FACTORS THAT INFLUENCE CUSTOMER SATISFACTION IN

SAVINGS AND CREDIT COOPERATIVES (SACCOs) IN KENYA: A

CASE STUDY OF BALOZI SACCO

BY

EMILY WANJIKU IRUGUTHU

UNITED STATES INTERNATIONAL UNIVERSITY

SUMMER 2014

ii

FACTORS THAT INFLUENCE CUSTOMER SATISFACTION IN

SAVINGS AND CREDIT COOPERATIVES (SACCOs) IN KENYA: A

CASE STUDY OF BALOZI SACCO

BY

EMILY WANJIKU IRUGUTHU

A Project Report submitted to the Chandaria School of Business in

Partial Fulfillment of the requirement for the Degree of Executive

Master of Science in Organizational Development (EMOD)

UNITED STATES INTERNATIONAL UNIVERSITY

SUMMER 2014

iii

DECLARATION

I, the undersigned, do solemnly affirm that this report is the work of my original thought

and has not been submitted to any other college, institution or university for the

attainment of any academic award and any resemblance to it in part or whole is purely

coincidental.

Signed:………………………………………. Date:……………………….

Emily Wanjiku Iruguthu (ID 640534)

This project has been presented for examination with my approval as the appointed

supervisor.

Signed:………………………………………. Date:……………………….

Dr. K. Njenga

Signed:………………………………………. Date:……………………….

Dean, Chandaria School of Business

iv

COPYRIGHT

Copyright © Emily W. Iruguthu, USIU-Nairobi, 2014

All Rights Reserved.

No part of this project may be reproduced, translated or reprinted in any form either in

part or whole including photocopying without prior written permission of the author.

v

ACKNOWLEDGEMENT

I would like to express my sincere appreciation and gratitude to all who have contributed

in making me accomplish this research project with moral support, guidance and wise

counsel.

To God Almighty for his everlasting love and providence. All glory and honor are His.

To my supervisor Dr. K. Njenga for his guidance and advice.

To my husband Iruguthu for his understanding and support. To our sons Joe, Dennis and

Victor, you are best children a mother would dream to have. God bless you mightily.

Lastly, to all my respondents for their participation. I thank you all.

vi

ABSTRACT

The purpose of this research was to investigate the factors that influence customer

satisfaction in Savings and Credit Cooperatives (SACCO) societies in Kenya. The

financial industry has been liberalized bringing in more financial institutions providing

accessible cheap loans. As a result of this, financial institutions including SACCOs are

competing to attract and serve the same customers. The study sought to establish answers

to three main research questions; to determine whether Information Communication

Technology (ICT); quality services/products, and staff training and qualification influence

customer satisfaction.

This research used descriptive research design. The population used in the study included

Balozi SACCO members based in Nairobi. A sample size of 108 members was drawn

from out of a population of 1075 members through stratified random sampling method.

The research methodology involved the collection of primary data from SACCO

members and managers. The study engaged the use of a structured questionnaire that was

pilot tested in order to ensure questions asked were relevant, had data validity and

reliability. Data analysis was done using Statistical Package for Social Scientists (SPSS)

to generate descriptive statistics (frequencies, percentages, cross tabulations) presented on

figures and tables. Further analysis was done using inferential analysis; chi-square tests

and correlation to establish the relationship between research questions and various

variables.

A significant majority of the respondents both members and managers were satisfied with

Balozi SACCO. According to the study findings 19% of the members were highly

satisfied, 66.7% satisfied and 13.9% fairly satisfied. The managers were equally satisfied

with the SACCO. Majority of SACCO members indicated good services to be the main

factor contributing to their level of satisfaction. These findings were further supported by

having most members (62%) in the SACCO for more than 5 Years. The study findings

also indicated majority of the respondents (83.6%) never thought of ever resigning from

the SACCO.

The study showed that customer satisfaction in SACCOs is high when SACCO

employees are responsive to the customers‟ needs. According to the study findings 62%

of the members who responded as being satisfied with SACCO services/products said

vii

SACCO employees are responsive. Another 36.5% of the respondents stated the SACCO

employees are highly responsive. The majority of respondents stated staff

professionalism, responsiveness and courteousness did influence their satisfaction

positively. This is directly contributed by the SACCO staff training and qualification.

The study has sufficiently demonstrated that Information Communication Technology

(ICT) influence customer satisfaction. The low adoption of ICT causes slow feedback and

slow transaction response. The study has exhaustively shown that services influence

customer satisfaction; however the loan products did not. The study found that the better

the quality of services the higher the satisfaction level. The study findings statistically

demonstrated staff training and qualification influence customer satisfaction. The study

concludes that there was a major difference in customer satisfaction between trained and

untrained among employee at SACCO.

On the level of efficiency of the electronic transaction services, majority of the

respondents (58%) were of the opinion that services were efficient. According to the

study findings the majority (97%) rated the loan products offered as popular. The

respondents also stated the current products meet their needs. The study shows that 67.6%

of the respondents agreed that the SACCO employees were courteous. When respondents

were asked what they would recommend for Balozi SACCO employees, majority stated

they would recommend SACCO employees to be more responsive and faster in their

service provision.

It is therefore recommended that a study to assess the level of customer satisfaction in a

SACCO with an interactive portal be undertaken. The study also recommends that the

SACCO should adopt a mechanism to enable members repay loans through MPESA. The

study recommended that further research be carried out to investigate other factors that

may influence loan products offered in relation to the level of customer satisfaction.

viii

TABLE OF CONTENTS

DECLARATION ................................................................................................................................. iii

COPYRIGHT ...................................................................................................................................... iv

ACKNOWLEDGEMENT ................................................................................................................... v

ABSTRACT ......................................................................................................................................... vi

TABLE OF CONTENTS .................................................................................................................. viii

LIST OF FIGURES ............................................................................................................................. xi

LIST OF TABLES .............................................................................................................................. xii

LIST OF ABBREVIATIONS ........................................................................................................... xiii

CHAPTER ONE ................................................................................................................................... 1

1.0 INTRODUCTION .......................................................................................................................... 1

1.1 Background of the Problem .............................................................................................................. 1

1.2 Statement of the Problem ................................................................................................................. 3

1.3 Purpose of Study .............................................................................................................................. 4

1.4. Research Questions ......................................................................................................................... 4

1.5 Importance of the Study ................................................................................................................... 4

1.6 Scope of the Study ............................................................................................................................ 5

1.7 Definition of Terms .......................................................................................................................... 6

1.8 Chapter Summary ............................................................................................................................. 7

CHAPTER TWO .................................................................................................................................. 8

2.0 LITERATURE REVIEW .............................................................................................................. 8

2.1 Introduction ...................................................................................................................................... 8

2.2 Information Communication and Technology (ICT) Influence on Customer Satisfaction .............. 8

2.2.1 Accessibility and Efficiency through ICT ..................................................................................... 8

2.2.2 ICT in Business/Institutions Alignment ........................................................................................ 9

2.2.3 Alignment of IT to Business Strategy ......................................................................................... 10

2.3 Quality Service/Product Influence on Customer Satisfaction ........................................................ 12

2.3.1 SACCO Brand ............................................................................................................................. 12

2.3.2 Perceived Price Fairness .............................................................................................................. 13

2.3.3 Staff Service Reliability .............................................................................................................. 14

2.3.4 Employee Involvement ................................................................................................................ 15

2.4 Staff Training and Qualification Influence on Customer Satisfaction ........................................... 16

2.4.1 Training Programmes .................................................................................................................. 16

2.4.2 A systematic Approach to Training ............................................................................................. 17

2.4.3 Employees Training as Result of Changing Environment .......................................................... 18

2.5 Chapter Summary ........................................................................................................................... 20

ix

CHAPTER THREE ........................................................................................................................... 21

3.0 RESEARCH METHODOLOGY ................................................................................................ 21

3.1 Introduction .................................................................................................................................... 21

3.2 Research Design ............................................................................................................................. 21

3.3 Population and Sampling Design ................................................................................................... 21

3.3.1. Population ................................................................................................................................... 21

3.3.2 Sampling Design ......................................................................................................................... 22

3.3.2.1 Sampling Frame ....................................................................................................................... 22

3.3.2.1 Sampling Technique ................................................................................................................. 22

3.3.2.2 Sample size ............................................................................................................................... 23

3.4 Data Collection Methods ................................................................................................................ 23

3.5 Research Procedure ........................................................................................................................ 24

3.6 Data Analysis Method .................................................................................................................... 24

3.7 Chapter Summary ........................................................................................................................... 24

CHAPTER FOUR .............................................................................................................................. 25

4.0 RESULTS AND FINDINGS ........................................................................................................ 25

4.1 Introduction .................................................................................................................................... 25

4.2 Background Information ................................................................................................................ 25

4.2.1. Gender of Respondents............................................................................................................... 25

4.2.2 Position in the SACCO ................................................................................................................ 25

4.2.3 Years in the SACCO ................................................................................................................... 26

4.2.4 Level of Education ...................................................................................................................... 27

4.3 Customer Service and it Influence on Customer Satisfaction ........................................................ 27

4.3.1 Level of Service Satisfaction ....................................................................................................... 27

4.3.2 Contribution to the level of satisfaction/ dissatisfaction ............................................................. 28

4.3.3 Reasons for Dissatisfaction ......................................................................................................... 28

4.3.4 Resignation from the SACCO ..................................................................................................... 29

4.4 Information Communication and Technology (ICT) Influence on Customer Satisfaction ............ 30

4.4.1 Efficiency of Services.................................................................................................................. 30

4.4.2 Common Method of Communication .......................................................................................... 30

4.4.3 Phone Banking Service ................................................................................................................ 31

4.4.4 SACCOs Website ........................................................................................................................ 32

4.4.5 Suggestions to Improve Current Status ....................................................................................... 33

4.5 SACCOs Products and their Influence on Customer Satisfaction .................................................. 34

4.5.1 Rating of Products Offered .......................................................................................................... 34

4.5.2 Rate of Product offered ............................................................................................................... 34

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4.5.3 Most Popular Product .................................................................................................................. 35

4.5.4 Least Popular Product.................................................................................................................. 35

4.5.5 Additional Products Suggested .................................................................................................... 36

4.6 Staff Training and Responsiveness‟ Influence on Customer Satisfaction ...................................... 37

4.6.1 SACCO Employees Professionalism .......................................................................................... 37

4.6.2 SACCO Employees Professionalism .......................................................................................... 37

4.6.3 SACCO Employees‟ Courteousness ........................................................................................... 38

4.6.4 Suggested Recommendations for SACCO Employees ............................................................... 39

4.6.5 Respondents Additional Comments ............................................................................................ 41

4.6.5 Correlation Analysis .................................................................................................................... 42

4.7 Chapter Summary ........................................................................................................................... 44

CHAPTER FIVE ................................................................................................................................ 45

5.0 DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS ........................................... 45

5.1 Introduction .................................................................................................................................... 45

5.2 Summary ........................................................................................................................................ 45

5.3 Discussion ...................................................................................................................................... 46

5.3.1 Information Communication Technology Influence on Customer Satisfaction .......................... 46

5.3.2 Quality Services/Products Influence on Customer Satisfaction .................................................. 48

5.3.3 Staff Training and Responsiveness Influence on Customer Satisfaction .................................... 50

5.4 Conclusions .................................................................................................................................... 51

5.4.1 Information Communication Technology Influence on Customer Satisfaction .......................... 51

5.4.2 Quality Services/products Influence on Customer Satisfaction .................................................. 51

5.4.3 Staff training and Qualification Influence on Customer Satisfaction .......................................... 52

5.5 Recommendations .......................................................................................................................... 52

5.5.1 Recommendations for Improvement ........................................................................................... 52

5.5.2 Recommendations for further Studies ......................................................................................... 53

APPENDICES .................................................................................................................................... 59

Appendix I: Introduction Letter ....................................................................................................... 59

Appendix II: Research Questionnaire .............................................................................................. 60

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LIST OF FIGURES

Table 3.1: Population Distribution ..................................................................................... 22

Table 3.2: Sample Size ...................................................................................................... 23

Figure 4.1: Gender of Respondents ................................................................................... 25

Figure 4.2: Position in the SACCO.................................................................................... 26

Figure: 4.3: Years in Sacco by Gender .............................................................................. 26

Table 4.1: Level of Education ............................................................................................ 27

Figure 4.4 Level of Service Satisfaction ............................................................................ 28

Figure 4.5: Reasons for Dissatisfaction ............................................................................. 29

Figure 4.6: Resignation from the SACCO ......................................................................... 29

Figure 4.7: Efficiency of Services ..................................................................................... 30

Figure 4.8: Most Common Method of Communication .................................................... 31

Figure: 4.9: Availability of Phone Banking ....................................................................... 31

Table: 4.2: Total Responses by Position in SACCO ......................................................... 32

Figure 4.10: SACCO Website Status ................................................................................. 33

Table: 4.3: Suggestions to Improve Current Status .......................................................... 34

Figure: 4.11: Rating of Products Offered .......................................................................... 34

Table 4.4: Rate of Products Offered .................................................................................. 35

Table: 4.5: Most Popular Product ...................................................................................... 35

Figure 4.12: Least Popular Product ................................................................................... 36

Table 4.7: SACCO Employees‟ Professionalism .............................................................. 37

Figure 4.13: SACCO Employees‟ Responsiveness ........................................................... 38

Table 4.8: Chi-Square Tests ............................................................................................... 38

Table 4.9: SACCO Employee‟s Courteousness................................................................. 39

Table 4.10: Recommendation for SACCO Employees ..................................................... 40

Table 4.11: Respondents Additional Comments ............................................................... 41

Table 4.12: Correlation between Research Question and Level of Satisfaction................ 43

xii

LIST OF TABLES

Table 3.1: Population Distribution ..................................................................................... 22

Table 3.2: Sample Size ...................................................................................................... 23

Table 4.1: Level of Education ............................................................................................ 27

Table: 4.2: Total Responses by Position in SACCO ......................................................... 32

Table 4.3: Suggestions to Improve Current Status ........................................................... 34

Table 4.4: Rate of Products Offered .................................................................................. 35

Table: 4.5: Most Popular Product ...................................................................................... 35

Table 4.6 Additional Products Suggested .......................................................................... 36

Table 4.7: SACCO Employees‟ Professionalism .............................................................. 37

Table 4.8: Chi-Square Tests ............................................................................................... 38

Table 4.9: SACCO Employee‟s Courteousness................................................................. 39

Table 4.10: Recommendation for SACCO Employees ..................................................... 40

Table 4.11: Respondents Additional Comments ............................................................... 41

Table 4.12: Correlation between Research Question and Level of Satisfaction................ 43

xiii

LIST OF ABBREVIATIONS

AGM - Annual General Meeting

BSS - Balozi SACCO Society

CDC - Centre for Disease Control

ICT - Information Communication Technology

MIS - Management Information System

SACCO - Savings and Credit Cooperative

USAID - United States Agency for International Development

1

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Problem

The main objective of any business venture is to make profit for sustainable growth

(Hughes, 2010). Marketing experts have come up with marketing strategies and business

approaches with the aim of soaring their profits and subsequent growth of their

businesses. These marketing strategies operate with an objective of meeting the needs and

wants of their target clientele and the delivery of services efficiently and effectively, and

thus achieving customer satisfaction. In the finance industry, financial institutions

compete for customers by designing and packaging their products and services more

attractively than their competitors. These include availing cheap credit, accessibility, and

flexible payment schedules, aligning products with members‟ needs and wants, and

proactively keeping abreast with the rapid changes in the financial environment (Pappas,

2007). Competition arises from the increased number of competitors in the market

providing more or less the same services or products. Financial institutions therefore

need to identify their competitive advantage and differentiate from the rest of the

competitors.

The diversification and demystification of commercial banks have brought stiff

competition to Savings Credit and Cooperatives Societies (SACCOS). The previously

protected market share has been challenged by competition from commercial banks and

other micro- finance institutions (Zeithaml and Bitner, 2009). Commercial banks have

become a major competitor to the SACCOs by introducing more lending services to

potential borrowers. Banks in Kenya have become more accommodating and receptive to

borrowers, provision of unsecured loans, faster customer service, and flexible payment

schedule and modalities and hence challenge the SACCO operations (Bwisa, 2010).

According to Hanif (2010), most SACCOs have since diversified their products and

services to meet the current consumer needs. This has been in response to the stiff

competition they face from commercial banks. They have continued to identify their

niche and differentiated their products from the banks in order to survive the onslaught

from these commercial banks. The SACCOs have a task to retain their existing clients,

2

attract new potential clients by providing quality services and products (Murugami,

2011). It is key that SACCOS maintain optimal customer satisfaction to in order to

survive in the highly competitive environment which forms the basis of this study.

Empirical studies show that cooperative movement in Kenya is an important player in the

social economic development of this country. Cooperatives cut across all sectors of the

Kenyan economy and provide an important framework for mobilization of both human

and capital resources (Ndaka, 2008). The cooperative movement has organized

institutions that caters for all cadres of persons. Its agenda is usually based on locally

determined objectives whose aims are to empower citizens to realize their social-cultural

and economic capacities using locally available and generated resources. The cooperative

movement in Kenya has been a success. It is estimated that there are over 10,800

cooperative societies with a membership of about 6 million. Financial SACCOs constitute

of 45% of the total number of cooperatives in Kenya and have become a major player in

the financial sector (Wangondu, 2009). Challenges encountered by SACCOs include;

lack of mechanisms to decide on urgent matters, such as changes in interest rates,

introduction of new products and services have to wait for AGMs. SACCOs have

experienced major upheaval in recent past.

A statistical overview of SACCO shows that Kenya has the largest SACCO movement in

the African continent (Dash and Mahaptra, 2009). The rapid growth came about after the

government enacted a special legislation, the SACCO societies Act 2008 under which the

Sacco Societies Regulatory Authority (SASRA) was established. SASRAs mandate

entail; license SACCO to carry out deposit taking business, regulate and supervise deposit

taking SACCO societies; manage the Deposit Guarantee Fund under the trustees

appointed according to the Act, and advise the Minister on national policy on deposit

taking SACCOs societies in Kenya. There were 6,007 registered SACCOs in Kenya as at

December 2010 (BSS, 2013)

Balozi SACCO was formed in 1975 and registered as a cooperative society. The

objectives of the SACCO were; to encourage thrift by its members by according to them

to provide an opportunity to accumulate savings, to create and develop a source of funds

for lending to qualified members at comparatively low and reasonable rate of interest; to

provide an opportunity for its individual members to improve their respective economic

and social conditions; and to perform the functions and exercise the powers designated

3

for savings and credit cooperative societies under the applicable law (BSS, 2013). The

core functions of the SACCOs was mobilization of savings from members, giving loans

to members, undertaking investments and provide education, training and information to

its members. The society‟s value were integrity, commitment to service delivery,

innovation and creativity, customer focus, professionalism and staff development. Balozi

SACCO offered both saving and loan products. The savings products on offer were

shares, deposits, benevolent funds and investment scheme fund. The society‟s customer

service charter sets out its commitment and the standards of service that it aimed to

provide (BSS, 2013).

The society draws its membership from employees who work in the US Embassy, United

States Agency for International Development (USAID), Walter Reed Project, Peace

Corps, Centre for Diseases Control (CDC), KK Guards and any other organized groups

whose membership may be proposed by the Management Committee and approved by

delegates at the Annual General Meeting (AGM). Balozi‟s operations and service

delivery to its members is based on some core values. Some of these values are customer

care, people friendly, integrity, quality, equity and fairness, innovation, transparency,

accountability and professionalism. The day to day activities are undertaken by a

secretariat which has the following staff members: Manager, Accountant, assistant

accountant, loans officer, assistant loans officer, ICT officer, registry officer, and

receptionist (BSS, 2013).

1.2 Statement of the Problem

According Nyer (2006), satisfaction is the degree of satisfaction provided by the goods

and services of a company as measured by the number of repeat customers. It is also the

quality or state of being satisfied or contentment. Oliver (2009) asserts that customer

satisfaction is a precursor of improved performance as well as customer retention for any

organization. With the onset of competition from other players like commercial banks

and financial institutions customer satisfaction is key to the attraction and retention clients

in SACCOs. Customer satisfaction is critical for service industries to be successfully in

today‟s competitive business environment.

Extensive research has been carried out on financial challenges facing SACCOs in

Kenya. Gunga (2009) lists several challenges facing SACCOs such as cash flow

problems, loan backlog, delayed refunds of members deposits, competition from banks

4

and micro finance institutions, poor members loyalty, liquidity and cash flow problems,

short vs long term lending. According to Oliver (2009) there are constraints facing

development of SACCOs as lack of appropriated and adequate managerial skills and

knowledge with the good strategic, business, succession plans and adequate

organizational set-up and transparent operational system.

Odhiambo (2004) assert that the level of customer satisfaction may be influenced by

various internal and external factors. In the telecommunication sector, a study to establish

factors influencing customer satisfaction in the telecommunication industry stated that

price fairness and quality of service are the factors that influence the level of satisfaction

most (Imbuga, 2005). With these challenges cited in previous studies SACCOs clients are

exposed to inadequate quality of services and products leading to inefficiency. It is

therefore incumbent upon SACCOs to be responsive to satisfy their customers in order to

retain and attract new SACCO members. This study therefore sought to investigate the

factors that influence customer satisfaction in SACCOs.

1.3 Purpose of Study

The main purpose of the study was to investigate the factors that influence customer

satisfaction in SACCOs.

1.4. Research Questions

The study specifically aimed to answer;

1.4.1 To what extent does information communication technology influence

customer satisfaction?

1.4.2 How does quality products/services influence customer satisfaction?

1.4.3: To what extent does staff training and qualification influence customer

satisfaction?

1.5 Importance of the Study

The study is intended provide information on the factors that influence customer

satisfaction. The findings of this study will be beneficial to the following stakeholders;

5

1.5.1 Government

The study will serve as a guide to government in its endevour to establish legislation and

polices that govern SACCOs in Kenya. The recommendations of the study will help in

policy formulation that will enhance efficiency in the SACCOs.

1.5.2 Management of Balozi SACCO

The study will serve as a guide to management of SACCOs on the formulation of

standard operating procedures on service delivery in order to improve customer

satisfaction. This will help them in implementing policies that will improve service

delivery structure and ensure the SACCOs performance.

1.5.3: Scholars and Researchers

The study will serve as a contribution to scholars and researchers to the existing literature

on customer satisfaction particularly in regard to SACCOs. The study will also provide an

area for further research by future researchers.

1.5.4: Employees of the SACCO

Employees of the SACCO will be guaranteed of continuity of work and good

remuneration when their businesses do well. Employee will be understand the factors that

need to be put in place to be able to obtain adequate and quality service. They may be

adequately informed on what they should demand from the SACCO.

1.6 Scope of the Study

The study was carried in Nairobi County due to its expansive size and a rich menu of

programmes in the SACCOs and the location is close to the researcher making it cost and

time effective. The target population was 1075 Balozi members who work in the SACCO.

The study took a period of three weeks to collect the needed data. The study was limited

by lack of immediate access to the required information from the respondents due to

suspicion. The researcher overcame this by conducting an interactive dialogue with staff

and educating them on the significance of the study to the SACCO.

6

1.7 Definition of Terms

1.7.1 Customer

In this study, this term refers to members of Balozi SACCO, who are the respondents in

this study. According to Oliver (2009) a customer is someone who has purchased a

product or a service as consumer or as a member of a group.

1.7.2 Customer Satisfaction

Customer satisfaction is the gap between the expected and perceived service is the

measure of service quality. When perceptions are greater than expectations, the customer

is delighted but when perceptions are less than expected, the customer is disappointed

(Pappas, 2007)

1.7.3 Customer Expectation

Is defined as the degree to which products and services meet or exceed (customer)

requirements and or expectations. Customer expectation has been defined as the desires

or wants of customers or what they feel a service should offer. Expectations in the

satisfaction literature have been operationalized as predictions of service performance

(Bwisa, 2010). Some attributes of customer satisfiers would include integrity, reliability,

availability, responsiveness and functionality.

1.7.4 Member

To be a member of Balozi one have to be a Kenyan employee who works in the US

Mission in Kenya as well as other organized groups that the Management Committee

deemed fit and approved (Murugami, 2011)

1.7.5 Quality Service

Service quality has been defined as the ability of a business organization to meet or

exceed customer expectations. Service is viewed as something provided by a certain type

of organization (Dash and Mahaptra, 2009). Successful service provider ensures to meet

the customers need, and in addition exceed their expectations.

7

1.7.6 Product

The various types of savings and loans services that the SACCO offers to members

(Murugami, 2011).

1.8 Chapter Summary

This chapter outlined the purpose of the study, the research questions focused mainly on

the factors influencing customer satisfaction in savings and credit societies, the

importance of the study was to key stakeholders as well as the scope of the study being

members of Balozi Sacco. Chapter two was the literature review and contained past

studies pertinent to the study where the research questions were discussed based on the

literature available on factors that influence customer satisfaction in SACCOs globally

and locally. Chapter three provided the methodology of the study on how data was

collected and analyzed. Chapter four contained a presentation and discussion of the

research findings as gathered from the field. Chapter five presented a summary of the

findings, conclusions and recommendations for the SACCOs to implement in order to

improve customer satisfaction.

8

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter reviewed significant studies and literature of topics of challenges facing

SACCOs in the cooperatives industry. The challenges faced by SACCOs have an impact

on the overall customer satisfaction of their SACCOs members. It thus provided insight

information on past studies and related literature on the subject.

2.2 Information Communication and Technology (ICT) Influence on Customer

Satisfaction

Information Communication and Technology (ICT) drives businesses in a fast-paced

world, where competitiveness and customer satisfaction is measured by efficiencies,

convenience, delivery speeds and cost-effectiveness (Cumby, 2006). The recent

development towards self-service and automated customer care has allowed business

organizations to reduce transactional costs leading to savings. This has been made

possible by online marketing, purchases and communication through websites and e-

newsletters. The websites enable interactions between consumers and providers of

products and service (Harrell and Mackoy, 2005). This provides an environment of

handling an ever-increasing number of customers‟ transactions efficiently.

2.2.1 Accessibility and Efficiency through ICT

Financial institutions have also been revolutionized by information technology especially

internet through the electronic financing. E-Finance activities include types of financial

activities that carried out over the internet such as online banking, electronic trading, the

provision and delivery of various financial products and services (Reichheld, 2011). The

internet is changing the business environmental as the internet is accessible by everyone,

a financial institution can no longer dominate by physical presence. The internet and new

information technologies have lowered the barrier of entering the finance industry

according to Day (2010) thus lowers the initial investment and transactional costs. As a

result, an innovation such as e-finance is the driving force that is changing the finance

industry making it more competitive.

9

With these financial innovation SACCOs must now turn to e-marketing in order to cope

with the current demand to meet the client‟s expectations and establish durable

relationships with customers (Gary, 2006). SACCOs can improve customer acquisition

and retention by integrating IT into their marketing practices to foster rich interactions

with their customers. E-marketing encompasses a broad set of interaction enabling

technology that is frequently used in industrial business-to-business markets including

customer relationship management, sales force automation, e-commerce websites, and

extranets. According to (Gronroos, 2007) E-marketing has had positive contribution in

the life of modern societies especially the consuming societies. It allows the customer to

purchase goods and services cheaply and with no limit. It allows the customer to make a

free selection and comparison between the prices of goods at the electronic stores through

the Internet. E-marketing also allows customization, personalization, and niche targeting

in a much more flexible, easier, quicker and cheaper way.

Whinston (2007) reckon that SACCOs cannot escape the hold of ICT over business

operations, especially considering that ICT enables businesses to find new ways to drive

down the costs of products and processes, in addition to improving performance.

SACCOs should embrace ICT in order to benefit from technological advances of internet

connectivity, electronic communication as well as web-based production and delivery of

products and services (Mukherjee and Malhotra, 2006). SACCOs should integrate ICT in

their operations in order to: automate their business processes, facilitate timely acquisition

of information, apply ICT to redefine processes and relationships with members and other

SACCOs and communicating to members more efficiently.

2.2.2 ICT in Business/Institutions Alignment

According Brown (2005) to SACCOs need to modernize their management systems by

adopting information technology in their management to reduce transaction costs and

improve the quality of services to their members. Ensuring that customers have ease of

access and readily available channels to use is an integral step towards guaranteeing the

convenience of delivery channels for the customer. The customer has been exposed to the

instant services offered through technology and therefore have become more tech savy is

therefore demanding speed and convenience from the service providers. Channels must

provide full functionality and maintain high levels of reliability and availability to meet

customer expectations. Customers want to be able to carry out their transactions on their

10

mobile phone or the computers from the comfort of their homes or workplaces (Fournier,

2004).

Finance industry has been revolutionized further with the entry of mobile phone-based

banking. According to Central Bank of Kenya Mshwari a mobile phone based banking

pushed the number of loan borrowers to 1.7 million (Johnston, 2011). Mshwari is a

mobile phone based account launched jointly with Commercial Bank of Kenya (CBA)

and telecommunication firm Safaricome. Mshwari allows Safaricome subscribers to open

bank accounts with CBA through their mobile phones, save money and borrow based on

their Mpesa usage records. Other banks such as KCB and Family Bank has initiated

similar products. KCB has recently launched M-Benki through which it is targeting more

clients through the mobile platform. According to KNBS (2012), Family Bank has

launch Pesa mob for the same objective. The mobile phone products allow users to

deposit, transfer and borrow money between the automated teller machines and their

phones without visiting any bank branch. Linkage to mobile phones to bank accounts has

enable access to financial services and credit by low income earners who have been for a

long time been excluded due to lack of collateral and banking history. SACCOs therefore

have a challenge of retaining and attracting new SACCO members to their SACCO

through continuous customer satisfaction.

2.2.3 Alignment of IT to Business Strategy

As versioned by Nabatanzi (2009), the need for congruence between an organization‟s

business strategy and information technology strategy is a widely held IT precept across a

broad range of other industries, though may not be believed widely appreciated.

Understood or not, information technologies do have substantial potential both to alter

and to support the way banks manage and assess their business activities, to simplify and

improve banks processes efficiency, and to enable completely new products or other new

business opportunities (Farrell, 2012). According to Fournier (2004), IT can facilitate

better information flows for internal communication (up, down, and sideways in the

organization), and more complex software knowledge management systems allow better

information flow about market information, accelerate anticipating client needs, help feed

product development, and speed information flow back to decision makers. Conversely,

changes such as rapid growth in client numbers and in product diversity or new business

11

models and strategies will all alter the nature of information flows and supporting

technologies needed.

A firms need technology managers with specific working knowledge of their businesses

so that controls over both the information systems and the processes by which they are

developed and maintained and other essential control procedures are designed,

implemented, and assessed in close collaboration with those developing business strategy

(Asuquo, 2007). Isolation of IT planning from business planning is a natural consequence

of banks‟ tendency toward buying off-the-shelf IS packages. According Seo and Yoon

(2004), important IT decisions will be made off-site by vendors who may not fully

understand businesses and the own business decisions made without solid understanding

of the IT issues involved. In such cases, research from other industries suggests that

several areas of core business knowledge are at risk of misinterpretation and

misalignment. Moreover, conflicts can arise between operating needs and a vendor‟s

incentive to minimize costs. For instance, rather than tailoring solutions to the specific

strategic objectives of the banks, the outsourcing vendor may tend toward one-size-fits-all

for its many buyers.

The impact of IT investments on organizational performance has been a concern for

academic researchers and business practitioners for many years. Lewis (2011) note that

organizations lack the ability to obtain value from IT investments, in part, because there is

not sufficient alignment between IT and business strategies. In fact, IT and business

alignment has persistently been considered among the five most important issues in MIS

for more than twenty years. Although the alignment between IT and business goals have

been widely discussed, there is little consensus among IT researchers about the best

approach for measuring the impact of IT business alignment on institutions performance

(Wanyama, 2009).

Alignment, according to Gichuru (2011), is achieved through the links between the four

domains in that the first link is the strategic fit, the vertical, and it is focused on the need

to make business decisions that determine the position of the firm in the marketplace as

well as the infrastructure, processes, and skills that determine the internal focus necessary

to achieve the desired market position. The second link, the horizontal, is functional

integration, and its purpose is to extend the principle of strategic fit to the functional

domains of business and information technology. He also noted “while each of the four

12

domains is important in its own context, they only gain value when employed as a

cohesive whole”. The alignment perspectives model uses a cross-domain alignment that

focuses on three of the four domains that allow strategic fit and functional integration to

be addressed simultaneously (Murthy et al., 2007). The four cross-domain relationships

are: Strategy Execution, Technology Potential, Competitive Potential, and Service Level.

2.3 Quality Service/Product Influence on Customer Satisfaction

Customer service process starts with what customer thinks and what will happen or what

he is to expect. It is has been generally accepted that quality means total and continuous

customer satisfaction while using a product or service (Ouma, 2011). As the customer

uses the service or product, this dimension changes and after the encounter becomes past

experience. The customer past experience will affect what the customer expects to happen

on a particular encounter. Service quality and customer satisfaction are the two core

pillars in any business organization. The service and product has be right, reliable and

delivered timely. In today‟s fast-pace world with intense competition, the key to

sustainable competitive advantage lies in delivering high quality service or product that

will in turn result in satisfied customers. When a customer feels there is something special

and valuable in his contact, a relationship may develop (Develtere and Pollet, 2009). This

positive first time encounters with customers make them repeat customers based on past

experience.

According to Olanda (2006), achieving high levels of customer satisfaction requires that

organizations continually monitor and examine the experiences, opinions, and

suggestions of their customers and other people who are likely to be potential customers.

Improving service quality to meet customers‟ standards is an ongoing part of doing

business. In this way, customers drive the organization. Service products are a crucial

component of service quality and can be a component of physical environment quality,

interaction quality and outcome quality in a hierarchical context (Chaichi, 2012). Hence,

managing relationships with customers is a profitable approach to service firms providing

service.

2.3.1 SACCO Brand

Image of brand or SACCO is one of the most complex factors. It affects satisfaction at

least in two ways. Firstly, customer may use his preferences to present his own image.

13

That may occur both in conscious and subconscious level. According to the Maghimbi

(2010) of extended self, people define themselves by the possessions they have, manage

or create. Mukherjee (2004) have showed that people use products to enhance self-image.

Secondly, according to social identity theory, people tend to classify themselves into

different social categories. That leads to evaluation of objectives and values in various

groups and organizations in comparison with the customer‟s own values and objectives.

They prefer partners who share similar objectives and values. Consumer-brand

relationships are more a matter of perceived goal compatibility. Brands cohere into

systems that consumers create not only to aid living but also to give meanings to their

lives. Oliver (2009) argues that for fully bonded satisfaction the consumable must be part

of the consumer‟s self-identity and his or her social-identity.

Much of the literature on customer satisfaction has looked at brand loyalty, and there is a

range of conceptualizations of satisfaction from repeat purchase to a lifetime relationship

as conveyed in recent banking advertisements (Levesque and McDougall, 2006). In

addition, customers typically have satisfaction relationships with a range of brands; this

may include several brands associated with the same category of goods. Polygamous

loyalty (Rams and Schindler, 2010) is consistent with the notion of avoiding putting all

one‟s eggs in one basket. Clearly the use of library resources involves learning about use

of IT-based services, location of stock, and the parameters of loans and reservations

services and involves the management of customers‟ expectations by the service provider.

In addition, services that a customer uses regularly, may have a large interpersonal

element with service agents, becoming in some cases an integral part of a customer‟s life.

Often as a result of learning and familiarization, switching service providers carries a risk.

Owing to the absence of tangibles, the risk associated with switching to a new service is

perceived to be high, or, in other words, the customer cannot easily guess the quality of

the service delivery of a new service provider, until they have sampled that service. The

emotional costs already invested in relationships with a service provider contribute to

make switching costs heavy (Greenaway, 2005).

2.3.2 Perceived Price Fairness

From the consumer's perspective, the monetary cost of something is what is given up or

sacrificed to obtain a product or a service. Thus, in studies on related topics, price has

often been conceptualized and defined as a sacrifice (Berry and Parasuraman, 2004).

14

There are three components to the concept of price: objective price, perceived non-

monetary price, and sacrifice. The objective monetary price (simply put, the amount of

money paid for product) is not equivalent to the perceived price (that is, the price as

understood and recorded in the mind of consumer) since consumers do not always know

or remember the actual price paid for a product. Instead, they encode the price in a way

that it is meaningful to them (Reichheld, 2012).

As to the relationship between price and satisfaction, research has shown that price is one

of the determinants of customer satisfaction (Ovenden, 2005). When customers were

asked about the value of services rendered, they consistently considered the price charged

for the service. In those cases in which consumers did not consider price in forming their

judgments about the quality of service, it was generally because they lacked a reference

price (Berry and Parasuraman, 2008). Still, though, this group ranked price as an

important factor when it came to their overall satisfaction.

The theoretical formation of price perception in services remains largely unexplored

(Varki and Colgate, 2001). The study suggests that the perception of price fairness plays

an important role in any exchange transaction. The feeling of fairness depends on the

gain-loss ratio felt by both partners in the exchange. From the consumer's perspective, the

gain is the product to be received, whereas the loss is the money to be paid. When a

consumer pays a higher price than others do, or when a consumer receives a lesser

product than anticipated (either in terms of quantity or quality), perceived negative price

inequity occurs. On the other hand, perceived positive price inequity may result from

either receiving a larger or better product than others, who paid the same price, or paying

a lower price but receiving the same product. Price fairness should have an influence on

customer satisfaction as well as on behavioral intentions (Athanassopoulos, 2010). This

study, then, proposes that the perceived fairness of price should directly affect customer

loyalty, and should also affect it indirectly via customer satisfaction.

2.3.3 Staff Service Reliability

Building a good relationship with the customer is one of the key elements of customer

satisfaction. Research shows that empathy plays an important role when dealing with

customers (Hughes, 2010). Addressing the customer by his name, knowing what he

purchased lately and offering new products to his taste, makes him feel important and that

15

the business has thought about him and his needs. Firms have adopted numerous service-

quality and relationship-building initiatives designed to give customers a reason to do

business with them (Pappas, 2007).

A quality product or service must have an acceptable amount of reliability; that is the

product/service must perform its intended function over its intended life under normal

environmental and operating conditions (Zeithaml and Bitner, 2009). Most consumers are

reluctant to buy digital goods and services online because they do not have enough

information to be confident with their purchases. According to a Gomez study, one of the

reasons that many customers purchase travel „offline‟ is the unreliability of the on-line

service when making a reservation. However, if a service proves to be reliable, then

customers will use it and be satisfied (Athanassopoulos, 2010).

2.3.4 Employee Involvement

All employees should be empowered and participate in the development of quality. This

is one of the main contributions from the Japanese development of quality management

and is the basis for the practice of quality circles (Varki and Colgate, 2001). For services,

this is particularly important for the front staff who carry out their duties in direct

interaction with the customers. In order to ensure a high employee commitment,

researchers suggests increasing the level of employee involvement. Berry and

Parasuraman (2008) identifies three central elements concerning employee participation:

Influence, interaction, and information sharing. Bwisa (2010) classifies employee

involvement into three elements: First, employee participation in the decision making

process without the intention to quantity their impact on the final decision. Secondly,

employees intentions should have an impact on the decision making process and the final

decision. Finally, employees‟ ability to link participation and control in decision making

processes.

The involvement of employees in making processes requires an exchange of information

among all participants (Ovenden, 2005). To make valuable decisions it is necessary

obtain as much information as possible concerning possible outcomes of a decision and

potential alternatives. Thus, the level of empowerment and provided information depends

on two aspects. First, the dimension (content/context) the employee is involved in the

decision making process and second, the service business. Where service is customized or

16

personalized, relationships are long-term, and employees have high growth and social

needs and strong interpersonal skills, the potential gains from empowerment can be

significant (Reichheld, 2012).

2.4 Staff Training and Qualification Influence on Customer Satisfaction

Employees are the face of the organization. Qualified motivated staff are expected to

offer improved customer satisfaction. The people rendering the services to customers

should have the attribute of knowledge and ability to inspire trust and confidence to the

customers (Berry and Parasuraman, 2004). The role of employees in service organizations

is comparable to the role of the service emanating from them. Their importance to the

firm is critical to both service delivery and service production. Service is all about the

people (employees) because they appear more often to be the most tangible clue to

customers‟ perception of what quality service entails. It is crucial for any business

organization to keep their current customers satisfied, while attracting new customers. In

kuman resource training, knowledge of staff and quality of work will be enriched

(Greenaway, 2005).

A detailed job analysis is required to determine the qualifications, skills and abilities of a

certain position. A desired job description is drawn with the selection criteria for the

potential candidate (Rams and Schindler, 2010). This requires competent human resource

persons to undertake this process and hire the best qualified candidate. The business

environment is fast evolving hence employees and employers need to keep abreast with

the technological advancement in the industry. This requires time, energy, resources for

frequent improvement of skills. Training and development programs are expensive and

the results may be hard to measure. However, Mukherjee (2004) through his study

emphasizes that staff training initiatives (tangibility, reliability, responsiveness, assurance

and empathy) enhances the capabilities of employees for better customer satisfaction.

2.4.1 Training Programmes

Training programmes and their objectives changed in the 1980s and 1990s (Murugami,

2011). Employers have to adapt to rapid technological changes, improve product and

service quality and boost productivity to remain competitive. Such improvements require

remedial – educational training because employees have to use critical thinking and

analytical skills. Environmental changes may be conceptualized as threats or

17

opportunities and both are associated with urgency, difficulty and high stakes (Ndaka,

2008). They are thus likely to evoke organizational responses and consequently human

resource management action.

Threats involve a negative situation in which loss is likely while opportunity involves a

positive situation in which gain is likely (Wangondu, 2009). Perceptions of threats can

intensify concerns about efficiency-enhancing strategies, hence focusing on internal

organizational issues such as cost-cutting, aggressive marketing, emphasis on quality and

change in organizational culture, while perceptions of opportunities are associated with a

greater sense of control which may imply initiating risky actions such as developing new

products or venturing into new markets (Dash and Mahaptra, 2009). The implication of

environmental change means that organizations have to respond by instituting a variety of

strategies in order to generate sustained levels of profitability in the future. An

organization faced with environmental change can establish several strategic postures

with the environment.

Employees must acquire team building, decision making and communication skills (Nyer,

2006). They also have to acquire knowledge and skills to work with the new technology.

Employee training can serve to increase commitment to the organization and perception

of the organization as a good place to work. This should arise from the fact that the

organization shows commitment to employees by providing opportunities for employees

to upgrade their skills and better themselves (Imbuga, 2005).

2.4.2 A systematic Approach to Training

Training in organizations requires a systematic approach (Cumby, 2006). The systematic

approach addresses issues of reasons why the training programme is necessary for the

organization, and whether there is a need and the purpose it should serve. It is also

important to establish what types of training to be offered and identify who should be

trained and who will offer the training. In addition, it should be established how effective

the training will be by evaluating against set standards and benchmarks and means of

identifying resultant changes (Palmer 1998).

Training is both important and expensive. Organizations therefore have to ensure that

implementation of training programme is effective by selecting the right programmes for

the right people under the right conditions. A systematic approach to training is thus

18

recommendable. Odhiambo (2004) outlines the advantages of training as: maintenance of

sufficient and suitable range of skills among employees, development of knowledge and

skills in the workforce, harnessing of work experience and other forms of on the job

development in a planned way, achievement of improved job performance and

productivity improved product quality, improved service to customers and increased

motivation among employees. In addition, the benefits of training to individual

employees include: increased personal repertoire of skills, job satisfaction, increased

value in the labour market, added abilities that improve effectiveness, greater motivation

and improved prospects of internal promotion and career development (Harrell and

Mackoy, 2005).

Performance appraisal on employees acts as an indicator of and provides insight as to

how each employee is performing his task. Appraisal facilitates: identification of

employee strengths, weaknesses and potentials points out areas of improvement, helps in

setting out of training needs, clarification of potential performance and career

advancement opportunities, encourages and motives by providing feedback and provides

information for manpower planning (Reichheld, 2011). Many organizations are now

using performance appraisal in order to identify the training needs that an employee

would require and specific areas that may need to be looked at in order to work on an

individual‟s weakness or improve on their strength for increased performance. It is the

process of systematically evaluating each employee‟s job-related strengths and weakness

and determining ways to improve on his or her performance (Gary, 2006).

2.4.3 Employees Training as Result of Changing Environment

According to Day (2010), training is a process which is planned to facilitate learning so

that people can become more effective in carrying out aspects of their work. Training is a

systematic modification of behaviors through learning which occurs as a result of

education instruction development and planned experience. Training is a lifelong learning

which has the aim of improving knowledge, skills and competences of employees within

a personal, civic, social and employment related perspective. According to Oliver (2009),

training is a continuing investment in the most valuable of all our national resources

people. Gunga (2009), postulates that an organization's decision whether or not to train its

workers affects the overall economy, even if the firm does not factor the economy into its

decision. If all firms within an industry fail to train their workers, the whole economy

19

suffers. Hence, training workers is a type of public good, a category that encompasses a

broad range of social dilemmas. Employees face a similar dilemma in their choice of how

much to contribute to the overall productivity of the organization.

A changing environment that affects performance management could affect the baseline

benefits and the costs of training. For example, the introduction of a new technology may

render past training more or less useful. If the introduction is gradual, the industry can

adapt to it smoothly. If the introduction is sudden, the change may be very disruptive. The

changes in performance management affects the operations of employees and the trained

employees may partially lose their advantage over the employees who have not been

trained (Gronroos, 2007). Employees who have not been trained are assumed to be

unaffected. The firms that train will perform better on average than ones that do not. If the

changing performance management lessens the benefits of training, the likelihood that the

firms will train decreases, but as long as the rate of performance management loss is not

too high, industries that train will accrue higher utilities on average than ones that do not.

If the performance management changes abruptly, the effect on trained employees can be

sudden and large. For instance, if the employees were trained to exploit one technology,

they may not have the set of skills necessary to deploy a radically new one (Mukherjee

and Malhotra, 2006).

Training helps to improve individual, teams, and corporate performance in terms of

output quality, speed and overall productivity. It improves operational flexibility by

extending the range of skills possessed by an employee (multi-skilling). Moreover, it

attracts high quality employees by offering the trainees learning and development

opportunities, increasing their level of competence and enhancing their skills thus

enabling them to gain higher reward and progress within the organization (Asuquo,

2007). Again, training increases the commitment level of employees by encouraging them

to identify with the mission, vision and the objective of the organization.

Training helps manage change by increasing the understanding of the reason for change

and providing people with the knowledge and skills that they need to adjust to new

situations. It helps provide high level of services to shareholders who include clients,

employees, shareholders, management, and suppliers thus improving the image of the

company (Farrell, 2012). According to Nabatanzi (2009) training has the following

benefits: Greater productivity and quality of end products, less scrap or spoiled work,

20

adoptability to new methods, less need for close supervision, fewer accidents and greater

job satisfaction showing itself in lower labour turnover and less absenteeism.

2.5 Chapter Summary

This study sought to add to the existing knowledge gap of customer satisfaction

especially factors influencing customer satisfaction to SACCOs. This research established

among other study the influence of Information Communication and Technology (ICT),

influence of quality of service/products, and influence of staff training and qualification

on customer satisfaction. The next chapter reviewed the study‟s methodology indicating

how data will be collected and analyzed.

21

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter describes the methods and procedures that was used to carry out the study to

answer the research questions stated in chapter one. The chapter presented a description

of the population, sampling design, research procedures and the data analysis methods

used during the study. The researcher used a questionnaire as the data collection

instrument.

3.2 Research Design

Cooper and Schildler (2003) defined research design as the blue print or plan for fulfilling

the objectives and answering research questions. This study adopted a descriptive

approach. According to Schindler and Coopers (2003), descriptive studies are more

formalized and typically structured with clearly stated hypotheses or investigative

questions. It serves a variety of research objective such as descriptions of phenomenon or

characteristics associated with a subject population, estimates of proportions of a

population that have these characteristics and discovery of associations among different

variables. This study adopted a descriptive design since it had a variety of research

questions associated with a subject population.

3.3 Population and Sampling Design

3.3.1. Population

In this study the target population refers to group of individuals, items from which as

sample taken for measurement. Kombo and Tromp (2006), states that it is a complete set

of cases or group members. The population of this study includes all the members of

Balozi SACCO. The Balozi SACCO had 1075 members. The members are drawn from

USAID, KK Guards, CDC, PC and others (BSS, 2013) as shown in Table 3.1. This

population formed the basis from which the sample of this study was drawn. The

population breakdowns of the employees in the different workstations were as shown

below;

22

Table 3.1: Population Distribution

Workstations Population Percentage

USAID 302 28

State 212 20

WRP 143 13

KK Guards 205 19

CDC 127 12

PC 61 6

Others 25 2

Total 1075 100

Source: BSS (2013)

3.3.2 Sampling Design

3.3.2.1 Sampling Frame

Sampling frame is the list from which the potential respondents are drawn. It is a

complete list of all cases in the population from which the same is drawn (Stevens, 1991).

In this study the sampling frame were number of all Balozi SACCO members. The

sampling frame for the study was 1075 members. This frame was provided by Balozi

SACCO.

3.3.2.1 Sampling Technique

Stratified random sampling method was used to determine the sample size from the

members. This method involved grouping members of the population into relatively

homogenous sub populations or strata and to help the researcher‟s achieved the desired

representation of the various sub populations. After the population has been divided into

appropriate strata, a simple random sample is then taken within each stratum, Cooper and

Schindler (2003). A simple random sampling was found appropriate because it ensured

that all employees had equal chance of being included in the sample and the data was

generalizable within a margin of error Mugenda and Mugenda, (2003).

23

3.3.2.2 Sample size

According to Mugenda and Mugenda, (2003) a researcher‟s choice of a sample size

should be governed by; the level of certainty that the characteristics of the data collected

represented the characteristics of the entire population, the accuracy that the researcher

required for any estimates made from the sample, the types of analyses undertaken in the

research study and finally the size of the total population from which the sample is being

drawn. The sample of 108 members was drawn out of the target population as displayed

in Table 3.2

Table 3.2: Sample Size

Population category Target population Sample Size

USAID 302 30

WRP 143 14

STATE 212 20

KK GUARDS 205 21

Peace Corp 61 6

CDC 127 14

Others 25 3

TOTAL 1075 108

3.4 Data Collection Methods

In this study a questionnaire was the sole data collection tool used to conduct primary

data. The questionnaire was ideal because the researcher gave the respondents time to

respond to the items during their free time bearing in mind that they were administered

when some of the respondents were on duty. The questionnaire was semi structured with

both closed ended questions and open ended questions were used to elicit more

information from respondents to complete any missing links. Likert scale questions were

also used to add quality of data by measuring the extent of responses given. The first

section focused on the demographics of the respondents, section two aimed at evaluating

24

Information Communication and Technology (ICT) and its influence on customer

satisfaction, section three was based on quality service/product and its influence on

customer satisfaction questions while section four solicited information on staff training

and qualification and its influence on customer satisfaction.

3.5 Research Procedure

A pilot testing of the questionnaire was done using ten respondents and they were

distributed in person by the researcher in a span of four days. The researcher then had the

opportunity to learn the various weaknesses of the questions and correct them before the

questionnaire was applied to collect data more widely (Gatara, 2010). The respondents

were issued with questionnaires to fill by themselves by the researcher using drop and

pick method. The research assured respondents of confidentiality on the information

provided. It took a period of three weeks to collect the questionnaires. This gave them

ample time to respond to the questionnaire and sought clarification where needed.

3.6 Data Analysis Method

Once the data was collected it was checked for completeness ready for analysis. The data

was first coded according to the themes researched on the research. The research was

both quantitative and qualitative in nature. This implies that both descriptive statistics and

content analysis were employed. Frequency tables were produced using the Statistical

Package for Social Sciences (SPSS) package. This is to give the distribution of responses

in the questionnaire in percentage form. Inferential statistics was applied using

multivariate regression to determine the relative importance of each of the variables with

respect customer satisfaction. The data was presented using tables and figures.

3.7 Chapter Summary

The chapter described the methodology that was used in the study. The research design

was descriptive in nature. The population was the employees of Balozi SACCO located in

Nairobi County. The sample size and the sampling techniques as well as the questionnaire

as a primary data collection instrument were described. Chapter four comes next and

presents the findings of the research as collected from the respondents.

25

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

The chapter presents results from data analysis and findings. The purpose of the study

was to investigate the factors that influence customer satisfaction in Savings and Credits

Cooperatives (SACCOs) in Kenya. The research was conducted across the members of

Balozi SACCO and members of management. Data was collected from seventy four (74)

respondents out of the 108 targeted indicating a 68.5% response rate. The data collected

was analyzed using Statistical Packages for Social Sciences (SPSS). The results and

findings were presented as shown below.

4.2 Background Information

4.2.1. Gender of Respondents

Out of the 74 respondents, 50% (37) of the respondents were male, while 50% percent

(37) respondents were female.

Figure 4.1: Gender of Respondents

4.2.2 Position in the SACCO

The study sought to establish the respondent‟s position in the SACCO. 70 (97.2%)

respondents were members, while 2 (2.8%) were in the management. This indicated that

the majority of the respondents were members as indicated in the graph presentation

below.

26

Figure 4.2: Position in the SACCO

4.2.3 Years in the SACCO

The respondents were asked to indicate the years they have been in the SACCO. From the

respondents, 13.7% of the respondents indicated they have in the SACCO for less than 5

years, 27.4% of the respondents indicated they have been in the SACCO between 5 – 7

years, 30.1% have been in the SACCO between 11 – 15 years and 28.8% have been in the

SACCO for over 15 years. These data was further disaggregated by gender as in Figure

4.3 below.

Figure: 4.3: Years in Sacco by Gender

97.2

2.8

.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Member Manager

Position in Sacco

Resp

onde

nt p

ositi

on in

Sacc

o

.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Male Female

Gender

Year

s in

Sac

co

Less than 5 years

5-10 years

11-15 years

Over 15 years

27

4.2.4 Level of Education

Respondents were asked to indicate their highest level of education attained. The purpose

was to determine the education status of the respondents. According to the findings 6.8%

represented O level holders, diploma and bachelor degree holders tied with a 34.2%,

master‟s holders represented 15.1% and certificate holders represented by 9.6% of the

respondents.

Table 4.1: Level of Education

Gender Level of education attained Total

O level Diploma Bachelors Masters Certificate

Male 11.1% 30.6% 25.0% 22.2% 11.1% 100.0%

Female 2.7% 37.8% 43.2% 8.1% 8.1% 100.0%

Total 6.8% 34.2% 34.2% 15.1% 9.6% 100.0%

4.3 Customer Service and it Influence on Customer Satisfaction

4.3.1 Level of Service Satisfaction

The respondents were asked to rate the level of service satisfaction at Balozi SACCO.

The purpose was to know the level of satisfaction in the service delivery at the SACCO.

Data collected indicated the level of satisfaction was high with a 66% of the respondents.

According to the responses 20% indicated to be highly satisfied while 14% were fairly

satisfied. The findings are summarized on the pie chart below in Figure 4.4.

28

Figure 4.4 Level of Service Satisfaction

4.3.2 Contribution to the level of satisfaction/ dissatisfaction

When respondents were asked as to what contributed to the level of satisfaction, the

highest response of 26% responded to be because of “good services” 13% said “quick

responses to queries” 9% “quality services”, 7% “loan processing has improved” and

“Time assurance of loans and dividends”

4.3.3 Reasons for Dissatisfaction

Those respondents who cited dissatisfaction the highest percentage of 33% cited slow

services while the lowest of 17% cited defaulting loans, degree of responsiveness is low,

delayed loan processing as well as slow disbursement of loans.

29

Figure 4.5: Reasons for Dissatisfaction

4.3.4 Resignation from the SACCO

When the respondents were asked if they have ever thought of resigning from the

SACCO, 83.6% said “no” while 16.4% said “yes” as illustrated in Figure 4.6

Figure 4.6: Resignation from the SACCO

30

4.4 Information Communication and Technology (ICT) Influence on Customer

Satisfaction

4.4.1 Efficiency of Services

The respondents were asked to state the level of efficiency of the electronic transaction

services. The majority of 58% responded as services to be being efficient, 24% stated

highly efficient and 18% with fairly efficient. These results are illustrated on Figure 4.7.

Figure 4.7: Efficiency of Services

4.4.2 Common Method of Communication

Respondents were asked which is the most common methods of communication. Most

respondent 46.3% cited email to be the most common method, followed by telephone

with 38.3%, letters with 13.% and 2.0% for short messaging services (SMS). This is

illustrated on Figure 4.4.2. The data was further subjected to multiple response analysis

from the total responses of 149. The results from this analysis are displayed in figure 4.8

below.

Highly efficient

24%

Efficient

58%

Fairly efficient

18%

31

Figure 4.8: Most Common Method of Communication

4.4.3 Phone Banking Service

The member respondents were asked if the SACCO provided phone banking services like

MPESA. 85% of the respondents indicated No while 15% indicated yes as illustrated on

Figure 4.9. However, when the managers were asked the same questions, they responded

“No”. The managers‟ responses are displayed in Table 4.2.

Figure: 4.9: Availability of Phone Banking

38.3%

2.0%

46.3%

13.4%

.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Telephone Sms email Letters

Method of communication

Resp

onde

nt o

pini

on o

n m

etho

d of

com

mun

icat

ion

AVAILABILITY OF PHONE BANKINGYes

15%

No

85%

32

Table: 4.2: Total Responses by Position in SACCO

Position in SACCO

Member

Count

Yes No Total

11 59 70

% within

Position in a

SACCO

15.7% 84.3% 100.0%

Manager Count 0 1 1

% within

Position in a

SACCO

.0% 100.0% 100.0%

IT

manager

Count 0 1 1

% within

Position in a

SACCO

.0% 100.0% 100.0%

Total Count 11 61 72

% within

Position in a

SACCO

15.3% 84.7% 100.0%

4.4.4 SACCOs Website

The respondents were asked to state whether the SACCOs website is up to date and

responsive. About 76% of the respondents responded with a Yes while 24% responded

with a No. Figure 4.10 has summarized these findings.

33

Figure 4.10: SACCO Website Status

4.4.5 Suggestions to Improve Current Status

The member respondents were asked to suggest what would improve the current status.

30% of the respondents suggested the website to be updated regularly. Closely related

was 20% members who also suggested the website to be updated with the member‟s

current loan repayment status. Another 10% suggested for a creation of a more interactive

portal. The IT manager suggested creating awareness to members on new tools of

payment. A table 4.3 below displays these findings.

Yes, 75.7

No, 24.3

.0

20.0

40.0

60.0

80.0

Yes No

34

Table: 4.3: Suggestions to Improve Current Status

Improving the current status Frequency Valid Percent

Regularly update the website 10 31.3

Update website with current payment status 6 18.8

Create more interactive portal 3 9.4

Create Mpesa pay bill number 2 6.3

Update individual payments regularly 2 6.3

Create awareness to members on new tools of payment 1 3.1

Improve to track defaulter timely 1 3.1

Introduce mobile banking 1 3.1

Need to network and be more responsive to customers 1 3.1

Online banking services 1 3.1

Respond promptly to queries 1 3.1

To update the statements memory 1 3.1

Update allotments more promptly 1 3.1

Update contributions and beneficiaries information 1 3.1

Total 32 100.0

4.5 SACCOs Products and their Influence on Customer Satisfaction

4.5.1 Rating of Products Offered

The respondents were asked to rate how popular the loan product offered is. According

to the study, 97% of the respondents rated them as popular while 3% rated them as

unpopular. Figure 4.11 has summarized these findings.

Figure: 4.11: Rating of Products Offered

4.5.2 Rate of Product offered

The respondents were asked to state whether the current products meet their needs.

Among the respondents who responded Yes the products meet their needs, 97% of them

said the loan products are popular, while about 3% of the respondents who said the

Not popular 3%

Popular 97%

35

product do meet their needs, said the products are not popular. These findings are further

summarized in Table 4.4 below. On correlating products offered and SACCO members

satisfaction it was established that there was a significant on the product offered to

customers with a P-Value of <0.001.

Table 4.4: Rate of Products Offered

Not

popular Popular Total

Does the current products offered meet customers'

needs

Yes 2.8% 97.2% 100.0%

No .0% 100.0% 100.0%

4.5.3 Most Popular Product

When respondents were asked to state the most popular product 32% of the respondents

indicated Normal loan, Insta Loan came second with 28%. School fees was third with

9.5%. The other products had minimal ratings. The findings are summarized in the table

4.5 below.

Table: 4.5: Most Popular Product

Frequency Percent

Dividends 2 2.7

Emergency loans 2 2.7

Insta loan 21 28.4

Insta plus 1 1.4

Investment 1 1.4

Normal loan 24 32.4

Quick pesa 5 6.8

School fees 7 9.5

Total 63 85.1

4.5.4 Least Popular Product

When respondents were asked to state least popular product most respondents said it is

quick pesa with 33.3%, followed by normal and insta plus with 25% each and lastly insta.

The IT manager indicated quick pesa to be the least popular. The findings are

summarized in the Figure 4.12 below

36

Figure 4.12: Least Popular Product

4.5.5 Additional Products Suggested

When respondents were asked to suggest which products they would like to be added,

22% of the members and the manager suggested loans on mortgage, 12% suggested

online application for emergency and quick pesa, and 11% suggested pay of emergency

using MPESA. The IT manager suggested an introduction of a new product which is

guaranteed by collateral and not by guarantors. Table 4.6 illustrates these findings.

Table 4.6 Additional Products Suggested

Member Manager IT manager

F % F % F %

Give mortgage loans 2 22.2 0 0 1 100

Include members has guaranteed and update

on website

1 11.1 0 0 0 0

Introduce new product which is guaranteed by

a collateral but not by guarantors

0 0 1 100 0 0

Investment loans to finance investment

projects

1 11.1 0 0 0 0

Lower interest rate 2 22.2 0 0 0 0

Online loan application for emergency and

quick pesa

1 11.1 0 0 0 0

Pay emergency loans using Mpesa 1 11.1 0 0 0 0

Update on needed products 1 11.1 0 0 0 0

16.7

25.0 25.0

33.3

.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Insta loan Insta plus Normal loan Quick pesa

Re

spo

nd

en

t o

pin

ion

on

leas

t p

op

ula

r lo

an

Loan products

37

4.6 Staff Training and Responsiveness’ Influence on Customer Satisfaction

4.6.1 SACCO Employees Professionalism

When respondents were asked to rate the professionalism of SACCO employees 26.8% of

the members thought they were highly professional, while 69% of the members said they

were professional and 3% rated them unprofessional. The IT manager and Manager said

they were highly professional and professional respectively. These findings are illustrated

in Table 4.7.

Table 4.7: SACCO Employees’ Professionalism

Highly professional Professional Unprofessional Total

Position in a

SACCO

19 49 3 71

Member 26.8% 69.0% 4.2% 100.0%

Manager 0 1 0 1

.0% 100.0% .0% 100.0%

IT manager 1 0 0 1

100.0% .0% .0% 100.0%

Total 20 50 3 73

27.4% 68.5% 4.1% 100.0%

4.6.2 SACCO Employees Professionalism

When respondents were asked to rate the level of responsiveness of SACCO employees

31.5% indicated they are highly responsive, 61.6% of the respondents said they were

responsive, while 6.8 thought they were unresponsive. These findings are displayed in

figure 4.13.

38

Figure 4.13: SACCO Employees’ Responsiveness

4.6.3 SACCO Employees’ Courteousness

When respondents were asked to rate the level of courteousness of SACCO employees

31% indicated they are highly courteous, 67.6% of the respondents said they were

courteous, while 1% thought they were discourteous. When the IT Manager was asked

the same question indicated SACCO staff are highly professional and the Manager

indicating they were professional. These findings are displayed in Table 4.9. The Chi-

square tests showed there was statistical significant difference on the level of variable.

There was a statistical significant difference on the level of courteousness of SACCO

employees with a P-Value of <0.001.

Table 4.8: Chi-Square Tests

Value df

Asymp. Sig.

(2-sided)

Pearson Chi-Square 49.671 2 <.001

31.5

61.6

6.8

.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Highly responsive Responsive Unresponsive

Re

spo

nd

en

t o

pin

ion

on

re

spo

nsi

ne

ss

Rate of responsiveness

39

Table 4.9: SACCO Employees’ Courteousness

Frequency Percent Valid Percent

Highly courteous 22 29.7 30.1

Courteous 50 67.6 68.5

Discourteous 1 1.4 1.4

Total 73 98.6 100.0

System 1 1.4

74 100.0

4.6.4 Suggested Recommendations for SACCO Employees

When respondents were asked what they would recommend for Balozi SACCO

employees, 11.8% of the respondents stated they would recommend SACCO employees

to be more responsive and faster in their services. An equal 11.8% of the respondents

indicated they are doing a good job. About 9% of the respondents recommended they

improve their customer relations. About 6% of the respondents indicated they be more

responsive to clarifications and another 6% of the respondent recommended training on

confidentiality. Table 4.10 illustrates all the respondents‟ responses on recommendations.

40

Table 4.10: Recommendation for SACCO Employees

Responses Frequency

Valid

Percent

Be more responsive and faster in their services 4 11.8

They are doing a good job 4 11.8

Improve on customer relations 3 8.8

Be more responsive to clarification 2 5.9

Train employees on confidentiality 2 5.9

Be more proactive in helping to recover defaulters 1 2.9

Be more responsive and guide members 1 2.9

Call back as they promise 1 2.9

Continuous learn IT to keep up with the changes in the market 1 2.9

Continuously improve their professionalism by attending

classes to learn what their peers from other Sacco have

1 2.9

Continuous development is necessary 1 2.9

Go for refresher course for services 1 2.9

Keep up the professional work 1 2.9

Lower interest charges 1 2.9

More training on handling customers 1 2.9

There is room for improved on customer case 1 2.9

They be more professional 1 2.9

To be considerate of all members interest 1 2.9

To be more proactive and give prompt accurate feedback 1 2.9

To know importance of members 1 2.9

Train employees to improve customer care 1 2.9

Treat everyone equally 1 2.9

Update members in case of any changes 1 2.9

Update new members on status 1 2.9

Total 34 100.0

41

4.6.5 Respondents Additional Comments

When respondents were asked to provide additional comments, majority of the comments

were featuring loan defaulters. A good number indicated they would like a MPESA pay

bill number introduced. Table 4.11 displays all the additional comments.

Table 4.11: Respondents Additional Comments

Responses Frequency

Valid

Percent

Reduce interest rates 3 14.3

Balozi Sacco is professionally managed 1 4.8

Borrow what other Sacco are doing to improve their services 1 4.8

Create Mpesa for payment of bills on clearing small amounts 1 4.8

Create pay bill number 1 4.8

Device a way of handling defaulters 1 4.8

Employees to keep up the good work 1 4.8

Find alternative measures to recover defaulting loans 1 4.8

Follow defaulters properly when they default 1 4.8

Look for a good way of dealing with defaulters 1 4.8

Lower the benevolence fund to 50 shillings 1 4.8

More efficient and responsive output 1 4.8

Put a copier either free or charge than people doing copies out

which is time waiting to some people

1 4.8

Reduce welfare fees 1 4.8

Regular training for staff is good for any organization 1 4.8

Reward people who attend general meeting 1 4.8

Services are within normal requirements 1 4.8

Shows attachment stressing guarantors, may / could fear taking

loans

1 4.8

To know whom they are talking to on phone 1 4.8

Total 21 100.0

42

4.6.5 Correlation Analysis

The researcher run a correlation analysis to establish whether there is a relationship

between variables and tested whether there is a statistical significant difference between

them. It was established that there is positive and negative relationships between

variables. On correlating electronic transaction efficiency and level of satisfaction it was

established that there was a significance on the electronic transaction efficiency and level

of satisfaction with a P-Value = 0.003. There was also a positive relationship with

Pearson correlation of 0.347**. The rating of loan products offered at Balozi showed a

negative relationship with level of satisfaction with Pearson correlation of - 0.066. There

was a statistical significant difference on the level of courteousness of SACCO employees

with a P-Value =0.006.

The Chi-square test showed that there was no significant difference between level of

service satisfaction and loan products offered. Table 4.12 provides an illustration of the

significance between the three research questions and customer satisfaction.

43

Table 4.12: Correlation between Research Question and Level of Satisfaction

Rate the level of service satisfaction

Electronic transaction

EFFICIENCY

Pearson

Correlation

.347**

Sig. (2-tailed) .003

N 72

Sacco's website is up to date

and responsive

Pearson

Correlation

.237*

Sig. (2-tailed) .042

N 74

How would you rate the loan

products offered

Pearson

Correlation

-.066

Sig. (2-tailed) .577

N 74

Does the current products

offered meet customers'

needs

Pearson

Correlation

-.066

Sig. (2-tailed) .577

N 74

Sacco employees

professionalism

Pearson

Correlation

.390**

Sig. (2-tailed) .001

N 73

Sacco employees

responsiveness

Pearson

Correlation

.453**

Sig. (2-tailed) .000

N 73

How would you rate of level

of courtesy of the Sacco

employees

Pearson

Correlation

.320**

Sig. (2-tailed) .006

N 73

44

** Shows that the test was carried out at 95% while the * shows that the test was carried

out at 90% confidence interval. Sig. (2-tailed) is the normal curve

4.7 Chapter Summary

The chapter explains the procedure followed in data collecting and analyzing for this

study. The results of the data analysis are then presented systematically in line with

research questions presented in Section 1.4 of this study. The analysis aimed at

highlighting descriptive characteristics of the data collected as well as establishing

statistical relationships between the various variables that would help in understanding

the factors that affect customer satisfaction in SACCOs and suggestions solutions to

achieve customer satisfaction. Chapter five discusses the findings draw conclusion and

give recommendations.

45

CHAPTER FIVE

5.0 DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

The purpose of this study is to investigate the factors that influence customer satisfaction

in SACCOs. This chapter aims at addressing two major areas. The first being a summary

of findings presented in chapter 4 in a manner that answers research questions and

secondly to compare these findings with the previous studies as presented in chapter 2 of

this study. It also presents major conclusions and recommendations for further studies.

5.2 Summary

To address the purpose of this study which was to investigate the factors that influence

customer satisfaction the research was guided by the following research questions; to

determine whether Information Communication Technology (ICT) influence customer

satisfaction, to determine whether quality products/services influence customer

satisfaction and to determine whether staff training and qualification influence customer

satisfaction.

This study adopted a descriptive approach. The study targeted Balozi Sacco 1075

members. The members were drawn from USAID, KK Guards, CDC, PC and others. The

population was stratified based on various strata i.e. workstations. The sample frame was

developed from entire Balozi member ship. A sample of 108 was drawn from the study

population. Out of the sample of 108, the total respondents were 74 representing a 68%

response rate. The study engaged the use of structured questionnaires that was pilot tested

in order to ensure questions asked were relevant, had data validity as well as reliability.

Data coding and cleaning was done. Analysis was done using SPSS to generate

descriptive statistics, for instance the frequencies as well as the percentages presented on

figures and tables. Further analysis was done using correlation analysis to establish the

relationship between the three research questions and the various variables.

Data collected indicated the level of satisfaction in the SACCOs was high with a 68% of

the respondents. When respondents were asked as to what contributed to the level of

satisfaction, the highest response of 26% responded to be because of “good services”.

46

Majority of the respondents (83.6%) never thought of ever resigning from the SACCO.

On the level of efficiency of the electronic transaction services majority of the responded

(58%) were of the opinion that services were efficient. Respondents were asked which

was the most common methods of communication were. Most respondent 46.3% cited

email to be the most common method. The member respondents were asked if the

SACCO provided phone banking services like MPESA where 85% who were the

majority disagreed. The respondents were asked to state whether the SACCOs website is

up to date and responsive where 76% who were the majority agreed. The member

respondents were asked to suggest what would improve the current status where 30%

who were the majority suggested the website to be updated regularly.

According to the study findings 97% who were the majority rated the loan product

offered as popular. The respondents were asked to state whether the current products meet

their needs. Majority (97%) agreed that the products meet their needs. When respondents

were asked to state the most popular product 32% of the respondents indicated Normal

loan. The least popular product most respondents said was quick pesa with 33.3%. While

asked to suggest which products they would like to be added 22% who were the majority

indicated loans on mortgage. On rating the level of responsiveness of SACCO employees

61.6% who were the majority agreed.

The study shows that 67.6% who were the majority agreed that the SACCO employees

were courteous. When respondents were asked what they would recommend for Balozi

SACCO employees, majority as shown by11.8% stated they would recommend SACCO

employees to be more responsive and faster in their services. An equal 11.8% of the

respondents indicated they are doing a good job

5.3 Discussion

This section gives the researcher‟s discussion on the study findings obtained where the

findings are compared with the findings of earlier studies in the literature review.

5.3.1 Information Communication Technology Influence on Customer Satisfaction

From the findings majority of the respondents believed that ICT can improve the level of

interactions and efficiency of services. Most respondents indicated electronic transactions

are generally efficient with a 23%stating to be highly efficient, 58% as efficient and 18%

47

as fairly efficient. This is in line with Nabatanzi (2009) who hold the view that websites

enable interactions between consumers and providers of products and service. This view

can is also supported by Fournier (2004). In his view SACCOs need to modernize their

management systems by adopting information technology in their management to reduce

transaction costs and improve the quality of services to their members.

ICT innovations have the potential for changing the competitive game for any SACCO.

On the other hand, the size of ICT investments put increasing pressure on managers to

assess its business value. One key to this dilemma is to improve the ability to measure

and track the impact of IT on productivity. The goal of every information systems, based

in any SACCO is to improve performance on the job and this performance efficiency is

only achieved when ICT is accepted and used warmly by the concern employees in

organizations (Reichheld, 2011). In their quest for development, many SACCOs put great

hope in use of ICT.

The SACCOs increasingly have turned toward ATM and other computer technology like

prepaid cards, loyalty cards, debit cards and even chip cards, to reduce the high costs

associated with maintaining traditional “brick and mortar” branches staffed by tellers.

Now the SACCO are using Information Technology in infront-office processing,

mortgage and loan application processing, and the electronic funds transfer to more

strategic innovations such as automated teller machines and new kinds of securities

(Gary, 2006).

Success in the electronic in service delivery by the SACCO is measured in the eyes of the

customer. A SACCO has to profitably meet the needs of customers and continuously

improve its ability to do so. It has to be accurate, reliable, helpful and understanding. The

goal is not simply to satisfy customers but to positively delight them. The specific things

that delight the customer vary from industry to industry and from product to product. But

most customers want the same things. According to Whinston (2007), customers are

interested in quality, they desire good and effective service delivery, they want flexibility

so that the specific product or service is obtained, and they covet value by not wanting to

pay a price that exceeds the value received from the product. Therefore, SACCOs in

particular, need rebuild a customer focused SACCO with new improved processes,

modern technology, a competitive range of delivery channels and focusing services on the

best customers. This of course requires the radical remodeling of the SACCOs delivery

48

channels and business process engineering resulting in significantly improved: process

excellence, speed of delivery, and value to customers. Fournier (2004) asserts that

through these, customers‟ perception of and reaction to electronic SACCO products and

services would be positive.

In summary the survey appreciates the fact that customer satisfaction is influenced by the

availability and efficiency of ICT services, quality products and services offered and the

staff training and qualifications to handle SACCO member clients.

5.3.2 Quality Services/Products Influence on Customer Satisfaction

The study sought to determine the factors that influence customer satisfaction in Balozi

SACCO. A significant majority of the respondents both members and managers were

satisfied and highly satisfied with Balozi SACCO. 19% of the members were highly

satisfied, 66.7% satisfying and 13.9% fairly satisfying. The Managers were equally

satisfied with the SACCO. These findings correlated with Olanda (2006) findings who

assert that the level of satisfaction is influenced by various factors which are both internal

and external. When cross tabulation analysis was run, for instance the managers indicated

the commitment of staff. That SACCO staffs are proactive and the knowledge of

employee‟s that customers are their employers influenced his satisfaction level. A high

majority of members indicated good services to be a main contributor to their level of

satisfaction. The findings were further supported by the fact that most members 62% have

been in the SACCO for more than 5 Years.

According to Develtere and Pollet (2009), SACCO customers‟ needs as reflected from the

results could be classified into the following categories: borrowing, cash deposit and cash

management, domestic and international money transfer services, safe custody, business

advisory services and agency services. When a customer approaches a SACCO to borrow,

his expectation is that he will receive what he perceives as good rates which will enable

his business post a reasonable after- tax profit. A prospective borrower also expects that

his SACCO would give him longer tenor with moratorium period, especially if she/he is

embarking on a new project. Most borrowers are in search of a SACCO that could

disburse money in a timely manner, immediately after approval of the facility. SACCO

customers get dissatisfied when a SACCO places undue reliance on collateral instead of

looking at the profitability and degree of reliability of the borrower. SACCO customers

49

detest conditions that are erroneous in facility offer letters. Chaichi (2012) findings show

that SACCO should constantly evaluate if it is able or meeting the expectation of

customers. When performance falls short of what the customer desires, a search for a new

SACCO relationship may commence.

The study found that when customers who are net placers of funds deposit money, they

would want a SACCO that pays higher interest rates and is quick at adjusting the rate

upward in line with the dictates of the market. The findings were similar with Maghimbi

(2010) in that given the volatility of rates in the Kenyan environment, most SACCO

customers expect a shorter tenor that would enable them make investment changes

swiftly. What is paramount to the Kenyan SACCO depositor is the safety of his deposits.

Soundness of a SACCO is an issue of the perception of the customer. Therefore, each

SACCO should manage its own public image. A customer who places a deposit with a

SACCO is guided by the need to withdraw his money with ease at any of the advertised

branches. The frequent breakdowns in systems in some SACCOs do not promote

customer satisfaction (Levesque and McDougall, 2006). Also, if a system is slow or its

capacity is limited, it would affect the operations staff service delivery to customers.

The findings from the study show that many SACCOs‟ customers in Kenya are fully

aware of the positive developments in information technology and telecommunications

which led to the introduction of new delivery channels for Kenyan SACCOs‟ products

and services. A similar study by Oliver (2009) shows that the aim is to satisfy and get

customers delighted. Most customers however, still patronize the SACCO branches and

find interaction with human tellers as very important. It also finds that customers enjoying

electronic SACCO services are still not satisfied with the quality and efficiency of the

services. This is expressed in the number of times customers physically visit SACCOs

and length of time spent before such services are received. Customers‟ perception of and

reaction to these developments are issues of concern to both Government and SACCO.

Mukherjee (2004) points out that a lot need to be done to create confidence in the minds

of customers about the benefits and security of the new delivery channels. Lack of

patronage for electronic SACCO products is expressed in lack of confidence.

50

5.3.3 Staff Training and Responsiveness Influence on Customer Satisfaction

According to the study respondents view staff training and responsiveness to have an

influence to the satisfaction of SACCO members. According to Berry and Parasuraman

(2004) and Rams and Schindler (2010) customers use the five dimensions of integrity,

reliability, availability, responsiveness and functionality to form their judgment of service

quality. This study finding confirms this as majority of the respondents indicated their

satisfaction was greatly influenced by the responsiveness of SACCO employees. A total

of 98.5% of the respondents were highly satisfied or satisfied due to the SACCO

employees responsiveness.

The study found that each discerning customer expects his account officer to advise him

on alternative investment outlets. If a SACCO official is self-centered and refuses to

advise the customer on investment switching, in the long-run, the customer will feel

dissatisfied and change to another SACCO that is proactive in offering the required

advice. As insignificant as the dispatch of statement of account could be, customers,

particularly corporate organizations, expect their SACCO to make statements available as

and when due. These were the equivalent to Mukherjee (2004) and Ndaka (2008) study

which indicated that customers should be able to vouch for the accuracy and integrity of a

SACCO‟s entries in the statement of account. Frequent errors or reversal entries

appearing on statement of account could be a source of dissatisfaction to some customers.

The study found that customers expected their SACCO to be accurate in passing

instructions to third parties. This was also found to be similar with Wangondu, (2009) and

Dash and Mahaptra (2009) in that the customers would normally frown at delivery errors

or disbursement of wrong amounts. When a SACCO deducts, without informing his

customer, some charges from the principal sum, the customer could be dissatisfied. In

making transfers, SACCO customers expect that study work would be reduced to the

barest minimum or, at least, would not be allowed to jeopardize prompt delivery of funds.

Trading customers with network of branches, expect their SACCO to have a wide

network of branches and to have correspondent SACCO relationship.

Nyer (2006) and Imbuga (2005) suggest that it is expected that a SACCO that provides

business advisory services to its customer should ensure the quality and timeliness of

advice. Customers who enter into long term relationships with their SACCO expect them

51

to be partners in the business so that they can offer professional advice that could help

solve the customers‟ specific business problems. It is the expectations of customers that

their SACCO would demonstrate a sound understanding of the dynamics of their

businesses and the changes in the economic environment this correlated with these study

findings in that customers could be delighted when a SACCO obtains on time and

provides customers with copies of their analysis of the annual statements. Such analysis

should draw out the strategic implications of government policy shifts or initiatives on the

customer‟s business.

5.4 Conclusions

5.4.1 Information Communication Technology Influence on Customer Satisfaction

The study has sufficiently demonstrated that information communication technology

influence customer satisfaction. The low adoption of ICT causes slow feedback and slow

transaction response. Customers‟ perception of convenience seems to shift once they are

experienced on ICT, and they view slow or lack of ICT services as inconvenient. Slow

physical response to transactions is perceived as even more inconvenient.

Finally, the SACCO seemed to have staff with more experience in using technology-

based service delivery, which is one major factor that contributes to customer trust and

helps them decide whether to adopt the new technology. Adopters indicated that they

have more confidence using technology-based channel because of their experience in the

technology offered by Balozi Sacco.

5.4.2 Quality Services/products Influence on Customer Satisfaction

The study has exhaustively shown that services influence customer satisfaction; however

the loan products did not. The study found that the better the quality of services the higher

the satisfaction level.

The study established that loan products offered at Balozi showed a negative relationship

with level of satisfaction with Pearson correlation of - 0.066. There was a statistical

significant difference on the level of courteousness of SACCO employees with a P-Value

=0.006.

52

5.4.3 Staff training and Qualification Influence on Customer Satisfaction

The study findings statistically demonstrated staff training and qualification influence on

customer satisfaction. The study concludes that there was a major difference in customer

satisfaction between trained and untrained among employee at SACCO. At Balozi Sacco

all employees were treated to the same provisions such as regular training and evaluation.

The study also concludes that the highly rewarded employees had greater job satisfaction

and personal responsibility than the lowly rewarded employee at SACCO. This could be

attributed to the higher salaries and better working stipulations.

5.5 Recommendations

5.5.1 Recommendations for Improvement

Based on the findings the researcher recommends the following for service delivery

which will ensure customer satisfaction in the SACCOs;

5.5.1.1 Information Communication Technology Influence on Customer Satisfaction

The findings of this study has demonstrated the Information communication technology

do influence customer satisfaction. The respondents cited email as the most common and

preferred mode of communication. They also expressed desire to a have a website portal

for more interaction between members and managers. It is therefore recommended for a

study to assess the level of customer satisfaction in a SACCO where there is an

interactive portal. The study also recommends that the SACCOs should engage their

clients on ways of improving their services e.g. through customer satisfaction surveys and

implement the findings.

5.5.1.2 Quality Services/Products Influence on Customer Satisfaction

The findings of this study have demonstrated that quality products/services influence on

customer satisfaction. The majority of the respondents though satisfied with the state of

products and services, they expressed their desired for a product guaranteed by collateral

in addition to one on guarantors. The study also recommends that the SACCO should

adopt mechanism to repay through MPESA. It is recommended that a study to conducted

to assess the feasibility of the suggested products.

53

5.5.1.3 Staff Training and Responsiveness Influence on Customer Satisfaction

The findings of this study had demonstrated that staff training and qualification influence

on customer satisfaction. The majority of respondents stated staff professionalism,

responsiveness and courteousness did influence their satisfaction positively. This is

directly contributed by the SACCO staff training and qualification. The respondents gave

suggestions as to what they would recommend for SACCO employees. While the

majority respondents expressed satisfaction to the level of services provided by the

SACCO staff, some respondents suggested for improve on customer relations, train

employees to improve customer care among other suggestions for staff training and

development. It is therefore recommended that a study be carried out to assess the level of

satisfaction post customer care and customer relations refresher course.

5.5.2 Recommendations for further Studies

The research was designed to investigate the factors that influence customer satisfaction.

After reviewing the varied responses, a number of gaps which were outside the scope of

this research have emerged. Since the correlation analysis carried out showed that there is

no statistical significant difference between the level of satisfaction between the loan

products offered and customer satisfaction. The study recommended that further research

be carried to investigate other factors that may influence loan products offered in relation

to the level of customer satisfaction.

54

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APPENDICES

Appendix I: Introduction Letter

10th

March 2014

USIU- Africa

P.O Box 14634- 00800

Nairobi

REF: REQUEST FOR PARTICIPATION IN DATA COLLECTION EXERCISE

Dear Respondent,

I am a student at USIU. I am collecting data for my research project in partial fulfillment

of the requirements of Executive Masters in Organization Development.

This letter is to request for your cooperation in providing the information for all sections

of the questionnaire to enable me obtain the required information for this research. The

information collected herein is meant for academic purposes and will be treated with

utmost confidentiality. Your cooperation will be highly appreciated. Thank you for your

time.

Yours sincerely,

Emily W. Iruguthu

Student ID No. 640534

60

Appendix II: Research Questionnaire

Please tick [√] as appropriate.

SECTION A: BACKGROUND INFORMATION (Please tick the most appropriate)

1. Your gender Male Female

2. Position in the SACCO Member Manager IT manager

3. Years in the SACCO Less than 5

years

5 – 10 years 11-15

years

Over 15

years

4. Level of education

attained

O level Diploma Bachelors Masters

Other………………………………………………………………………………

SECTION B: CUSTOMER SATISFACTION (Please tick the most appropriate and

fill in the spaces where applicable)

5. How would you rate

the level of service

satisfaction at Balozi

sacco

Highly

satisfying

Satisfying Fairly

satisfying

Dissatisfying

6. What has contributed

to this satisfaction/

dissatisfaction

7. Have ever thought of

resigning from Balozi,

If yes, why

No Yes

8. What would you

recommend to

improve the current

status

…………………………………………………………

61

SECTION C: INFORMATION COMMUNICATION AND TECHNOLOGY

(ICT) (Please tick the most appropriate and fill in the spaces where applicable)

9. Electronic transactions

are

Highly

efficient

efficient fairly

efficient

Inefficient

10. How does the sacco

communication with

members

Telephone sms email letters

11. What is the most

common method of

communication

12. Does the sacco provide

phone banking like

mpesa

Yes No

13. Sacco‟s website is up to

date and responsive

Yes No

14. What would you suggest

to improve the current

status

SECTION D: PRODUCTS (Please tick the most appropriate and fill in the spaces

where applicable)

15. How would you rate the

loan products offered?

Popular Not popular

16. Does the current products

offered meet customers‟

needs

Yes No

17. Which is the most popular,

why

62

18 Which is the least popular,

why

19 What additional product(s)

would you suggest

SECTION E: STAFF TRAINING AND RESPONSIVENESS (Please tick the most

appropriate and fill in the spaces where applicable)

20 SACCO employees are

Highly

professional

Professional Unprofessional

21 SACCO employees are Highly

responsive

Responsive Unresponsive

22 How would you rate of

level of courtesy of the

SACCO employees

Highly

courteous

courteous discourteous

23 What would you

recommend for sacco

employees

24 Please provide any

additional comments: