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International Conference on Entrepreneurship (IConEnt-2016) “How Innovation could Improve the Performance and Productivity in Entrepreneurship?” March 17, 2016 Universitas Pelita Harapan, Tangerang – Indonesia

THE DEVELOPMENT OF MICROFINANCE CLIENT SATISFACTION MODEL TOWARD GRAMEEN REPLICATION INSTITUTION IN INDONESIA

Ahmad Hermanto1), Suharto2), Amilia Hasbullah3)

1,2,3)

Krisnadwipayana University, East Jakarta

e-mail: [email protected]

Abstract Nowadays, microfinance is recognized as one of approaches to overcome poverty alleviation in developing countries. Grameen replication method influenced the type of microfinance movement particularly in Indonesia. However, in its development into an established microfinance replication approach, Grameen replication is also facing the challenges on client satisfaction toward its activities. With respect to Grameen replication implemented group based activities and provide microfinance products, the solidarity group model and service quality deployed in this research. Therefore, this paper attempt to develop the framework on client satisfaction model as to Grameen replication institution. It is expected to become a basis measurement model which providing beneficial input for the microfinance movement in developing countries especially in Indonesia. Keywords: Microfinance, Grameen replication, client satisfaction, solidarity group, service quality.

1. Introduction Microfinance phenomenon and the role of Microfinance Institutions (MFI) is currently becomes one of the mainstream for efforts to increase revenue (income generation) of the poor, improving access to financial services for the products and services of venture capital , and poverty alleviation tools (Armendariz & Morduch, 2005; Bakhtiari, 2011; Gibbons & Meehan, 2002; Johnson & Rogaly, 1997 ; Imai, Arun, & Annim, 2010). MFI Grameen Bank is a cooperative / BPR in Indonesia, which runs financial services model by replicating the Grameen Bank

system. Generally MFIs in Indonesia, running its service to the community with conventional systems like national banks, in fact, MFI competeless with national banking or any other commercial banking. Among the national banking and commercial banking system applied by most MFI in Indonesia, thus Grameen Bank system is known with the alternative model by reflected from the success of Grameen Bank in Bangladesh. 32


Grameen Bank was introduced by Mohammad Yunus in the early 1976 (Yunus, 1998). He initiated the project for small loan in Jobra Village which finally became the Grameen Bank by 1983 as an independent financial institution.

Indonesia which adopted the Grameen Bank model. The numbers of institutions that carry out microfinance activities with the pattern of Grameen Bank in Indonesia on the one hand succesfully implemented microfinance

Experience has shown the success of Grameen Bank to provide financial services to poor clients in the villages, especially the women, numerous studied and replicated in more than 43 countries including Indonesia. Grameen Bank system is one system of

services program activity, but the other remained the realities associated with the output and the sustainability challenges of microfinance services with the Grameen Bank system. The products provided in Grameen

microfinance services that implement the group solidarity model, as a condition to obtain a loan on the MFI which applicated

Bank system are still faced with the fact that there are many among micro businesses generally poor , still trapped in practice

Grameen Bank system. The success of Grameen Bank in providing financial services to its customers, especially in poverty reduction is recognized worldwide. On October 13, 2006, the Norwegian Nobel Committee gave the award to Mohammad Yunus, a Nobel Peace Prize winner, and was considered a success in

moneylenders loan sharks or other highly incriminating them , and are still interested in the credit products offered by the other moneylenders . The implication also arise from product is determined by the level of micro business confident toward Grameen Bank system in Indonesia is relatively low. Thus,

combating poverty. In Indonesia, in the last 10 years the implementation of Grameen Bank replication system has been carried out by the institutions in implementing micro-credit programs, such as Yayasan Dharma Bhakti Parasahabat, Business Partner Foundation, Mitra Karya, PT. MBK Ventura, Cooperative

eventhough it is applied in Indonesia, but not spesifically deployed by micro business community to enlarge their business. On the other word, the branding factor of Grameen Bank in Indonesia is established yet. Those things, become a challenge for Microfinance Institutions (MFIs) which deploy Grameen Bank system to continue to

ASD, Mitra Dhuafa Foundation (Mitra Dhuafa Cooperative), and other microfinance institutions such as cooperatives and BMT (Sharia Cooperative) in various regions in

improve the quality, quantity and sustainability of its services, in order to maintain customer confidence by improving quality of products and services, and expand the branding system of Grameen Bank, so as 33


to provide maximum satisfaction for customers. Based on thus phenomenon, the quality of service (quality service) becomes important to consider the financial services provided by Grameen Bank system, in order

2. Literature Review 2.1 Marketing According to Kotler (2000) marketing is a social and managerial process in which individuals and groups obtain what they need and want by creating and exchanging

to meet customer satisfaction.An appropriate service quality is reflected by customer satisfaction on which its investment relationship sustain for any longer in Grameen Bank system. With respect to group solidarity which

products and value with others. Meanwhile, according to Stanton (2001), marketing is a total system of activities binis designed to carry out, pricing, promoting and distributing goods which can satisfy the desires and services to customers

become main charactheristic applied in Grameen Bank system, the Grameen replicator in the field is also exposed to the

by using a policy of product, price, promotion and distribution of mutual satisfaction, its definition shows that

situations in which solidarity group formed as a medium for lending have ups and downs in , on the one hand many groups are still very conducive to follow the rules of the loan, whilst there are some groups which function group has been significantly reduced so that to be dissolved.in Grameen Bank system, the solidarity group detemine

marketing as a human activity that is directed to meet and satisfy the needs and wants through an exchange process. The above explanation refers to the concept of Service - Profit Chain , which has brought various companies achieve success global.Service -profit Chain emphasizes the importance of people , both employees and

the solidarity loan which means the existence of solidarity group determine sustainability of loan disbursement in the group. Concurrently, it also is clear that the operational success of microfinance services with the Grameen Bank system is influenced by varius factors. Therefore, with respect to poverty alleviation, it needs to seek an

customers, and how their relationship could drive companies performance.Service -profit chain is the relationship between profitability ,customer loyalty, employee satisfaction, employee loyalty, and productivity .

appropriate model in which meet the MFI client satisfaction and the significant growth of MFI with Grameen Bank itself.

satisfaction is the provision of services with higher quality consistently. The key is to achieve or exceed the expectations of the people targeted. This means that the quality of service interpreted as the level of

2.2 Service Quality One way to differentiate

customer

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satisfaction with the services provided to the community. Since service is not a physical item, but an experience, service quality is strictly linked to customer satisfaction. Actually, customer's perception of quality is an

acces, communication, competence, courtesy, credibility, reliability, responsiveness, security, understanding, and tangible. Furthermore, Parasuraman (2005) conducted a study in focus groups (focus

antecedent of his/her satisfaction level with the service (Brady and Cronin, 2001; Falk et al.,2010). Service quality also could be defined as the overall characteristics of services in order to meet the needs that have been determined

groups), both users and service providers and found the result, that there is a very strong relationship between communication, competence, courtesy, credibility and security are then grouped into a single dimension, namely assurance. Concurrently,

(Coulter ,1998). Assessment on service quality is something that is complex because to assess

it also found a very strong relationship between acces and understanding which are then combined into a dimension of empathy.

service quality is might be different with assessing the quality of the product, particularly due to on its intangible and patterns of production and consumption that is running simultaneously. Besides the differences in these characteristics, in the assessment of service quality, customers are directly involved and

Finally Parasuraman (2005) proposed five dimensions of service quality. These five dimensions are:

participate in the service process, therefore the service quality is how consumer responded to the services consumed or perceived (Jasfar, 2002)

provide services in a timely manner (timeline) , in the same manner in accordance with the schedule that has been promised and without making mistakes every time the service is done . The attributes that existed in this dimensions are: a. Provide services as promised. b. Accountability of handling customer

2.2.1 Service Quality Dimension Parasuraman, Zeithamal and Berry (1995) conducted a research on some kind of industrial services. Before grouping into five dimensions, the three researchers have successfully identified ten factors assessed customers and are the main factors that determine the quality of services, namely:

Reliability Reliability is the ability to provide services promised precisely (accurately) and the ability to be trusted (dependenl ) , mainly

service issues. c. Provide good service to the customer at the first impression. d. Provide services on time.

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e. Provide information to customers about when services promised will be realized. Responsiveness Responsiveness is the willingness or desire of employees to assist and provide services

Emphaty Dimensions attitude of understand customers, personal

of empathy include contact personnel and companies to the needs and difficulties of good communication, and attention, the ease of

required by the customer. To let customers waiting, especially for no apparent reason, will produce a negative image that is not supposed to be happenned, except if the error is addressed quickly, it could be a memorable and be a pleasant experience. Attributes that

communication or relationship. Attributes that exist in this dimension are: a. Provide individual attention to customers. b. Employees who understand the wishes of its customers.

exist in this dimension are: a. Providing fast services. b .Willingness to help / assist customers.

Tangibles In this dimension, it is observed with the availability of physical facilities, equipment,

c . Prepare for and respond to handle the response the requests from customers.

and other means of communication as well as that which can and should exist in the service process. Attributes that exist in this dimension are: a. Modern equipment b. Attractive facility.

Assurance Assurance dimension covers knowledge, ability, friendliness, courtesy, and trustworthiness of contact personnel to eliminate the nature of the customer doubts and feel free from danger and risk. Attributes that exist in this dimension are: a. Employees who provide assurance in the form of confidence. b. Make customers feel safe when using company’s services. . c. Employees are polite. d. Employees who have extensive knowledge in order to answer questions from customers.

2.3 Group Solidarity Solidarity is a basic need for community to enhance its social life. Solidarity is integration, and the level and type of integration, shown by the people or groups of people and their neighbors (Jary, 1991). According to Hechter (1988) the solidarity of the group is the group's ability to influence the behavior of members to subject to various obligations and act on behalf of the group to ensure that the obligations will be fulfilled.his opinions about solidarity groups, in line with the definition of the group proposed by Konopka (1972) which 36


argued that a group into "groups" (meaning not just a collection of individuals), when the group create patterns of relationship, bonding, or the certain strength gives their members a feeling of togetherness and sense of belonging.

5. Members of the group come from one area / village (similarity region). This component is to ensure that among the group will get to know one another well, and will facilitate the service process by Grameen Bank Institution.

With respect to Grameen Bank’s main activity, Muhammad Yunus (1999) described the function of solidarity groups in the Grameen Bank system, associated with some of the theories of groups and sociology, the solidarity group has five dimensions as the

2.4 Client Satisfaction The fundamental question is what exactly makes the customer satisfied? For two decades, drivers of customer satisfaction is not inexhaustible discussed , in various

basis for this study, which are: 1. Support and customer’s protection. It is implemented in the process of loan

occasions and events , thousands or even tens of thousands of articles both theoretical as well as practical to try to review the drivers

application as well as the group members to free themselves from exploitation of moneylenders. 2. Behaviour improvement It’s improved the behavior of orientation activities for the group before obtaining their loan which aims to improve the behavior / credit discipline of group

of customer satisfaction . According to Yunanto (2008), there are five major driver customer satisfactions, namely: 1. The quality of the product Customer satisfied if after buying and using these products, it turns out good quality products. The quality of these products is a global dimension and there

member. 3. Moral responsibility It’s occurred among members of the group. It is basically shaped to help each loan repayment between one and the other through various source groups. 4. Group Approval As an agreement together with members

are at least six elements of quality of products: performance, durability, features, reliability, consistency, and design. 2. Price For sensitive customers usually low price is an important source of satisfaction because they will get a high money value.

of the group which implemented in the activities of admission of new members, and approval of the proposed loan of its members, as well as the approval of the loan application itself.

Component unimportant sensitive to price are not advantage

prices are relatively for those who are not price. Product quality and able to create a competitive in terms of client 37


satisfaction.these two aspects are relatively easy to be imitated. Through the development of technology, each company usually has the ability to create a quality product that is almost the same as competitors.Therefore, many companies

3. Research Methodology In respect of formulating the model of microfinance client satisfaction toward Grameen replication, those previous literature reviews are beneficial in order to equip this model.

that rely more on third driver. 3. The quality of service Quality of service is dependent on three elements: systems, technologies and people. The human factor is contributing about 70 %, so that the satisfaction with

3.1 Proposed Framework The exisiting literature on the effort to develop microfinance client satisfaction model could be generated from these approaches: group solidarity and service

the quality of services is usually difficult to be imitated. The configuration of attitude and behavior which in line with

quality approaches. The elements of these approaches described as follow.

the company's desire is not easy work. Improvements must be made from the process of recruitment, training, work culture, and the results are seen for 3 years. This concept is believed to have five service quality dimensions, namely reliability, responsiveness, assurance, empathy and tangible. 4. The emotional factor Customer satisfaction can be defined as a symbol of pride, self-confidence, a symbol of success, part of a group of important people and so on are examples of emotional values that underlie customer satisfaction. 5 . An access to find the product Customers will be more satisfied if relatively easy, comfortable and efficient in getting the product or service.

Tangibles

Responsiveness

Reliability

Assurance

Emphaty

Product Quality Service Quality Dimension

Price

Customer Satisfaction

Quality of service Emotional

Solidarity Group Approach

Support and Protection

Behavior Improvement

Moral Group Responsibility

Group Approval

Product Access

Regional Similarity

Fig. 1: Microfinance Client Satisfaction Model toward Grameen Replication Institution

This framework illustrated that the role of quality of service (independent variable) which covered dimensions of tangibels, responsiveness, realibilty, assurance and empathy and solidarity groups (independent variables) which cover these elements: support and protection, behaviour improvement, group moral responsibility, group approval and the similarity of the regional are considered very important in 38


influencing customer dependent variable).

satisfaction

(the

4. Discussion As demonstrated in Figure 1, service quality and group solidarity is predicted to obtain a

5. Conclusion The evolution of microfinance activities such as Grameen Bank Istitution has received much attention against poverty alleviation. This point of view has been examined in the

positive effect on microfinance customer satisfaction toward Grameen Bank Institution. Factors contained in the quality of service and solidarity groups are able to influence microfinance client satisfaction’s dimension.in any other word that the quality

literature and empirical studies. This paper attempted to seek its development from microfinance client satisfaction frame of reference. Thus, it embarked on developing the model of microfinance client satisfaction toward Grameen Bank Institution in

of service and solidarity groups simultaneously can be predicted derive positive effect on microfinance client

Indonesia. From the extensive review on the literature, it is found that two approaches whereas solidarity group and service quality

satisfaction. Based on the previous reference (Luthfi, 2009; Yunanto, 2008) it is also conceivable to interpret this model on the following feasibility whereas quality of service partially positive and significant impact on microfinance client satisfaction; solidarity groups partially positive and significant

would contributed significantly toward microfinance client satisfaction. This model is expected advantageous for Grameen Bank Institution in Indonesia to improve their performance and contingently preserve their client and desicively contribute to poverty reduction around the globe.

impact on microfinance client satisfaction. Based on this model, the Grameen Institution could possibly assess to what extent their performance toward their client satisfaction. The elements developed from these two approaches would convey beneficial input for Grameen Institution to improve their activiities with respect to client satisfaction point of view.

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Customer Perceptions and expectation. 1995, p.55 Zeithaml, Valerie A., and Bitner, Mary jo. (1996). “Service Marketing”. New York ; Mc Graw-Hill Companies. inc.

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