22.5% of the variation in customer retention is explained by the model. This indicates that other factors are responsible for 77.5% of the variability in customer retention.  Table 4.6 shows that the model accounted for just about a quarter of all variation although the significant value of the F statistics is less than 0.05; indicating that the variation explained by the model is not due to chance and is therefore considered significant. a. Dependent Variable: Customer Retention Tangibility of Service, Reliability, Responsiveness and Assurance seems to be less important predictors of Customer Retention by Micro Finance Banks, as they all have very low coefficients and they also contribute less to the overall model as implied by the corresponding low absolute standardized coefficients. Thus, all have no significant effect on Customer Retention. Empathy, however, has a very high effect on customer retention as indicated by the high standardized coefficient (B = 0.435) and a significant p-value (p = 0.000) that is less than 0.05. This could be as result of the overriding influence of cultural empathy, where everyone is a lookout for the other; sharing feelings, emotions, bereavements and joyous moments.

Conclusion and Recommendations
The outcome of the statistical analysis conducted in this study has shown that Customer Retention is influenced European Journal of Business and Management www.iiste.org ISSN 2222-1905(Paper) ISSN 2222-2839(Online) Vol.12, No.14, 2020 by several factors that fall outside normal apriori expectations. Tangible service may be deemed to be an essential ingredient in determining whether customers will remain committed to a particular brand or not, but it appears Micro-Finance Bank customers in the Kaduna area are less inclined to stay because of it; likewise for reliability, responsiveness and assurance. However, empathy is indicated as the major and only determinant of Customer Retention in Micro-Finance Banks in Kaduna metropolis. It will be safe to adduce that all the other factors without empathy will amount to naught in the estimation of the customers. One can have tangible service that is devoid of the understanding of the feelings of the customer or an assurance of getting served without due consideration for the channel of service delivery as it impacts the emotion of the customer.
In view of the foregoing the study recommends that MFBs in the study area should pay much attention on aspects of Empathy as follows: I. Adoption of policies and practices that make staff to render services to customers as individualized or personal products to them; II.
Show of more care by staff of MFBs in their interaction with customers; III.
Exhibition of high degree of respect by staff of MFBs in dealing with customers; IV.
Show of high degree of love by staff of MFBs to customers in handling all their issues; V.
Show of high degree of friendliness by staff of MFBs in all their interaction with all categories of customers.