THE IMPACT OF CURRENT FINANCIAL SERVICES ON A CUSTOMERS

EXPERIENCE IN DEVELOPING COUNTRIES (THE CASE OF MALAWI)

By Kondwani Barthuel Jabulani Manda
Background
The importance of increasing access to credit, savings opportunities and other financial services
as a means of reducing poverty has long been recognized in Malawi. The need for a
comprehensive strategy to deepen financial access in Malawi was a specific recommendation of
the Financial Sector Assessment Programme, conducted in 2007 by the Ministry of Finance with
support from International Monetary Fund (IMF). And this led to the project called Financial
Inclusion in Malawi (FIMA) established by the United Nations Capital Development Fund
(UNCDF) and housed at the Ministry of Finance which was aimed at developing a national
strategy for building an inclusive financial sector1.
Consequently, a comprehensive market study called Finscope survey2 done by FinMark
Trust, followed to understand the demand for financial services. Most importantly, the survey
was used as a tool to assess financial access in the country and to identify the constraints that
prevent financial service providers reaching the financially excluded. The research found that
only 1 153 809 people (19%) out of 15,447,500 people have access and uses financial services3.
The survey found that Malawi is a nation of savers because it was surprisingly ranked
high for a country with low levels of income when compared to the other nations with higher

The Financial Inclusion Malawi (FIMA is a United Nations Capital development Fund (UNCDF) and
Government of Malawi initiative to deepen and strengthen the Malawis microfinance sector so that access to
financial services reaches out to the vast majority of Malawians particularly in rural areas who are still outside the
formal financial sector. The initiative is about building an inclusive financial sector. FIMA provide grants to MFIs
and facilitates lines of credit to MFIs for on lending to the public. MUSCCO started collaborating with FIMA in
September 2009. FIMA has through UNCDF provided a grant of US$ 195,000 to MUSCCO for SACCO institutional
strengthening programs particularly focus sing on women membership in SACCOs which is still very low at 23% of
the total SACCO membership. Through FIMA, MUSCCO has also benefited from a line of credit extended by
CORDAID meant to T to boost up MUSCCOs lending capacity to SACCOs. www.uncdf.org
2
The FinScope survey is an individual based survey representative of the adult population (rich and poor,
urban and rural) which provides insights into how people source their income and manage their financial lives. It
looks at the use of, and demand for, financial products and services (formal and informal) and how factors such as
geographical access, the attitudes, behaviour, and quality-of-life of people impact on consumption patterns in
various financial market segments. www.finscopeafrica.com/
3
www.finmarktrust.org.za/

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levels of income. It further recommended that banks should seek the economically active but
unbanked people4.

Problem Statement
The FinScope survey indicates that there is still a great market potential for banking business in
Malawi with only 19% of the population having access and using banking services. It is with the
understanding that most banks have (ever since the information was released) embarked on
activities to ensure that they get the unbanked population. Examples of these Banks include First
Merchant Bank, Malawi Savings Bank, NBS Bank, Opportunity International Bank of Malawi
and many others. These activities include opening of new branches in places where they had
none, rigorous promotion activities such as advertisements etc. Apparently, acquiring customers
is no longer the biggest challenge for most banks, however, retaining customers is. Severn
(2012), argued that daily failures in customer management cost the Banks millions. These
failures range from slow services, poor after sales service, high interest rates, unresponsiveness
to customer queries, unfriendliness, e.t.c. Should we argue that Banks are more focused on
expansion than on services being offered? Why do customers bank with other Banks on top of
their initial Bank?
This, nevertheless, is not to suggest otherwise. Muyeed (2012) argues that Commercial
banks assaulted by the pressures of globalization, competition from non-banking financial
institutions, and volatile market dynamics are constantly seeking new ways to add value to their
services because financial services compete in the marketplace with generally undifferentiated
products , service quality becomes a primary competitive weapon (Stafford, 1996). Currently
technological changes are causing banks to rethink their strategies for services offered to both
commercial and individual customers (Hossain and Shirely, 2010). However, this does not
explain the market response to the changes in quality of services offered. Do Banks retain
customers because of a service being offered or it is because of the quality of the service being
offered?
A key aspect in customer satisfaction is the way a customer can get satisfied or
dissatisfied with a companys service. If a company wants to satisfy its customers the first

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problem it needs to solve is what it is that satisfies customers and, equally important, what it is
that makes customers dissatisfied with the company and its products and services. Whether
customers are satisfied or not, depends on the balance between customers expectations and
customers experiences with the products and services. When a company is able to lift a
customers experience to a level that exceeds that customers expectations, then that customer
will be satisfied.
Because customers have ever increasing expectations it is necessary for companies to
continuously improve their quality and hence customers experiences with the company. The
issue is what should be improved to keep the customers satisfied. Customers experience is not
just one simple aspect of a company but a whole range of aspects. Some of these aspects are
concerned with the way customers experience the company itself, some are concerned with the
way customers experience the physical product and, finally, some are concerned with the way
customers experience the service the company offers.
The role of research5 in the growth of Malawis financial institutions cannot be
undermined. Thus, it has played a tremendous role in helping financial institutions grow their
market by providing critical information regarding the banked and the unbanked population. But
what has been the role of research on service offered and that of a customer experience with
these services?
The banking population has proved that Malawians love to save their money, and the fact
that banks have grown their businesses to carter for almost everyone even those that were
unbanked is very encouraging, nevertheless, one still wonders whether the current financial
services are geared towards satisfying customer needs or they are there to serve the interest of
these financial institutions.
While most financial institutions are excited about the information Finscope survey
brought, particularly on growth opportunities, very little has been done on customer satisfaction6,
resulting in Banks having large customer base with minimum number of customers actually

This complements management functions of planning and control

On 21st April 2010, The Nation Newspaper carried an article whereby Consumers Association of Malawi
(CAMA) was going to stage a demonstration against high interest rates by Banks

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banking with them (thus Banks are registering more customers than the number of those that do
bank or access any other services provided by the Banks) 7. Can we conclude that Banks in
Malawi have unappreciative customers or that Banks are failing to satisfy their customers?
It is a common knowledge that Banks have to increase their profits in order to create new
markets, to protect and develop their market shares and to survive in the face of intense
competition and demographic chance levels. However, has the Banks wish to increase profit
blinded them of their responsibility to satisfy customers? Has profit making become a priority
over customer satisfaction? How do Banks keep up with the ever increasing number of
customers and potential customers in the face of intense competition from various financial
institutions? How do banks comprehend the fact that differentiation of population in the number
and composition affect quality and attribute of customer who benefits from banking services
(thus change in demographic structure)? What determines profit, the customer or the number of
branches among other factors8?
OBJECTICTIVES OF THE STUDY
Main Objectives
The main objective is to demonstrate the impact of current financial services on customers
experience with the service provider.
Specific Objectives
1. To analyze the impact of auto teller machines (ATM) on customer acquisition and
retention
2. To analyze the impact of interest rates on customer loyalty to a financial institution
3. To analyze the impact of service hours on customer needs.
4. To analyze the impact of number of branches on customer satisfaction
5. To demonstrate how financial institution can drive revenue through offering quality
services.
Hypotheses
To investigate the above objectives the following null hypotheses will be tested;

There are several other factors that determine profit including market forces, environmental factors, cultural
factors e.t.c. but these are not relevant for this study

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i.

The presence of auto teller machines in every district affects the retention and number of
customers of the Bank

ii.

Customers, apart from getting the desired service from a financial institution, they also
focus on their return interests by virtue of banking with a particular Bank.

iii.

Service hours open to assist customers proves Banks commitment to satisfy customer
needs

iv.

A Banks many branches is not a panacea to customers needs but tools for improving an
institutions productivity

v.

Banks can drive revenue through offering quality services because this differentiate their
homogenous products

Justification of study
Muyeed (2012) argues that, Banks that excel in quality service can have a distinct marketing
edge since improved levels of service quality are related to higher revenues, increased cross-sell
ratios, higher customer retention (Bennett and Higgins, 1988), and expanded market share
(Bowen and Hedges, 1993). Therefore, banks should focus on service quality as a core
competitive strategy (Chaoprasert and Elsey, 2004).

Knowledge of Consumer characteristics plays an extremely important role in many

marketing applications such as defining the market for the product or service, or deciding on the
appropriate techniques to employ when a company targets a certain group of consumers
(Solomon, 2009)
The study of the impact of current financial services on customers experience in
developing countries is necessary to fill in the gap that has been created by FinScope survey. The
survey does not address any information regarding a customers experience with a service
provider nor does it question the services provided, but rather emphasizes on the need and how
to get the unbanked population so that inclusive financial sector is created. Understanding
consumers is good business. Thus basic marketing concept states that firms exist to satisfy needs.
Consequently, a marketer should incorporate knowledge about consumers into every facet of a
market plan (Blackwel RD, et al, 2006).
It is the purpose of this paper to help remove the mentality of companies that
institutionalizes customer churn by focusing more and more on acquisition but ignoring and
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milking existing customers (Thomas S. O 2011); which, consequently, affect the retention of
customers thereby losing them to other players in the market.
Furthermore, the paper intends to show that a lot is at stake e.g. brand loyalty, if
corporations continue to focus on success and profit rather than customer and the service being
offered, for these are vital factors that a company need if they are to grow profitably.
It is the conviction of this paper that Banks are losing millions of Kwachas through
customers that defect to other Banks, or are banking with several banks thereby hindering profits
and growth prospects of these financial institutions.
Literature Review
The report of FinScope Survey addresses key issues that need to be considered by any firm that
wants to grow its market share, for instance, the statistics about the banked and unbanked
population. It further puts into perspective the nature of peoples lives (housing, food etc). Such
knowledge should provide firms with a basis of understanding their target market (customers)
and hence helping them to offer competitive services or improving the quality of service so that
it meets the needs of a customer. Nevertheless, the report does not address the experience of
existing customers over the services being offered. And this could express why the level of
indirect access to banking is high in Malawi with 22% of banked adults making use of bank
accounts that are not registered in their names. Indirect banking access mainly occurs through
the use of the account of a spouse, parent or child although the bank accounts of neighbours and
friends are often used in rural areas. 9
Managers have been implored to consider their customers, and have consequently
developed the customer satisfaction measurement. However, application of customer satisfaction
measurement has fallen short of its promise as Dakta (1994) has observed, thus many
organization have set goals to meet customer needs but only a few have rigorously measured
their customer satisfaction. He further noted that most companies that measure customer
satisfaction may not act on the results. And this is because satisfaction data sometimes does not
correlate highly with organization performance, as indicated by customers who say they are
satisfied but buy elsewhere (Jones and Sasser, 1995). However, does this justify an institutions
failure to meet customer needs? Should customers suffer because they are not able to eloquently

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express their opinion about a particular product? Both Dakta (1994) and Jones et al (1995) fail to
address the key issue of how questionnaires should be formulated to capture the real sentiments
of customers.
Mendes (2011), argues about retail banking citing that the top twenty percent of
customers in retail banks generally account for more than ninety percent of a banks profits,
however, he does not mention how he comes about with these statistics. This maybe the case in
Australia but it definitely is not the case here in Malawi where banks make profits only through
service charges.
Muyeed demonstrates that the central issues involving the meaning of service quality
have been well documented (Cronin and Taylor, 1992; Parasuraman, Berry, and Zeithaml,
1991b; Babakus and Boller, 1992; Carman, 1990). Of interest here are two aspects of service
quality measurement; (1) the number of dimensions that constitute service quality and (2) the
operationalization of the measurement. Previous researchers have been looking at the linear
relationship between service quality and satisfaction judgments. In recent studies on satisfaction
judgments, it has been suggested that the relationship should be in a non-linear form (Ding,
2004). According to Taylor (1997), there is evidence that suggests that evaluation of satisfaction
should involve a curvilinear or higher order form as well as an interaction effect (Taylor and
Baker, 1994). This has been confirmed by Oliva et al. (1992) who stated that the satisfaction
function should not be in the linear form. A study by Edris (1997) on quality for business
customers among Kuwaitis found that local ownership is one of the determinants for bank
selection.
There are many other researchers who concluded that service quality is the antecedent to
satisfaction (Ahmad and Kamal, 2002; Cronin and Taylor, 1992; Yavas et al., 1997). Hence in
this research, the question of which one is the antecedent will be studied. Using service quality as
the antecedent to satisfaction is more logical and that why it has been taken into consideration.
This is because satisfaction is an important goal to be achieved by bank marketers and if the
banks want to increase satisfaction, they can do it through service quality (Goode et al., 1996).
However, the only disadvantage with this information is that it does not capture the Malawian
market which is basis of this paper.

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Research Methodology
This is a study based mainly on the primary data collected through scientifically developed
questionnaire. The questionnaire will be personally administered on a sample size of 140, chosen
from seven branches of a bank, two from the southern part of Malawi, one from the eastern
region, two from cetral region, and two from northern region.

The questionnaire will be designed on the basis of the study of scholars such as Parasuraman et
al. (1985), Hossain and Shirely (2010). Parasuraman et al. (1985) and Hossain and Shirely
(2010) identified eleven dimensions of service quality which are reliability, responsiveness,
competence, access, courtesy, communication, credibility, security, competence, understanding
the customer and tangibles. Upon considering the above studies, the paper has adopted Muyeeds
(2012) four dimensions (reliability, competence, tangibles and empathy) which cover the 14
parameters/scale (Table 1). The degree of perception of customers on the parameters is
quantified by using a 5-point Likert scale. However, customer demographic information will be
included in the questionnaire.
Table 1
Service quality dimensions
Reliability

Competence

Tangibles

Empathy

14-item scale/parameters
1. Customer support
2. Good manners and hospitality
3. Maintaining of customer grievances
4. Imposing of service charge
5. Safety of customers' investment
6. keep confidentiality of account and
transactions
7. Various kinds of service offered
8. Reputation of the bank
9. Infrastructure facilities like parking, ATM
etc
10. Banking Network
11. Modern equipment and dcor
12. Easy to operating account
13. Convenience business hour
14. Providing prompt information to customers

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Time- frame/table
Table 2: Time-plan for completion of research report by
The project is expected
to be finished within
sixty days

date

date

date

date

03-05

16-06

13-07

21-06

26-07

date

Date

Date

The final paper will be

ready by 28 June 2012
Finalise proposal

25-04

Gain approval

01-05

Gather data
Do data analysis
Write report
Finalise report

31-07
07-08

21-08
05-09

Chapter arrangement
CHAPTER ONE: INTRODUCTION
1.1 Background
1.2 Problem Statement
1.3 Main Objective
1.3.1 Specific Objective
1.4 Hypotheses
1.5 Justification of the study
1.6 Literature Review
1.7 Research Methodology
1.8 Time Frame

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction
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2.1 Financial Services in Malawi

2.1.1 Insurance
2.1.2 Banks
2.1.3 Micro Finance
2.1.4 Credit Unions
2.1.5 Investment Funds
2.1.6 Government Sponsored Enterprises
2.2 Market of Products
2.3 Customer Services
2.3.1 Quality of Services
2.3.2 Service Quality
2.4 Customer Care
2.5 Marketing Mix
2.5.1 Four Ps
2.5.2 Extended Marketing Mix
2.6 Marketing of Services
2.6.1 People
2.6.2 Physical Evidence
2.6.3 Processes
2.6.4 Four Cs Model
2.7 Chapter Summary
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction
3.1 Description of the Sample Frame and Size
3.2 Target Group
3.2.1 Sampling Methods
3.2.2 Sample Size
3.3 Data Collection Methods
3.4 Data Analysis
3.5 Secondary Data
3.6 Research Ethics
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3.7Chapter Summary
CHAPTER FOUR: RESULTS AND DISCUSSIONS
4.0 Introduction
4.1 Current Financial Services
4.2 Customers Perception of Current Services
4.2.1 Internal Customer
4.2.2 External Customer
4.3 Customers Expectations
4.3.1 Internal Customers
4.3.2 External Customers
4.6 Other Observation
4.7 Chapter Summary
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
5.1 Conclusion
5.3 Recommendation
5.4 Further Areas of Study

References
APPENDICES

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