A Study on the Influence of Service Quality of Microfinance Institutions on Customer Satisfaction: A Case of Microfinance Institutions of Butajira City of Ethiopia

Aravind Kumar Soudikar, Ato. Adugna Belay


The primary purpose of this project paper was to examine the influence of service quality on customer satisfaction with special reference to Butajira city microfinance institutions. To attain this objective self-administered questionnaire was designed and distributed to 197 customers of the three microfinance institutions out of which 184 questionnaire (93.4%) were returned and used for analysis.  This study used the SERVPERF instrument developed by Cronin & Taylor (1992) to measure customers’ perception on the quality of service delivered by each microfinance institution and the level of customer satisfaction. The sampling process employed in this research was stratified sampling. Stratified sampling was chosen because the samples were selected from three different microfinance institutions. The technique employed in selecting the client respondents was random sampling technique. The selection was made randomly from those who were there for the service. The criterion for selecting sample respondents was that they should at least do business with the microfinance for a minimum of two years. The data collected has been analyzed with the help of Microsoft Excel Software Package and SPSS 20.0. Pearson correlation was conducted to assess the relationships between the service quality dimensions and customer satisfaction. The results show a positive statistical significance between the five dimensions of service quality (Tangibles, Reliability, Responsiveness, Assurance and Empathy) and customer satisfaction. Responsiveness dimension is commonly succeeded at all the three microfinance institutions. Reliability dimension is above the average of the scale in Omo but it is lower at Agar & Meklit microfinance institutions. Assurance is the third important dimension at Agar microfinance while it is below the average of the scale at Meklit and Omo microfinance institutions. The mean score of customer satisfaction for each microfinance institutions is lower. Accordingly, most of the respondents of the three microfinance institutions are dissatisfied with the services rendered by the institutions. Therefore, in order to stay competitive, all the three microfinance institutions need to improve their service quality especially in the identified areas or dimensions.

Key Words: Marketing mix, Service quality, Customer satisfaction, Service quality models, Microfinance institution

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ISSN : 2251-1555