PROJECT TOPIC- EFFECT OF CUSTOMER’S PERCEPTION OF BANK LOAN ADMINISTRATION ON CUSTOMER SATISFACTION IN NIGERIA-A STUDY OF SELECTED UNIVERSITIES’ STAFF IN THE SOUTH-EAST
This study examined the effect of customers’ perception of bank loan administration on customer satisfaction in Nigeria with focus on selected Universities’ Staff in South-East-Nigeria. The objectives of the study are to examine the effect of customers’ perception in the areas of bank loan products, pricing, documentation, promotion, supervising and monitoring on customer satisfaction with a view to improving bank loan service delivery in Nigeria. Survey research design was utilized for this research and primary data collected through five- point likert scale questionnaire administered on 380 sampled loan customers made up of teaching and non-teaching staff in the selected Universities. The sample size was determined through Topman’s formula. Cronbach’s Alpha was used to test the reliability of the research instrument. Data collected were subjected to statistical analyses with the adoption of descriptive and analytical techniques. Means and standard deviations were used to analyze the research questions, while Correlation Analysis was adopted to interpret the effects of the variables of interest. The study results showed that there is strong positive correlation between customers’ perception of bank loan administration-loan products, pricing, documentation, promotion, supervising/ monitoring and customer satisfaction. This implies that customer’s perception of bank loan administration has significant effect on customer satisfaction. Major recommendations made include; banks should continuously liaise with customers to determine the appropriate loan products that customers will perceive to meet their needs in order to achieve customer satisfaction; banks should adopt friendly and affordable pricing policies that would encourage loan customers; they should adopt modern and best practices in the monitoring and supervising of customers’ investments; among others. This study has implications for the formulation of customer service satisfaction policy in commercial banks in Nigeria as a lead way to increase the effectiveness and efficiency of loan administration in the banking sector in Nigeria.
- Background of the Study
Marketing is one of the essential ingredients employed by organizations to achieve their never-ending search for survival, growth, and profits. Stanton (1991) sees Marketing as a system of interrelated activities designed to develop price, promote, and distribute goods and services to groups of customers. In the words of Kotler (1984), Marketing is the business function that identifies current unfulfilled needs and wants, defines and measures the magnitude and target markets the organization can best serve, decides appropriate products and services to serve these markets.
Thus, marketing serves as a link between society’s needs and its pattern of response. It is whole business seen from the point of its final result; that is from the customer’s point of view upon which satisfactory service delivery will be achieved. Service delivery is all about consumers receiving market offerings (goods and services) at the right or acceptable price, quality, location and time for consumption from a business organization.
The ability by which this service delivery meets up the expectations of customers is referred to as satisfactory service delivery. But the determinant whether Firm’s service delivery meets up with customer’s expectations or not for customer satisfaction determination lies heavily on the consumers’ perception. It is often said in marketing that customer perception is more than reality.
Perception is the process by which an individual selects, organizes and interpretes marketing stimuli into meaningful and coherent picture of the world ( Schiffman and Kanuk,1987). Perception deals with” how we see the world around us” (Ozo, 2007). A stimuli is unit of input to any of the senses and marketing stimuli generally, refers to product, price, promotion and place. Organizations, therefore, put in place various marketing strategies to achieve satisfactory service delivery as well as overall corporate objectives ( profit) .
Any activity that adds value to customer needs will inevitably attract the customers’ interest, satisfaction and consequently creates customer loyalty. It will not only create and sustain customer satisfaction, but will enhance customer experience, build and sustain relationship and enhance customer engagement and commitment to the market offering and brand.
The reward of such is not only profitability but also the availability of community of happy and contented customers (Ogba.2012). Satisfactory Service is all about responsiveness and timely delivery of service, quick and prompt resolution of customers’ complaint, easy access to services, staff – customer friendliness, among others. Customer service is an ingredient of improving service quality and service quality has strong relationship with customer satisfaction (Sara, 2013).
Customer satisfaction therefore is a measure of product or service quality. If service quality meets customer expectations and needs, then customer satisfaction will be achieved, but if it does not, then customer satisfaction will not be achieved. It is not surprising that unsatisfied customers are often the cause of negative word- of- mouth communication as they report negative impressions to other customers ( Oliver,1999; Lewis,1991; Newman,2001) in (Ogba,2012). Customer satisfaction in the banking industry has become a very critical issue as it is being conceived as the determinant of banks’ survival.
Banks are key financial institutions in the service industry that operate in the economy by bridging the gap between the surplus and deficit economic units. One of the ways the banks do this is through lending to its customers, those who are actively engaged in exchange relationship with the banks; that is current consumers ( Anyanwu, 1999). Banks’ lending, whether on short, medium or long term, constitutes the major risk assets of the industry in Nigeria.
Lending in banks are in form of loans, over-drafts and advances to individuals, business organizations as well as government to enable them embark on developmental activities as a means of aiding their growth in particular or in contributing towards the economic development of the country in general. The customer may be in need of fund for various purposes which may spread through new capital venture bridging, farming, contract jobs and other business expansion, among others.
Olokoyo (2011) puts it succinctly: a loan or credit facility refers to a contractual promise between two parties where one party, the creditor agrees to provide a sum of money to a debtor, who promises to refund the said amount to the creditor either in one lump sum or in installments over a specified period of time. The agreement may include provision of additional payment of rental charges on the fund advanced to the borrower for the time the funds are in the hands of the creditor.
This process of developing and delivering loan includes product (different types of loan), documentation(application process, processing, approval, guarantors demand, and other security requirements), pricing (interest charges, administrative charges, method of payment}, promotion (advertising, sales promotion, personal selling, publicity), monitoring and supervision (spot checks, audited account records) among others.
In recent times the process of granting loans and advances by banks has generated concerns among customers and other stakeholders in the industry. There have been complaints on the loan administration such as unnecessary delays in processing of applications, arbitrary charges on interest, among others. These reactions have resulted to various perceptions held by bank loan customers.
Since Customer perceptions have been defined as worldwide verdict of customers in relation to how superior a service is, which can be affected by a number of factors (Parasuraman, Zeithaml and Palmer,1988; Surechander, Rajendran and Aantharaman, 2002), customer evaluation of services (such as loan services) go a long way in determining the level of satisfaction or dissatisfaction of service provided.
These concerns spread across individual customers, such as civil servants, small- scale traders, young entrepreneurs and corporate groups. The products, prices, promotion and distribution processes of bank loan services have also been criticized, thus creating problems in customer satisfaction. These customer service delivery indices constitute the parameters through which satisfaction is measured.
Basically, the service industries survive on provision of satisfactory customer service, which means the manner customers are attended to by service providers and the way the service was given to them (Sara, 2013). When customers do not get the desired services required from their customer-banks, they seek for better services elsewhere. These therefore, constitute delay in achieving the purpose for which loans are sought.
The challenge in customer service satisfaction in banks therefore, is how to blend the 7 P’s of marketing-product, price, promotion, place, people, process and physical evidence in order to attract and maintain customers through satisfactory value creation. Banks as one of the service industry that offer credits in form of loans to customers are posed with the challenges of developing and delivering loan services that will attract and maintain customers. Through these loan services, the banks expect to achieve high customer value perception and maximum return on investment.
It is against the above highlights that this study examines customers ‘perception of Bank loan administration with a view to assessing the effect on the customer satisfaction in commercial banks in Nigeria. An overview of the possible gaps will unravel the true position and would enable the researcher come up with concrete suggestions and recommendations which would serve as vignettes for business growth in the Nigerian banking industry.
PROJECT TOPIC- EFFECT OF CUSTOMER’S PERCEPTION OF BANK LOAN ADMINISTRATION ON CUSTOMER SATISFACTION IN NIGERIA-A STUDY OF SELECTED UNIVERSITIES’ STAFF IN THE SOUTH-EAST
1.2 Statement of the Problem
Loan service is one of the major sources of revenue to banks but delivering of loan services that will satisfy customers is a challenge to them. Banks’ performance is also measured by the level of satisfaction derived by its customers from loan services in the midst of competition in the industry. Banks in Nigeria, therefore, are faced with the onerous task of survival which compels them with the task of developing strategies to win, satisfy and retain more loan customers and at the same time make profit.
This situation has brought about undue pressure to the banks and loan administration in particular. To satisfy customers’ tastes in today’s changing society is no longer easy which is marketing focus. Thus, it is not disputable that marketing stimuli are used to satisfy customer’s taste in order to survive in competitive business environment. In view of this reality, banks can only make profit when customers’ tastes are satisfied and when loans granted to customers are repaid with interest in due time.
In delivering loan services in the face of this competition, as a way of survival, banks adopt various processes in order to secure their investment (loans) and make profit but such processes have been seen to generate concerns and various perceptions which seem to whittle down the expected satisfaction of their customers(Onwuameze,2013). The processes employed by banks include, adoption of multiple loan products, intense promotional tactics, rigorous documentation, delay in the processing and release of approved funds, high level pressure on customers for payment without any consideration on the investment made with the loan, high interest charges, among others.
The banks engage in these processes believing that they will secure their investment and yield maximum profit whereas the actions are assumed to bring about negative perception on the banks’ total delivery of loan services to customers. Bank loan customers expect that loans should be treated in line with their promotional jingles which proclaim easy delivery of bank loans , but on the contrary loan customers complain about the methods of loan administration bordering on processing delays, spurious pricing processes, deceptive promotional practices, poor product quality, lack of interest on the customer’s investment, among others, (Onwuameze, 2013) .
It is suggesting, therefore, that the banks’ strategies regarding loan administration should be put to test in order to establish whether it is responsible for customer dissatisfaction or determining the level of satisfaction customers receive. As banks are of the view that if it fails to apply such loan administration methods on loan service delivery, it may not guarantee loan repayment with interest as at when due to ensure the banks make profit from their investments and remain in business?
This is on the assumption that customer satisfaction tools- quality loan products, timely loan delivery, staff- customer friendliness, among others may make it impossible for banks to obtain adequate and necessary collateral required for safe investment, an exercise which involves huge expenses and will directly increase the cost of the loan to customers. Then, what actually will be customers’ perception of loan administration put in place by a bank?
The above picture of bank loan administration challenges painted reveal the present situation which has reached alarming dimension without any plausible solution in sight. Since no such research has been conducted among Universities’ staff in the South- East, Nigeria, this novel approach is therefore ideal to find out the effect of customers’ perception of bank loan administration on customer satisfaction as a lead- way to formulation of workable loan service delivery method.
1.3 Objectives of the Study
The general objective of the study is to examine the extent customers’ perception of bank loan administration affect customer satisfaction with a view to improving banks’ services in Nigeria.
The Specific objectives are:
- To ascertain the effect of bank customers’ perception of loan products on customer
- To ascertain the effect of bank customers’ perception of loan pricing on customer .
- To ascertain the effect of bank customers’ perception of loan documentation on customer satisfaction.
- To ascertain the effect of bank customers’ perception of loan promotion on customer satisfaction..
- To ascertain the effect of bank customers’ perception of monitoring and supervision on customer satisfaction.
- Research Questions
The research questions on this study include:
- To what extent does bank customers’ perception of loan products affect customer satisfaction?
- To what extent does bank customers’ perception of loan pricing affect customer satisfaction?
- To what extent does bank customers’ perception of loan documentation affect customer satisfaction?
- To what extent does bank customers’ perception of loan promotion affect customer satisfaction?
- To what extent does bank customers’ perception of loan monitoring and supervision affect customer satisfaction?
1.5 Research Hypotheses
The following hypotheses will be tested in this study:
Ho1: The bank customers’ perception of loan products has no significant effect on customer satisfaction.
Ho2: The bank customers’ perception of loan pricing has no significant effect on customer satisfaction.
Ho3: The bank customers’ perception of loan documentation has no significant effect on customer satisfaction.
Ho4: The bank customers’ perception of loan promotion has no significant effect on customer satisfaction.
Ho5: The bank customer’s perception of loan monitoring and supervision has
no significant effect on customer satisfaction.
- Significance of the Study
Different categories of constitute a significant part in the total assets banks have in Nigeria. These assets bring into the banks coffers a lot of profit which is the basis of measuring banks financial position. In view of the fast changing societal value leading to a new order in economic adventures, individual earnings, co-operate/government revenues require diversification. Therefore, the need for banks to be reviewing loan administration methods in order to be improving customer satisfaction will be aided by this study.
The findings in this study are intended to assist the operators of the banking business to develop workable approaches for different categories of loan geared towards improving loan delivery for customer satisfaction in Nigeria. The results of this study would also guide officers in-charge of credit operations in the banks on how to effectively discharge their credit functions and the need to always have quality loan packages as their target for their bank and customers. The outcome of this research would also serve as a contribution to already written works of scholars in Customer service satisfaction.
Consequently, this study would help in no small measure by adding to the academic harvest of marketing scholars in the Faculty of Business Studies, Marketing and Entrepreneurship Studies, Ebonyi State University, Abakaliki.
This research is also expected to play a pivotal role in stimulating research into other areas relating to the topic and other related areas in the banking sector. This effort would yield significant contribution to most of the vexing issues confronting banking institutions in Nigeria.
Thus through the foregoing, the research would contribute immensely to the development of the banking industry, improve income of the customer as well as contribute to the economic stability of the country.
1.7 Scope of the Study
This research focuses on entire staff of State Universities and commercial banks in the five Eastern States of Nigeria (namely, Anambra, Abia, Enugu, Ebonyi and Imo). This is premised on the fact that banks emphasize on customers who have steady and regular monthly salaries. Hence, the scope deals with all teaching and non-teaching staff of the selected Universities in the South East zone in Nigeria. Consequently, the study examines some categories of loans available to these customers in the selected commercial banks such as my Salary Plus, Top –up, Take over, Home Asset Finance, fast cash, among others; the banks’ products, pricing, documentation, promotion , monitoring and supervision, among others and assesses the effect of customer’s perception of these bank loan administration variables on customer’s satisfaction in banks.
1.8 Limitations of the Study
This study was limited by the fact that most literature available dealt on service quality and service performance with emphasis on critical customer service measurements. However, this challenge was surmounted by exploring studies in the Banking and Finance, Accounting and other Business disciplines since the marketing discipline has interface with virtually all existing Business and Behavioral studies.
The banks, due to their strict rules on disclosure of official information, particularly on their customers were not willing to give out information regarding them. This limitation was also surmounted by the support of friends who are bankers in close confidence and customers outside the banking premises.
This research experienced some challenges on the attitude of some respondents. Because the information required border on sensitive area that should be private to the respondents, not many were very willing to give out information without further explanations. This researcher overcame this challenge due to the proper training given to the assistants and the application of tact and patience.