MBA Department,

Siam University, Bangkok

CHAPTER II

LITERATURE REVIEW

This chapter, literature review purposely, is divided into three parts: bank, customer satisfaction and

related researches. Firstly, it discussed general overview of the country wherein Sonali Bank was born and its

present services and products. It also provided the bank’s functional mechanism. Secondly, it discussed

different aspects of customer definitions and related theories by various people. Finally, it brought out related

researches that had conducted by previous researchers, and a summary of all what had been discussed in this

chapter.

2.1 CUSTOMER SATISFACTION DEFINITION

In the consumer marketing community, customer satisfaction has long been regarded as an important

goal and marketing tool (Reichheld & Schefter, 2000; Kotler, 2009). Customers are important for whatever

business it is. A customer of a bank and other businesses it does not differ. The customer in the bank does not

differ in the basic motivation from a supermarket shopper or a patient in a hospital; all they have a need in

common – the solving of personal problem (McMahon, 1992). Shieffer (as, cited in Kotler et al. (2009)

defined who is a customer and where she or he stands in business cycle - creating loyal customers is at the

heart of every business. But customer with different demographic, psychographic and socioeconomic has

different interest towards service/product (McMahon, 1992). And, it is not the ultimate target of a business as
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cleared by Kotler et al. (2009) that although the customer-centered firm seeks to create high customer

satisfaction, that is not its ultimate goal. If the company increases customer satisfaction by lowering its price

or increasing its service, the result may be lower profit.

However, it is obviously defined that the customer is the most important part of the product line.

Without someone to purchase our product, we might as well shut down the whole plant (McNealy, 1996).

Many businesses have to depend on customers in order to succeed in business. When we look comparatively

the ‘Traditional Organization Chart’ and ‘Modern Customer-oriented Chart’ (Kotler et al. 2009) it clearly

proves that in ancient time the owner or top manager was playing an important role. Today it was not. It

becomes opposite almost every industry has to pay more attention to customer satisfaction.

Customer satisfaction is divided into two levels; a transaction-specific assessment and an overall

assessment (Karnjira, 2011). She further summarized the works of Oliver (1980, 1981) of the first level of

satisfaction that it is based on attitude and emotional reaction. And, according to Taylor and Baker (1994) the

latter level is based on experiences of a customer. Harris (1996) shared that customer’s perception comes from

comparing past purchase and consumption experience with the current purchase.

Moreover Scheuing (1991) added, it occurs when customer expectations are met or exceeded. A goal

of producing consistent customer satisfaction, or even guaranteeing it expressly, constitutes enlightened self-

interest because only satisfied customers assure a firm long-term growth in revenues and profit. However it is

happened, Sheth, Mittal and Newman (as, cited Lambin 2000) that any marketplace transaction requires at

least three customer roles: buying, paying and using or consuming.

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2.2 SATISFACTION AND DISSATISFACTION THEORIES

Kumar and Gangal (2011) identified that customer satisfaction is an ambiguous and abstract concept

and the actual manifestation of the state of satisfaction will vary from person to person and product/service to

product/service. The state of satisfaction depends on a number of both psychological and physical variables

which correlate with satisfaction behaviors such as return and recommend rate. A consumer decision does not

end with the purchase. After using the product/service, the consumer compares the level of performance with

expectations and is either satisfied or dissatisfied (Belch & Belch, 2012). Kotler (2000) and Harris (1996)

satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s

perceived performance (or outcome) in relation to his or her expectation. Hoyer and MacInnins (2004)

identified them (satisfaction and dissatisfaction) with evaluation of outcome feeling after accessed to provided

service or product. Therefore, postpurchase evaluation process is important because the feedback acquired

from actual use of a product will influence the likelihood of future purchase (Belch & Belch, 2012). If they

feel it (service or product) is not met at their expectation they would feel negative attitude towards it. When

the provided service or product is met with their expectation and they feel happy and build positive feeling

towards it. The degree of customer satisfaction or dissatisfaction is varies and it often related to customer

initial expectation. Therefore customer’s expectation plays an important role in creating satisfaction (Harrel,l

2002). He also defined that customer’s expectation are beliefs about the performance of a product based on

prior experience and communication. Furthermore it is insightfully defined based on five elements: personal

experience, observations of others, company actions, advertising and promotion.

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Building customer loyalty is a task of every business. Hence it becomes a challenge. There can be a

big difference between what the company thinks customers want and what the customer is really looking for

(Lambin, 2000). Failure to provide what customer looking for is decline of business. Businessman wants

customers to be happy with product and service they are provided. And they start to measure the degree of

customer’s satisfaction systematically (Kotler et al.2009).

The industrial firm faces multiple customers; that is, a group of individuals, the buying centre, who

exercise different functions and roles and have distinct competencies and motivations (Lambin, 2000).

Scheuing (1991) argued that customer satisfaction is the principle objective of any well-managed firm. If they

feel they are provided and served satisfactorily and their time and energy have valued for, they would

repeatedly access its services and products.

In the study of Sonali Bank, customer satisfaction is the feeling of its members (customers) with the

service and policy that are provided. They would be satisfied if the service and policy of the bank are met at

their expectations. On the other hand, if they are not met with expectation of members, Sonali Bank has to

adopt its service and policy in according to demographic, psychographic, or socioeconomic factors of the

members wherein it operates.

2.2.1 Equity Theory

Equity theory according to Adams (as, cited in Yoda and Kumakura, 2007) is referring of humans

seek a balance between the input that they employ at work, and the outcome of these inputs. In other words, it

identifies fairness of exchange between individuals (Honyer & MacInnis, 2004). Hom (2000) shares that this

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theory emphasizes the customer’s attitude about fair treatment in the consumption process. Customers

generate feeling between perception of inputs and outputs. They then compare between with the service and

their expectations. When parties, banker and customers meet fairness in the exchange of their expectation it is

equity. When the ratios are equal, there is perceived fairness. When either ratio is considered to be high, then

unfairness is experienced (Yoda & Kumakura, 2007; McShane & Von Glinow, 2010).

It would be cleared in the case of Sonali Bank input refers to attending weekly meeting, membership,

and effort involved in obtaining a service. Outcome refers to the benefits perceived through the service

procurement processes, i.e. amount of loan, rotating turn to take loan, staffs’ attitude and so on. It is therefore

the exchange of service to customer is judged by individuals. Let us take an example of loan borrowers of

Sonali Bank. Mrs. Aung Ma Prue and Mrs. Dung Chai Ma, both of them are members of same group in Sonali

Bank (input). Mrs. Prue is provided especially facilities (outcome) by Sonali Bank staff but Mrs. Ma is not

(outcome). Isn’t that unfair? The same input generates different outcomes. On account of this eventually Mrs.

Prue will be satisfying with bank services while Mrs. Ma is dissatisfied. And, Mrs. Prue will be royal

customer while Mrs. Ma would not be.

2.2.2 Disconfirmation Paradigm

In consumer based businesses it is often discussed the confirmation or disconfirmation paradigm

which is expectation. In this paradigm, expectation has both been defined as consumer perceived probabilities

of the occurrence of positive and negative mental state (Bandyopadhyay, Dubey & Purohit, 2012).

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Furthermore it is clearly defined as a ‘frame of reference’ or an ‘adaptation’. Individuals compare the outcome

level of product/service experience with the frame of reference. If the outcome is rated below the expectation

negative disconfirmation to expectation occurs which lead to consumer disaffection and if perceived outcome

meet or exceed expectation satisfaction occurs. The process of disconfirmation paradigm is shown in the

following figure.

Figure 2.1 Disconfirmation Paradigm

Positive
Expectations Satisfaction

Disconfirmation
Dissatisfaction
Performance

Negative

Feeling

Source: Hoyer & MacInnis, 2004

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The above figure No. 2.1 illustrates that the expectations are desired product/service outcomes and

pre-consumption beliefs overall performance and performance of the product/service will bring customers to

the evolution stage (disconfirmation) which result in either satisfaction or dissatisfaction (Hoyer & MacInnis,

2004). More clearly the diagram denotes that expectations, performance and feeling also affect satisfaction

and dissatisfaction of a consumer.

Hoyer and MacInnis (2004) further explain satisfaction is based on expectations while performance is

used to measure the product and service meet the need of customer. It is clarified defining that there are

objective and subjective aspects as well. Objective means that how performance could do or meet actual

performance of product/service. On the other hand, subjective is referring to individual feeling towards

performance of the product/service. Hence disconfirmation often depends on subjective rather than objective

of performance. It means that when performance is better than expected or in expectation; that is the positive

disconfirmation is leading to satisfaction. If the performance is lower than expectation that is a negative

disconfirmation or dissatisfaction.

Nevertheless the prior customer’s expectation is not the factor that would influence his/her

satisfaction or dissatisfaction with product and service. Post-decision feeling of customer would occur either

negative or positive while using the product/service. And, this can build satisfaction or dissatisfaction

evaluation without prior influence or advertising, inspection or past experience (Honey & MacInnis, 2004).

For example in the case of Sonali Bank’s customers, if they make use of the loan properly and happily repay

installment every weekly it would satisfy them. In contrast, if they feel bad while using the loan they are more

likely to be dissatisfied.
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Oliver (as, cited in Bandyopadhyay, Dubey & Purohit, 2012) presented a cognitive model of

antecedents and consequence of satisfaction as following:

1) Prepurchase attitude is the function of experience

2) Satisfaction is a function of disconfirmation of expectation

3) Postpurchase attitude is the function of prepurchase attitude and satisfaction

4) Prepurchase intention is a function of prepurchase attitude

5) Postpurchase intention is the prepurchase intention, satisfaction and post purchase attitude.

Furthermore they provide with recent research argument that customer satisfaction/dissatisfaction is

more complicated and may not only come through disconfirmation. In the case of satisfaction with durable

product performance impacted customer satisfaction/dissatisfaction directly rather than through

disconfirmation (Bandyopadhyay, Dubey & Purohit, 2012).

2.2.3 Elements of Customer Satisfaction

In the field of customer satisfaction there are plenty of studies had being done. Among those many

challengeable studies the work of Zeithaml et al. (1990) which identifies the ten key criteria in evaluating

service quality leading to service satisfaction of customer as follows.

1) Tangibles: Appearance of physical facilities, equipment, personnel and communication materials.

2) Reliabilities: Ability to perform the premised service dependably and accurately.

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3) Responsiveness: Willingness to help customers and provide prompt service.

4) Competence: Possession of required skills and knowledge to perform the service.

5) Courtesy: Politeness, respect, consideration, and friendliness of contact personal.

6) Credibility: Trustworthiness, believability, honesty of service provider.

7) Security: Freedom from danger, risk, or doubt.

8) Accessibility: Approachability and ease of contact.

9) Communication: Keeping customers informed in language they can understand and listening to

them.

10) Understanding the customer: Making an effort to know customers and their needs.

2.3 JOBRA, PADUA VILLAGE AND SONALI BANK TO CHITTAGONG

In the year 1971, the Liberation War broke out in East Pakistan (Bangladesh); Yunus was enrolling a

PhD in United State of America. He was waiting for this chance and return in 1972. He was appointed to the

government’s planning commission. But he was not happy with it and resigned to join Chittagong University

as the head of economic department (Yunus & Jolis, 2001). The famine of 1974 in the country was a shocking

in everyday news – people were dying in starvation. He was frustrated teaching economic theories at

Chittagong University for they were not answering the need of starving and dying people in the famine 1974.

He thought that he is useless being an economics professor. He wanted to be a student in Jobra with real life

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Siam University, Bangkok
and it would be his university to learn, every household would be his different economic departments, and the

villagers would be his practical teachers from practical life.

He started Sonalicredit project starting from Jobra with his students. One day, as Yunus and his

colleague professor Latifee walked around the village they bumped up with a woman named Sofia Begun

making bamboo stools. They started to talk to her and interviewed about how she could get bamboo and sell

the bamboo stools. She borrowed 5 taka from moneylender to buy bamboo and had to sell back to him. The

profit was 50 cents; that is, her whole day income. This shocked Yunus. She earned 50 cents (US$ 2cents) 1

per day only while he teaches in term of millions of dolor.

He asked one of his students Ms. Maimuna to collect a list of people like Sufia in Jobra. She had

collected 42 persons. They owed 856 taka to moneylenders in the village. He gave 856 taka to Maimuna and

asked to distribute among those 42 borrowers to return the owed. So that they could sell their products in free

markets and get more profit. He also did not demand for interest of his 856 taka nor did he fix when they had

to pay back. They were freed to pay whenever they had enough money and convenience for them as well (see

Chapter I, Yunus & Jolis, 2001). It was in year 1976 Yunus took loan of 10,000 taka from Janata Bank of

Jobra. He started Sonali project staffed entirely by his five students.

In 1977, Yunus met with the managing director of Bangladesh Krishi (Agricultural) Bank, Mr.

Anisuzzaman and proposed to open a branch under the name ‚Sonali Branch of the Agricultural Bank‛ in

Jobra. It was approved and started the branch with 1,000,000 taka initially (see Chapter XVI, Yunus & Jolis,

1
With 50 cents of taka in 1976 a ½ kg of rice could buy
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2001). In 1979 his proposal ‚Sonali Bank Project‛ was granted by the Central Bank. But he was asked to

prove his project in a chosen district rather his native town, Chittagong. They chose Tangail district which is

not so far from capital city, Dhaka. It was a place with a lot of corruption and bloodshed. However, he took

two years leave from university and went there with his students to carry on his project. They worked out very

successfully and by 1982 expanded five branches in five districts – Dhaka, Chittagong, Tangail, Rangpur and

Patuskhsh (see Chapter XVIII, Yunus & Jolis, 2001). It was beginning and latter on spread rapidly in

countrywide. Eventually it was introduced in Chittagong district as well.

2.3.1 THE ORGANIZATIONAL STRUCTURES AND FUNCTIONS

Sonali Bank is unlike to commercial banks. It is most likely social service bank. The Sonali Bank’s

staffs go from door to door in order to serve its service to rural people while customer has to come to other

private commercial banks and get service (Yunus & Jolis, 2001). In fact, group responsibility for individual

loans is a fundamental organizing principle of the micro-credit model (Karim, 2008).

Figure 2.2 Sonali Bank Organizational Structure

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Head
Office
Branch

Centre

Group

Members

Source: Adopted from Banker to Poor (Yunus & Jolis, 2001)

Sonali Bank’s staffs go to advertise its service/product in rural villages. Its targeted customers are also women

not the men (Yunus & Jolis, 2001). They are not given loan individually. They have to form a group of five

members. Five to eight groups build a centre. A branch typically covers sixty centers (Bernasek, 2011;

Hanley, 2003; Karim, 2008).

2.3.2 Loan and Repayment Mechanism

Every member is required to undergo Sonali training for five to six weeks. During these weeks they

have to learn loan types, compulsory and optional savings plans, interest rates, center norms, and Sonali

Bank’s social slogans (Hanley, 2003). Moreover, before gaining acceptance into the Bank each member has

to separately undergo an oral exam (85% of rural women are illiterate), if any member fails then the groups

acceptance into the bank is stalled until exams are retaken (Satgar, 2003; Hanley, 2003). The successful

candidate groups’ names were reported to Bank, so that after next following meeting they could borrow loan.

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The loans are first extended to only two members, if they pay regularly for the next six weeks , then loans are

granted to a further two members, the group leader receives her/his loan last (Satgar, 2003). The lending

mechanisms are (Yunus Jolis, 2001):

 One year loans

 Equal weekly installments in 50 weeks

 Repayment starts one week after the loan

 Interest rate of 20 per cent

 Repayment amounts to 2 per cent per week for 50 weeks

 Interest payment amounts to 2 taka per week for a 1,000 taka loan.

Loans are given in small amount without any collateral, but group members are responsible for their

peer members. However to control risk if group members take big amount they require collateral, an asset that

the borrower forfeits upon default and that thus motivates repayment. Most formal lenders require physical

assets such as land or houses (Schreiner, 2003). ‚Although Sonali did not invent the threat of termination as

an incentive to fulfill contracts (Stiglitz and Weiss, 1983), it did popularize its combination with a second

design element: default by one group member leads to loss of access for all members‛ (Schreiner, 2003, p.5).

2.3.3 Lending to Poorest of the Poor in Rural

Similarly like many countries in Asia, gender gap is clearly seen in Bangladesh. According to the

Social Institutions and Gender Index’s survey Bangladesh ranks 63rd out of 86 countries in 2012 (SIGI, 2012).

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Also, it is one the most populated countries living on less than $1.25 (PPP) a day (%) 43.3 and living below

the national poverty line (%) 31.5 (ADB, 2012).

Yunus and Jolis (2001) vividly drew picture of women status in Bangladesh, especially they were

drawing intention to Muslim society and their religious and social norms purdah for women. Whenever

Yunus goes for promoting his project he had to take female students for go-between. He could not directly

talk to women and promote Sonali project himself. ‚My go-between would be enter the house, introduce me

and speak on my behalf‛ (Yunus & Jolis, 2001, p.94). Nonetheless there is the wall for unknown woman and

man to talk in his society he could overcome and successfully brought one of the most favorable loan lending

projects in rural Bangladesh. And, even it was introduced among indigenous people of Chittagong Hill

Tracts, Bangladesh. These people hold different belief and social life from majority Bengali in the country.

One of the indigenous villages, in Murali village there are five groups out of 230 households – 25

households are members of Sonali Bank. They have a centre in the village itself. The interview with

Nyanavamsa2 (interviewed on July 28, 2012) in Murali shows people in Murali have natural attitude towards

Sonali Bank. Sonali Bank staffs either male or female welcome to promote their project. They don’t have such

kind religious and social norm like purdah. Also, man and woman have equal right to access. ‚We have some

problems in accessing to outside opportunities. That is because of language barrier and different from the

majority of the country people in almost every aspects of life. Some of this village people have borrowed loan

2
Nyanawamsa Sayadaw is a Buddhist monk and abbot of this village temple. He has very strong influential figure
among Farmers society. He is also a leading social and educational motivational monk in Wagga Union of Kaptai,
Chittagong.
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from Sonali Bank and other NGOs’ projects. Finally they face problem to repay. All these are because of their

managing and investing.‛ Said Nyanawamsa.

2.4 RELEVANT RESEARCHES

There are couples studies have been conducted on customer satisfaction. Those studies showed

different degree of different customer satisfaction with provided product/service. The case study of this would

be a useful for development of Sonali Bank’s service quality to meet the need of customer in Chittagong Hill

Track, Bangladesh.

In regard of Sonali Bank customer satisfaction there are couples of studies had been conducted, but

they were not quantitative studies. They did rather oral interview and literature reviewed works. Most they

addressed social issue such like gender gap between male and female. And, this is what the founder had been

addressed throughout his books, articles and speeches. The related research works are:

1) ‚Banking on Social Change: Sonali Bank Lending to Women‛ by Alexandra Bernasek (2011);

2) ‚The Secrets of Success: the Sonali Bank Experience in Bangladesh‛ by Abu Elias Sarker (2001);

3) ‚Demystifying Micro-Credit: the Sonali Bank, NGOs, and Neoliberalism in Bangladesh‛ by Lamia

Karim (2008);

4) ‚A Cost-Effectiveness Analysis of the Sonali Bank of Bangladesh‛ by Mark Schreiner (2003).

The first three studies (Alexandra Bernasek 2011; Abu Elias Sarker 2001; Lamia Karim 2008) from

above mentioned four were more likely similar of their depending variables; that is, they were addressing that

how far the customers of Sonali Bank had been progressively development comparing to non-Sonali Bank

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members. However there were no issues that addressed defectively faced problem with Sonali Bank in those

rural areas. The last one of the four studies by Mark Schreiner (2003) did not explore the experiences of

Sonali Bank’s customers. It did commend on the policies of Sonali Bank that how Sonali Bank works with

members and keeping them remain as members by some indirect threatens.

This finding is further study of the researches of those four previous studies. It is therefore this study

explores customer satisfaction with Sonali Bank service components and its policies – antipoverty lending

loan to poorest of poor rural women rather than men. On the other hand, the researcher intends to examine

whether those research papers were truly explored the rural life of Bangladesh women – no single paper had

explored negative dimension of Sonali Bank, all papers were positively explored that rural women were

effectively progress due to Sonali loan. Also, this is a questionnaire qualitative study of Sonali Bank’s

members and non-members or had withdrawn from it, and different of educational level as well. Why?

Because those studies were not drawing what are possible alternative to improve Sonali Bank service along is

its policies.

2.5 SUMMARY

This research integrated Bangladesh socioeconomic overview in a brief and the bank itself. To

explore various aspects of Sonali Bank products and services severed in Padua Chittagong it provided

different definitions, theories, concepts of customer satisfaction done by different researchers and authors.

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In first part of this chapter it discussed that Bangladesh is one of the developing countries counting

more than half population are living in Sonali or countryside. Sonali Bank therefore was established in order

to service these Sonali people giving small of money for loan. And, it is a member based bank. Group

members are responsible for their group members.

In the second part of this chapter it discussed that customer satisfaction is center of all business

including bank. Failure to provide the need of the customers is weakness of a firm or organization.

In the conclusion it provided what were the researches that had been conducted by previous

researchers. Also, it explored why those researches are different from this work and what their contributions

were.

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