INFLUENCE OF GROUP LENDING STRATEGY ON CUSTOMER RETENTION IN MICRO FINANCE BANKS IN NAIROBI COUNTY, KENYA
Abstract
The purpose of the study was to establish the influence of group lending strategy on customer retention in micro finance banks in Nairobi County, Kenya. The population for the study was drawn from the microfinance banks operating within Nairobi County and licensed by the Central Bank of Kenya. The target population was 79 comprising of top level managers, middle level managers and lower level managers drawn from the 13 MFBs in Nairobi county. The researcher used the questionnaires to collect primary data from the respondents as research tools. The data was analyzed with the help of SPSS. The findings indicated that there was a notable relationship between the independent variable and dependent variable with a strong positive a correlation coefficient of 0.788. Therefore, it was concluded that free will own selection, progressive lending, flexible social collateral and sequential lending greatly need to be enhanced to boost customer retention in the MFBS in Kenya. The study recommended that there is need to allow members to switch collateral savings from one member to another to minimize customer attrition. The study recommended that there is need for the compulsory savings for the members that determine allowable loan mounts to reduce customer attrition. The study recommended that members need to freely do peer screening before being allowed to borrow. The MFBs can be encouraged to carry out peer selection as a way of minimizing customer attrition and members of groups can carry out self-risk profiling in determining loan amounts and when to be disbursed to members. The MFBS should have adequate social structures which can encourage member unity. The study recommended that MFBs can carry out peer monitoring by grouping members into small borrowing pools to create a sense of competition in managing good repayment record that result in reduced attrition. The MFBS should have a credit policy to cover security requirement for group members provided that other loan requirements are fully satisfied. There is need to have adequate acquisition of relevant information; social sanction and peer pressure in case on loan default to reduce customer churn.
Key Words: Free-Will Own Selection, Flexible Progressive Lending Strategy, Flexible Social Collateral Strategy, Sequential Lending Strategy, Customer Retention
CITATION: Ambunya, G., & Moronge, M. (2019). Influence of group lending strategy on customer retention in microfinance banks in Nairobi County, Kenya. The Strategic Journal of Business & Change Management, 6 (2), 1902 –1918.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1227
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