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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
Qualitative Research on Customer Retention in Microfinance
Banks of Pakistan
JUNE 2011
VOL 3, NO 2
Dr. Rehman Gul Gilal (Corresponding author)
Assistant Professor, Department of Business Administration
Shah Abdul Latif University, Pakistan.
Soomro Rahim Bux
Lecturer, Department of Business Administration
Shah Abdul Latif University, Pakistan.
Gilal Naeem Gul
Lecturer, Department of Business Administration
University of Sindh (Mirpurkhas Campus)
Abstract
This paper presents the framework for customer retention in microfinance banks. The paper
integrates the two relatively new disciplines; microfinance and relationship marketing. Today,
microfinance which is often viewed as the tool to fight against poverty, is facing the numerous
problems, Customer dropouts is one of them. This problem is of such severe in nature, that it
threats the very existence of microfinance. To provide solution, a theoretical framework that
helps microfinance banks to retain its most profitable customers is developed. Phenomenological
philosophy and strategy of case study was adopted. Both open and closed end questionnaires
were developed and administered from the various categories of respondents. In addition to
quantitative analysis, a qualitative, issue-based analysis of different issues; such as customer
selection and screening process, needs of customers and financial products, group lending,
employee turnover and marketing in microfinance banks. Finally on the basis of results, a
conceptual customer retention model for microfinance banks was developed.
Keywords Microfinance Banks, Customer Dropouts, Customer Retention Framework.
1. Introduction
The microfinance sector in Pakistan has mushroomed during the last decade. Today, number of
microfinance organizations is operating in country. The sector has shown mixed growth and
performance results. Though, generally successful but almost entire microfinance sector plagued
with customer dropouts particularly early customer dropouts. For example, one of the leading
microfinance institutes is also facing the same problem. According to Asian Development Bank
reports the customer retention rate during 2005, 2006 and 2007 for the said institute was around
27%, 52% and 65% respectively. (Figure 1) The bank officials argue that a low customer
retention rate does not affect its organization much since it unable to generate customer deposits.
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