ABSTRACT

 Globalization has brought about changes in the financial industry therefore markets with fast changing technology must make things happen. Customer’s satisfaction and innovation are interrelated in that banks cannot best satisfy their customers if they fail to embrace innovation in their operations. The main objective of the study was to determine the effect of Innovation on customer’s satisfaction of micro finance in Tubah sub division. Specifically, the study investigated the effect of product innovation, process innovation and service innovation on customer’s satisfaction of micro finance institution in Tubah sub division. The target population included all customers of micro finance banks in Tubah. The study sample was drawn from the population using stratified random sampling technique with 60 respondents from different micro finance banks in Tubah. The study used primary data. Data analysis was carried out by use of descriptive statistics and inferential statistics that involved the use of regression analysis to determine the strength of association between the variables. The findings revealed that innovation has a significant effect on customer’s satisfaction and recommended that banks should adopt innovation to enhance growth, competition, increased productivity and profits and thus better satisfy their customers. 

Keywords: Financial Innovation, customer’s satisfaction, microfinance institution, Tubah sub division.

CHAPTER ONE

INTRODUCTION

1.1 Background of study                                

In recent years, the financial industry has witnessed a rapid transformation fueled by technological advancements and innovation. These changes have had a profound impact on various sectors, including microfinance institutions (MFIs). MFIs play a crucial role in providing financial services to underserved populations, particularly in developing economies. With the advent of financial innovation, MFIs have the opportunity to enhance their service offerings and improve customer satisfaction. This paper aims to explore the effect of financial innovation on customer satisfaction in the context of microfinance institutions. Microfinance institutions have traditionally focused on providing basic financial services such as credit, savings, and insurance to individuals who lack access to formal banking services. Aghanya &Ayadi(2020). However, the emergence of financial innovation has expanded the scope of services offered by MFIs. Financial innovation encompasses a range of technological advancements, including mobile banking, digital payments and alternative credit scoring methods. These innovations have the potential to revolutionize the way MFIs operate and interact with their customers. With improved accessibility, affordability, and convenience, financial innovation can significantly impact customer satisfaction.  Zeller &Sharma (2018).

Financial innovation refers to the development and implementation of new financial products, services or process that aim to improve efficiency, accessibility and affordability of financial services in the contexts of micro finance institutions, financial innovation can take various forms, such as the introduction of new mobile banking services Digital lending plate forms, or new credit products. These innovations have potentials to enhance customer’s satisfactions experience, increase access to finance and ultimately improve customers satisfaction (Christian et Al, 2014) Customer satisfaction is a critical factor for the success and sustainability of MFIs. Satisfied customers are more likely to remain loyal, recommend the institution to others and used a wide range of product and services. Therefore, understanding the factors that influence customers satisfaction in the context of financial innovation is essential for MFIs to design and implement effective strategies to attracts and retain customers (Khan et Al 2010).

One of the key advantages of financial innovation for microfinance institutions is the ability to reach a wider customer base. Traditional banking methods often require physical presence, which can be a significant barrier for individuals living in remote areas. Financial innovation, particularly the use of mobile banking and digital platforms, enables MFIs to extend their services to previously underserved regions. By providing access to financial resources, MFIs can empower individuals and communities, fostering economic development and reducing poverty. The increased accessibility offered by financial innovation is likely to enhance customer satisfaction by meeting the needs of a larger customer base. Chakravarty (2019) financial innovation also enables microfinance institutions to provide more tailored and customized products and services to their customers. With the use of advanced analytics and alternative credit scoring methods, MFIs can better assess the creditworthiness of borrowers and offer personalized loan products. Armendariz & morduch (2018). This not only improves the efficiency of loan processing but also reduces the risk of default. Additionally, digital platforms allow MFIs to collect and analyze customer data, enabling them to understand customer preferences and behavior more effectively. By offering personalized solutions, MFIs can enhance customer satisfaction and build long-term relationships. Ojasalo J. & Ojasalo, K. (2018). 

Financial innovation has also revolutionized the payment systems used by microfinance institutions. Digital payment platforms, such as mobile wallets and online banking, offer customers a convenient and secure way to conduct financial transactions. These platforms eliminate the need for physical cash, reducing the risk of theft and improving overall transaction efficiency. Moreover, digital payments enable customers to make transactions at any time and from anywhere, enhancing convenience and accessibility. By providing efficient payment systems, MFIs can enhance customer satisfaction and improve the overall customer experience. Bateman & Wood (2018). Financial innovation also opens up opportunities for MFIs to improve their customer service through enhanced communication channels. Digital platforms enable MFIs to communicate with customers in real-time, providing timely updates, alerts, and personalized notifications. Additionally, the use of chat bots and artificial intelligence-powered customer service tools can enhance the efficiency and responsiveness of customer support. By leveraging these technologies, MFIs can provide prompt and personalized assistance to customers, addressing their queries and concerns effectively. Improved communication channels contribute to building trust and strengthening the relationship between MFIs and their customers, ultimately leading to higher levels of customer satisfaction.

While financial innovation offers numerous opportunities for microfinance institutions to enhance customer satisfaction, it is important to consider potential challenges and risks. One of the key challenges is ensuring the security and privacy of customer data in the digital era. With the increased use of digital platforms and data analytics, MFIs must prioritize data protection and implement robust cyber security measures. Additionally, there may be a digital divide among customers, with some individuals lacking access to the necessary technology or digital literacy skills. MFIs need to address these disparities to ensure that financial innovation benefits all customers and does not exclude marginalized populations. Furthermore, regulatory frameworks and policies need to keep pace with financial innovation to ensure consumer protection and maintain the integrity of the microfinance sector. Several studies have examined the relationship between financial innovation and customer satisfaction in the banking sector. However, there is limited research specifically focusing on the fill this gap in the literature and provide valuable insights for MFIs operating in Tubah sub division to enhance their customer satisfaction levels through innovative financial solutions.

The research will adopt a mixed-methods approach, combining quantitative surveys and qualitative interviews with customers of selected MFIs in Tubah sub division. The quantitative surveys will gather data on customers’ perceptions of financial innovation, satisfaction levels, and demographic characteristics. The qualitative interviews will provide deeper insights into customers’ experiences, preferences, and attitudes towards innovative financial products and services offered by MFIs (Dzansi et al., 2017).

1.2 Problem statement

Cooperatives banks in Cameroon face stiff competition, first within themselves and secondly from non-banking financial institutions like ORANGE and MTN and are constantly seeking new ways to add value to their services. In an increasingly competitive market where a rising number of players are spoiling customers for choices, banks must identify the factors that are best able to attract new customers and retain the existing ones

In Cameroon cooperatives, banks focused more on lending which is the most profitable function of a cooperative bank. As a result, less attention has been put on innovation (Ngu, 2007). Nowadays, to be able to survive the prevailing intensive competition in the banking industry, innovation must be given great importance especially as banks offer similar products in a competitive environment. To keep customers in the highly competitive and changing market arena, most companies are emphasizing maintaining and expanding their customer base by using customer acquisition marketing strategies for survival aimed at maintaining and enhancing the relationships with customers (Krishnamoothy and Srivasan, 2013). It must however be noted that the livelihood of any business is its customers. The profit comes from sales minus cost. Sales must be realized first before the cost becomes relevant (Xu, et al. 2002). Customers decide on sales based on their perception of product and service quality determines profits, and customers alone define and determine what that quality should be.

In every business organization, effective implementation of widespread customer satisfaction strategies ensures positive returns on investment with minimal wastage of resources and cost reduction. Cooperatives lose the majority of their customers because the service rendered to them is not satisfying and sufficient, so they tend to switch from one service provider to another.

It is based on the above problem that the researcher decided to find out the effect of innovation on customer satisfaction of micro finance institution in Tubah sub division

1.3 Main Research Objectives

1.3.1 Main Objectives

To investigate the impact of financial innovation on customer satisfaction in microfinance institutions in Tubah sub division.

1.3.2 Specific objectives

1. To assess the effect of product innovation on customers satisfaction in micro finance institution in Tubah sub division.
2. To examine the effect of process innovation on customer satisfaction in micro finance institution in Tubah sub division.
3. To investigate the effect of service innovation on customer satisfaction in microfinance institutions in tubah sub Division.

1.4 Research Question

1.4.1 Main Research Question

What is the impact of financial innovation on customer’s satisfaction of micro finance institution in Tubah sub division?

1.4.2 Specific research questions

1. What is the effect of product innovation on customers’ satisfaction of microfinance institutions in Tubah sub division?
2. What is the effect of process innovation on customer satisfaction of microfinance institutions in Tubbah sub Division?
3. What is the effect of service innovation on customer satisfaction of microfinance institutions in Tubah sub Division?

1.5 Hypothesis

H1: Products innovation has no significant effect on customer satisfaction in micro finance institutions in Tubah sub Division.

H2: Process innovation has no significant effect on customer satisfaction in micro finance institutions in Tubah sub Division.

 HO3: Service innovation has no significant effect on customer satisfaction in micro finance institutions in Tubah sub Division.