DESIGN AND MARKETING OF NEW FINANCIAL PRODUCTS A CASE OF NIGERIAN BANKS THESIS SUBMITTED TO FACULTY...
Transcript of DESIGN AND MARKETING OF NEW FINANCIAL PRODUCTS A CASE OF NIGERIAN BANKS THESIS SUBMITTED TO FACULTY...
1
DESIGN AND MARKETING OF NEW FINANCIAL
PRODUCTS
A CASE OF NIGERIAN BANKS
THESIS
SUBMITTED TO FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF LAGOS
BY
KINGSLEY. O. ANANWUDE
089029473
[email protected], [email protected] +2348027551021, +2348038268380
No part of this research work may be produced, stored or transmitted in any form or by any means, electronic or
mechanical, including photocopy, recording, or any information storage and retrieval system, without the written permission of the
author. @Kingsley Ananwude 2011. [email protected]. 08027551021
SUPERVISOR: DR. G.O. MELODI
IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE
DEGREE OF MASTERS OF BUSINESS ADMINISTRATION (MBA)
AUGUST 2011
2
CERTIFICATION
This is to certify that this research work was carried out by Kingsley Ananwude under
the supervision of Dr. G.O. Melodi at University of Lagos, Nigeria, in accordance with
the rules and regulations of the University.
AUGUST 2011 ---------------------------------------------- -----------------------------
KINGSLEY ANANWUDE DATE
Student
AUGUST 2011 ------------------------------------------------- -----------------------------
DR. G.O. MELODI DATE
Project Supervisor
3
DEDICATION
Dedicated to the almighty God, the author of knowledge and giver of wisdom and to my
mum, mrs. Janet Ananwude for her, support, love and care.
To God be the glory.
4
ACKNOWLDGEMENT
My gratitude goes first to God almighty, for seeing me through the period of this
research and times of intense academic works and enormous studies, at the University
of Lagos.
I must acknowledge the dual role of Dr. G.O. Melodi, first, as a lecturer and later as a
research supervisor. Despite his tight schedules, he ensured effective supervision and
timely completion of this work.
My unreserved gratitude goes to my mum, Mrs. Janet Ananwude for laying the
foundation on which my subsequent academic structures were founded. She also
assisted me in great measures throughout the duration of research at the University of
Lagos. My sincere appreciation goes to my best friend Roseline Uju Ifeoma Ezeh for her
constant encouragement and inspirations.
I must acknowledge the immense supports of my brothers Christian Arinze Ananwude
and Shedrack Azunna Ananwude. I also wish to commend my uncle sir Charles
Ananwude for his moral supports and encouragement. I wish to acknowledge other
departmental and faculty lecturers who labored in one way or the other to ensure the
objective of this program was achieved, notably is Dr. Jonathan Ifechukwu.
5
Finally, I thank the management and staff of University of Lagos for adhering strictly to
the curriculum of the program and ensuring that quality and standards are maintained.
ABSTRACT
This thesis seeks to expound the trend in the design of new financial products and
services and hence unravel the changes through time that have taking place within the
Nigerian banking industry. The challenges and prospects in product development,
effective marketing strategies, creativity and innovation as well as development of
competitive strategies as keys to survival in a developing economy were thoroughly
discussed.
The main objective of the study is to correlate the contribution of financial product
design to achieving sustained profitability, maximization of shareholders wealth and
hence achievement of the overall goal of the banks in Nigeria.
The stages in new product design -idea generation, idea screening, concept
development & testing, etc were thoroughly reviewed.
Contemporary products of Nigerian banks in the 21st century - custodian of valuables-
bailee/bailor, temporary overdrafts (TODS), collection products & services, local
purchase orders (LPO), bonds & guarantees, advisory services, attractive cot
surrendering products (CSP), internet banking product, mobile banking , etc were
6
thoroughly analyzed. Also the concept of marketing as enunciated by Kotler, the
evolution towards marketing concepts as well as the stages in the evolutionary trend
were explained.
The idea of relationship management as a process whereby banks engage high quality,
well motivated labour, with excellent interpersonal skills, to manage the business
relationships between the banks and their respective clients, eventually raised the bar of
the competition and provided a new twist to the entire landscape of the Nigerian
banking industry.
This strategy which was traceable to Standard Trust Bank (STB) now embedded in
United Bank for Africa (UBA) under the dynamic leadership of the then founder and
promoter Mr. Tony Elumelu in early 2000 has since been adopted by all banks in
Nigeria, especially after the consolidation exercise of 2004/2005 under the able
leadership of Professor Charles Chukwuma Soludo as governor of the Central Bank of
Nigeria (CBN). This has also been adopted by the Microfinance banks (MFBs), who
play in the lower rung of the ladder.
The thesis was further expounded to explain the relationship management cycle (RMC),
customer retention strategies (CRS) and service quality management (SQM). The
strategy of Consumer protection (CP) was explained. Consumer protection are been
carved out as separate unit by banks to resolve amicably issues between them and
their valued customers, especially relating to controversial charges.
The relevant research hypotheses and questions were properly discussed.
7
Questionnaires were administered to over 100 respondents especially customers of
banks including - traders, artisans, students, bankers, transporters, civil servants etc.
The data collected were prepared using Statistical package for social sciences (SPSS).
The data were analyzed and presented in tabular form.
The result obtained were subsequently interpreted and inferences drawn. The
significant contribution of new product design, relationship management, innovation,
new product development, excellent service delivery and effective marketing strategy to
the profitability and maximization of shareholders wealth were thoroughly discussed.
Summary, Conclusion, recommendations and useful suggestions were given.
It is hoped that the thesis ―Design of and marketing of new financial products, a case of
Nigerian banks‖, will be of immense use to Nigerian banks, especially now that
competition and battle for survival is raging. The thesis will also be of immense use to
all those who have one form of relationship or the other with Nigerian banks and will be
of assistance to students for further researches.
8
TABLE OF CONTENTS
CONTENT PAGE
TITLE PAGE
CERTIFICATION I
DEDICATION II
ACKNOWLEDGEMENT III
ABSTRACT IV
TABLE OF CONTENTS V
APPENDIX X
BIBLIOGRAPHY XI
CHAPTER ONE
1.1 INTRODUCTION ......................................................................................... 1
1.2 PROBLEM STATEMENT ............................................................................ 4
1.3 AIMS AND OBJECTIVE OF STUDY ........................................................... 6
1.4 RESEARCH QUESTIONS .......................................................................... 7
1.5 RESEARCH HYPOTHESIS......................................................................... 8
1.6 METHOD OF STUDY .................................................................................. 8
9
1.7 SCOPE AND LIMITATION .......................................................................... 9
1.8 OUTLINE OF CHAPTERS .......................................................................... 11
1.9 SIGNIFICANCE ........................................................................................... 11
1.10 REFERENCES ............................................................................................ 13
CHAPTER TWO
LITERATURE REVIEW .......................................................................................... 14
2.1 INTRODUCTION ......................................................................................... 14
2.2 NEW PRODUCT DESIGN ........................................................................... 14
2.3 STAGES IN NEW PRODUCT DESIGN 15
2.71 IDEA GENERATION 15
2.72 IDEA SCREENING 16
2.73 CONCEPT DEVELOPMENT & TESTING 16
2.74 BUSINESS ANALYSIS 17
2.75 BETA TESTING AND MARKET TESTING 17
2.76 TECHNICAL IMPLEMENTATION 18
2.78 COMMERCIALIZATION 18
2.79 NEW PRODUCT PRICING 19
2.4 THE FUZZY FRONT END 19
2.41 OPPORTUNITY IDENTIFICATION 20
2.42 OPPORTUNITY ANALYSIS 20
2.43 IDEA GENESIS 20
2.44 IDEA SELECTION 21
10
2.45 CONCEPT AND TECHNOLOGY DEVELOPMENT 21
2.46 OUTCOME OF FFE 22
2.47 PRODUCT LIFE CYCLE 23
2.48 STAGES IN PRODUCT LIFE CYCLE 24
2.481 INTRODUCTION STAGE 24
2.482 GROWTH STAGE 24
2.483 MATURITY STAGE 24
2.484 SATURATION & DECLINE STAGE 24
2.49 CRITIQUE OF THE PRODUCT LIFE-CYCLE CONCEPT 24
2.410 NEW PRODUCTS OF NIGERIAN BANKS IN THE 21ST CENTURY 26
2.411 CUSTODIAN OF VALUABLES- BAILEE/BAILOR 26
2.412 TEMPORARY OVERDRAFTS (TODS) 26
2.413 COLLECTION PRODUCTS & SERVICES 27
2.414 LOCAL PURCHASE ORDERS (LPO) 27
2.415 BONDS & GUARANTEES 28
2.416 SAVINGS MOBILIZATION 28
2.417 FINANCIAL INTERMEDIATION 28
2.418 ADVISORY SERVICES 29
2.419 LOCAL & FOREIGN FUNDS TRANSFER (LFT & FFT) 29
2.420 FOREIGN EXCHANGE (FOREX) PRODUCTS 30
2.421 CUSTOMIZED VALUE ADDED PRODUCTS 30
2.422 ATTRACTIVE COT SURRENDERING PRODUCTS (CSP) 30
2.423 INTERNET BANKING PRODUCT 31
11
2.424 MOBILE BANKING 31
2.425 DESIGN OF ISLAMIC BANKING PRODUCTS 32
2.426 PRINCIPLES 32
2.427 HISTORY & EVOLUTION OF ISLAMIC BANKING PRODUCTS
IN NIGERIA 33
2.428 CONSTITUTIONALITY OF ISLAMIC BANKING PRODUCTS 35
2.429 A CASE FOR NON-INTEREST BEARING PRODUCTS 36
2.430 MICROFINACE BANK PRODUCTS 36
2.431 OBJECTIVE & GOALS OF MICROFINANCE BANKS IN NIEGRIA 38
2.432 PRODUCT PAPERS 41
2.433 INVENTION OF AUTHORITY-TO-COLLECT (ATC) IN DISTRIBUTIVE 41
2.434 AUTHORITY-TO-LIFT (ATL) 42
2.435 IDEA OF RECEIVABLE REFINANCING 42
2.436 INVOICE DISCOUNTING 43
2.437 INVENTORY REFINANCE 43
2.438 CONTIGENT LIABILITY PRODUCTS 43
2.439 BID BOND 44
2.440 PERFORMANCE BOND 45
2.441 ADVANCE PAYMENT GUARANTEES (APG) 45
2.442 BANK GUARANTEE (BG) 45
2.443 INDEMNITIES 46
2.444THE NATURE & WORKINGS OF OFF-BALANCESHEET PRODUCTS 46
12
2.445 BANKER'S ACCEPTANCE (BA) 46
2.446 COMMERCIAL PAPER (CP) 47
2.447 CONSUMER LENDING PRODUCTS 47
2.448 SALARIES BACKED-ADVANCES 47
2.449 NAIRA (N) CREDIT CARDS 48
2.450 ASSET ACQUISITION PRODUCTS- QLS, MPOWER,WAAS 48
2.451 SHARES PURCHASES & TRADING 49
2.452 EQUIPMENT LEASE FACILITIES (ELF) 49
2.453 DEVELOPMENT OF MORTGAGE PRODUCTS 49
2.454 SYNDICATION PRODUCTS IN NIGERIAN BANKING INDUSTRY 50
2.455 CONTEMPORARY PRODUCTS OF NIGERIAN BANKS IN INTERNATIONAL
TRADE FINANCE 50
2.456 LETTERS OF CREDIT (LC) 51
2.457 BILLS FOR COLLECTION (BC) 51
2.458 ADVANCE PAYMENT/TELEGRAPHIC TRANSFERS (TT) 52
2.459 OPEN ACCOUNT 52
2.460 EXPORT FINANCE PRODUCTS 53
2.50 THE CONCEPT OF MARKETING, AS AN INTEGRAL
PART OF PRODUCT DESIGN ............................................................................. 53
2.51 EVOLUTION TOWARDS THE MARKETING CONCEPT ............................ 54
2.52 THE RELATIONSHIP MANAGEMENT ....................................................... 59
2.53 PROFITABILITY SEGMENTS ..................................................................... 61
13
2.54 THE CUSTOMER RELATIONSHIP LIFECYCLE ........................................ 66
2.55 CUSTOMER RETENTION STRATEGIE ..................................................... 68
2.56 CUSTOMER FOCUS AND SERVICE QUALITY ......................................... 71
2.57 THE CONCEPT OF VALUE ........................................................................ 72
2.58 COMPONENTS OF QUALITY ..................................................................... 73
2.59 MEASURING SERVICE QUALITY .............................................................. 75
2.60 A SERVICE QUALITY CULTURE ............................................................... 76
2.61 THE ROLE OF STAFF IN SERVICE DELIVERY ........................................ 78
2.62 CONSUMER PROTECTION ....................................................................... 80
2.63 REFERENCES ............................................................................................ 82
CHAPTER THREE ................................................................................................. 86
RESEARCH METHODOLOGY .............................................................................. 86
3.0 INTRODUCTION ......................................................................................... 86
3.1 RESTATEMENT OF RELEVANT QUESTIONS .......................................... 86
3.11 RELEVANT RESEARCH HYPOTHESES ................................................... 87
3.2 STUDY POPULATION ................................................................................ 87
3.3 DATA COLLECTION METHOD ................................................................. .. 88
3.4 SAMPLING PROCEDURE .......................................................................... 89
3.5 METHOD OF ADMINISTERING QUESTIONAIRE ...................................... 90
3.6 ANALYSIS OF SAMPLES ........................................................................... 90
3.7 DECISION RULE ......................................................................................... 92
14
3.8 LIMITATION OF METHODOLOGY ............................................................. 93
3.9 REFERENCES ............................................................................................ 94
CHAPTER FOUR ................................................................................................... 95
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 95
4.0 INTRODUCTION ............................................................................................ 95
4.1 AGE OF RESPONDENTS ........................................................................... 95
4.2 GENDER OF RESPONDENTS ................................................................... 96
4.3 MARITAL STATUS ...................................................................................... 96
4.4 EDUCATIONAL QUALIFICATIONS ............................................................ 96
4.5 RELIGIOUS VIEWS .................................................................................... 96
4.6 GEOPOLITICAL ZONES ............................................................................. 96
4.7 OCCUPATION ............................................................................................. 97
4.8 RESPONDENTS WITH BANK ACCOUNT .................................................. 97
4.9 DURATION OF BANK ACCOUNT .............................................................. 97
4.92 DEVELOPMENT OF NEW PRODUCTS 98
4.93 FREQUENCY OF NEW PRODUCT DEVELOPMENT 98
4.94 EFFECT OF COMPETITION ON R&D 98
4.95 EFFECT OF INNOVATION TO THE INDUSTRY 98
4.96 EVOLUTION IN THE FINANCILA INDUSTRY 99
4.97 IMPACT OF R&D TO CLIENT BASE 99
4.98 TREND OF CLIENT BASE 99
4.99 DIVIDEND DECLARATION TWO DECADES AGO 99
4.100 RECENT TREND OF DIVIDEND DECLARATION 100
15
4.101 REASON FOR DIFFERENCE IN PATTERNS OF DIVIDEND
DECLARATION 100
4.102 PRESENT & PAST RETURN ON INVESTMENT (ROI) 100
4.103 R&D AWARENESS 100
4.104 TIMING OF R&D 101
4.105 FREQUENCY OF NEW PRODUCT DESIGN 101
4.106 RELEVANCE OF R&D TO INDUSTRY 101
4.107 COMPARISON OF R&D IN NEW AND OLD GENERATION BANKS 101
4.108 PREFERNECE BETWEEN OLD & NEW GENERATION BANKS 102
4.109 FACORS AFFCETING CHOICE OF INSTITUTIONS 102
4.110 BANKING IN THE 21ST CENTURY 102
4.111 RATE OF TRANSFORMATION 102
4.112 DESIRABILITY OF TRANSFORMATIONS 103
4.113 INFLUENCE OF TRANSFORMATION TO CUSTOMERS 103
4.114 LEVEL OF PATRONAGE 103
4.115 INCREASE IN PATRONAGE BY CONTEMPORARIES 104
4.116 JUSTIFICATION OF INVESTMENTS IN R&D 104
4.117 PATTERN OF BANKS PROFITABILITY 104
4.118 NFLUENCE OF MOBILE & INTERNET BANKING 104
4.119 FREQUENCY OF BANKER‘S VISITS 105
4.120 EFFECT OF MARKETING TO THE INDUSTRY ......................................... 105
4.121 LENGTH OF MARKETING TREND ............................................................ 105
4.122 CHALLENGES IN FINANCIAL PRODUCT MARKETING ........................... 105
16
4.123 RELEVANCE OF FINANCIAL PRODUCT DEVELOPMENT TO THE
BANKING INDUSTRY……………………………………………………...... .... 106
4.124 VOLUME OF TRANSACTIONS IN RELATION BANKER‘S VISITS ............ 106
4.125 CONTRIBUTION TO SHAREHOLDER‘S WEALTH .................................. 106
4.126 RESPONDENTS‘ TREND OF AGREEMENT ON POSITIVE IMPACT
OF NDP TO ROI 107
4.127 FACTOR ANALYSIS ................................................................................... 109
4.128 KMO & BARTLETT‘S TEST OF SPHERICITY ............................................ 109
4.129 COMMUNALITIES ....................................................................................... 109
4.130 TOTAL VARIANCE EXPLAINED ................................................................. 109
4.131 COMPONENT MATRIX ............................................................................... 110
4.132 REFERENCES ............................................................................................ 111
CHAPTER FIVE
SUMMARY, CONCLUSIONS, SUGGESSTIONS AND RECOMMENDATIONS
5.0 INTRODUCTION ......................................................................................... 112
5.1 SUMMARY .................................................................................................. 112
5.2 FINDINGS ................................................................................................... 114
5.3 DISCUSISION OF FINDINGS ..................................................................... 115
5.4 CONCLUSIONS .......................................................................................... 118
5.5 RECOMMENDATIONS AND SUGGESTIONS ............................................ 118
5.6 REFERENCES………………………………………………. 120
17
CHAPTER ONE
1.1 INTRODUCTION
Financial institutions, especially banks all over the world are coming up with more
creative ways to design improved new products and services, faster and more
efficiently. The overall aim of new product design & development is to enable the
institutions grow their revenues over time, maximize shareholders wealth, increase
market share, improve upon existing ones by modifying certain features of the products,
expand frontiers into new markets, help to maintain sales, transforms the institution,
shape the future of the organization and ensure the institution is ahead of the
competition and well reposition to exploit existing and future opportunities. Marketing of
these products to get within the reach of the target market is an integral part of the
product design process.
The business development units (BDU) of a financial institution plays key role in
development of new products by identifying and evaluating new-product ideas and
working with research & development (R&D) and other relevant units in every stage of
development. The effective marketing of these financial products when developed is
basic to realizing the full objective of the organization.
The scope of the research will be limited to financial product design (which are mostly
intangible products and services), with some emphasis in its marketing and their
contribution to the profitability of the banks as well as maximization of returns on
18
investment (ROI) of stakeholders, who are exposed to risks, having committed their
capital to the business.
The study showed that such products often evolve through the means of benchmarking
of the competition, research, product papers, designed to capture their target market.
Good example is the arrangement between Zenith Bank Plc and Flour Mills of Nigeria
(FMN) Plc. By this arrangement, the bank designed a product that enables borrowing
customers access loan without tangible collateral, but secured by means of an
Authority-To-Collect (ATC). The ATC which is a title to the actual product, is designed
through a synergy between the financing bank and the multinational whose products are
been financed, then printed by the multinational and given to the bank for further
release to the bank‘s customer. Zenith bank pays the multinational at sight and places a
lien over this document of title. Subsequent releases are made in tranches to the
borrowing customer to enable them have access to the actual products, as proceeds of
previous release are received. This has proved very successful in commodity trading
and fast moving consumable markets. A variant of this arrangement also exist between
Dangote Cement Industries Plc and United Bank for Africa (UBA).
Currently, banks all over the world are experiencing continual and rapid market
challenges which call for concern. Also the incidence of globalization, government
regulations, low capacity utilization, commercialization/privatization, economic
restructuring, low market share/sales volumes, low profitability, declining productivity
and labour union incessant demands for better working conditions also pose great
19
challenges to the management of these banks whose basic concern is to position and,
or reposition their banks on a sound footing for global competitiveness.
In responding to the market reality, diverse strategies are adopted to sustain the
relevance of the banks in the current dispensation. Thus development of new products
is achieved through design of new-to-the-world products that creates entirely new
market at one end and/or improvements or revisions of existing products that creates
brand extensions that better satisfy consumer needs at the other end.
In the case of Nigeria, banks add new products through acquisition or development. The
acquisition route takes three forms: The institution buys other institutions, it can acquire
patents from other institutions or it can obtain a license from the regulator. All these are
geared to achieve growth through inorganic means. Nigerian banks also achieve growth
via organic means, which is usually through product design and development from
within the company. The rapid change in the environment has necessitated the need to
develop new products and provide innovative and efficient services to be able to cope
and remain relevant in the present global competitive environment.
Since banks operate in a very dynamic, unpredictable and complex environment, there
is need to develop effective strategies for the design of financial products and services,
in order to cope with the turbulent environment in which they operate.
20
1.2 PROBLEM STATEMENT
Consumers have become more aware of their rights in the business environment. They
have also become aware of the availability of several product alternatives. The
incidence of global economic meltdown have further dwindled the fortunes of financial
institutions, with banks as the worst hit. In the Nigerian scenario, present realities shows
that the case is worse than imagine.
The stress test of 2009 by the regulator- Central Bank of Nigeria (CBN) have further
confirm the woes of the financial institution, with result showing that about 8 out of 24
banks (≈33%) in the country have negative share capitals. The implication of this is that
over 33% of banks operating in Nigeria have lost their capital and have further
compounded their problems with capital in the range of minus N30 billion to over N300
billion, a gap that will take several decades to cover, going by organic growth
mechanisms.
This was the origin and a precursor to the banking tsunami of August 14, 2009, with a
most shocking pronouncement by the CBN governor that led to the sacking of eight (8)
MD/Chief executives Officers and numerous directors of the banks.
With further threats of revocation of operating licenses, withdrawal of inter-bank
guarantees, nationalization, outright sales or acquisition of erring banks, enormous
pressure is being mounted on the banks to create more businesses and maximize
retained profits towards meeting up with the demands of the regulator.
21
To escape from the big hammer wielded by the regulators- Securities and exchange
commission (SEC), Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Company
(NDIC), affected banks faced with the dilemma, have taken the option of mergers &
acquisition (M&A). This is followed by recent signing of Transaction Implementation
Agreement (TIA) being witnessed. The aim of TIA is to take over the erring banks from
the original owners, whose capitals have been eroded and hand over same to new
owners, with vested interests and whose capital is used to rescue the erring institutions,
to avoid total and monumental collapse, with resultant effect of loss of depositors funds,
loss of trust and confidence on Nigeria financial institution by oversea counterparts, and
loss of wealth by shareholders.
These have led to increase in competition, with each bank struggling to have a sizeable
wallet share of the available market.
It could be recalled that before the 21st century, banking in Nigeria was characterized
by armchair banking, where bankers are comfortably sitting in the bank and customers
come in to be attended. In the wake of 21st century according to Hammer and Champy
[1993], the major environmental pressures noted above have led to the development in
the three C‘s – customers, competition, and change.
Customers today know what they want, what they are willing to pay, and know how to
get products and services on their own terms.
Competition is generally increasing with respect to price, quality, selection, service, and
promptness of delivery. Removal of trade barriers, increased international cooperation,
and the creation of technological innovations cause competition to intensify
22
Change continues to occur. Markets, products, services, technology, the business
environment, and people keep changing, frequently in an unpredictable and significant
manner.
Some of the old marketing strategies of the banks were no longer relevant in this new
environment. Banks, as a result are forced to develop new marketing strategies to cope
with challenges in the financial service sector.
Remaining afloat in the face of these challenges are some of the problems which banks,
especially those with Nigerian origin have to contend with. To ensure the future of the
bank is guaranteed, the financial institutions have resorted to design of new financial
products and effective marketing of same, to remain profitable and hence maximize
shareholders investment.
1.3 AIMS AND OBJECTIVE OF STUDY
The major objective of the study is to examine the trends, challenges and prospects in
the design of new financial products and services by Nigerian banks and the effect of
this on the profit portfolio of the institutions and shareholders‘ wealth. Other objectives
of the study include:
1. To study the process and relevance of new product development to
achieving the profitability target and overall goal of the banks.
2. To examine the significant contribution of marketing as an integral part of
design of financial products and services, to the profitability of banks.
23
3. To examine how banks achieve competitive edge using superior product
design strategies as tools in the Nigerian financial sector.
4. To examine how banks increase their market share using effective
marketing strategies.
5. To offer relevant suggestion toward better utilization of customer focused
strategies in the Nigerian financial sector.
1.4 RESEARCH QUESTIONS
The relevant research questions to be answered by the research hypothesis are as
follows:
1. How do banks develop customer focused financial products and services?
2. How will banks achieve increase in their business share and shareholders
wealth using relevant strategies in the design of financial products and
services?
3. Will development of new financial products and efficient services lead to the
increase in the satisfaction of customers?
4. How can banks achieve competitive edge over others in a competitive
environment?
5. What is the relationship between the development of new financial products
and services and the goal of profit maximization of the banks in the financial
service sector?
24
1.5 RESEARCH HYPOTHESIS
The relevant hypotheses to be tested in the study are as follows:
HYPOTHESIS ONE
Ho: The development of new financial products and services in response to the needs
of their customers is not significantly related to increase in profitability for the banks and
maximization of wealth for shareholders.
Hi: The development of new financial products and services in response to the needs of
their customers is significantly related to increase in profitability for the banks and
maximization of wealth for shareholders.
HYPOTHESIS TWO
Ho: The development of effective marketing strategy for financial products and services
by the banks is not significantly related to achieving customer satisfaction.
Hi: The development of effective marketing strategy for financial products and services
by the banks is significantly related to achieving customer satisfaction.
1.6 METHOD OF STUDY
The method of study and data collection adopted was mailing of questionnaires. This
involves designing of questionnaires containing valid questions aimed at eliciting
valuable responses from the respondents. The questionnaires so designed was sent
across various stakeholders including happy/aggrieved customers of banks, dormant
25
account holders, traders, artisans, bank staff, business men, civil servants, students of
various institutions, professionals, organized private sectors etc. Thus the respondents
cut across various segments of people who have one business or the other with
Nigerian banks.
The respondents were allowed a time frame to objectively study the questionnaires and
give their honest opinions on the questions raised in the questionnaire.
Various considerations were involved in arriving at this method of study. These include-
cost effectiveness, since budget analysis shows it is cheaper than other methods.
Elimination of enumerator‘s bias, since the views of the respondents will be different
from those of the researcher. The respondents will have enough time to consult sources
before completing the questionnaires.
Thus, it is believed the method will yield data of high quality. Also it is expected that the
respondents will be very objective in giving their various opinions and will feel free
enough to supply honest answers to some sensitive questions.
1.7 SCOPE AND LIMITATION
The banking industry contains both the old and new generation banks, which were the
target of the study. The study population which is the Nigerian financial institution,
especially the banks, is quite large to be completely sampled by the study, therefore
beyond the scope of this study. Thus only a few of the banks were actually sampled and
26
energy concentrated on them. The result obtained was assumed to be representative of
the entire population of the Nigerian banking industry. Hence the researcher was unable
to study all the banks in the banking sector of the economy. The scope of the study was
only limited to Zenith bank, Guaranty trust bank and UBA plc.
Enumerators bias was also a major limitation as some of the stakeholders that lost out
in the power equation during the restructuring that occurred in their organizations, which
was enforced by the central bank, and which was occasioned by the infamous global
financial meltdown, could not see anything good in the transformation agenda, new
product development and innovative product re-design efforts of the new management.
Another major limitation in the study was the general apathy to research in Nigeria,
most of the respondent complained of lack of time to fill the questionnaires and where
filled, some of the responses seemed not as sincere as expected.
Another limitation is the lack of funds to conduct the research on a very wide scale. The
scope of the research has been limited to about four banks because of financial
constraints. This however does not limit the generalization of the study.
Another limitation is the uncooperative attitude of the management of banks. The
management of some banks considered some of the questions as very confidential to
the operation of their banks.
27
1.8 OUTLINE OF CHAPTERS
This study is presented in five chapters with Chapter One serving as the general
introduction to the whole study. It states the research problems, and provides insight
into the research. Chapter Two traces the literature review on design of financial
products and services.
Chapter Three contains the methodology, definition of terms and overview of the recent
development in the financial sector of the Nigerian Economy. Chapter Four establishes
the model to be used and discusses the statistical methods (data presentation and
analysis) employed to make the analysis clearer. Chapter Five analyses the empirical
findings of the study, which is the summary, suggestions and conclusions and/or
recommendation of this study.
1.9 SIGNIFICANCE
The result of the study would enable senior management of financial institutions
develop relevant product design and customer focused strategies for their banks. Since
the sudden consolidation exercise, the various policy measures churned out via the
credit and monetary policies/guidelines have jolted the banks rather violently from their
cozy armchairs to the field to scout for deposits and for business. They now compete
fiercely and scramble actively for deposits. Intense competitions, innovation,
development of new products and provision of excellent service have therefore been the
order of the day. In the process, banks are repositioning for the fierce competitive
environment through information technology (computerization), new products, better
28
packaging of old products. In all these, the financial institutions generally are moving
away from armchair to dynamic postures to woo customers and clients and the result is
bound to be the much desired improved services for the customers. In such a highly
competitive environment therefore, only the competent and efficient banks can survive
and remain in business.
The result of this study would enable banks know the level of satisfaction received by
customers with their services. It would also enable banks know if the quality of service
affects their customers‘ loyalty to them and how that in turn affects their bottom line. The
study is important to the management of the banks.
29
1.10 REFERENCES
Kimball R C [1992] ‗Relationship Versus Product In Retail Banking‘, Journal of
Retail Banking, 12, 1 – Spring
Ketu A. A (2008) "Microfinance banks in Nigeria: An Engine for Rural
Transformation" West African Institute for Financial and Economic
Management, Lagos Nigeria.
Keltner B [1995] ‗Relationship Banking and Competitive Advantage: Evidence
from the US and Germany‘, Californian Management Review, Vol. 37, N0. 4
Parasuraman A, Berry L L & Zeithaml V A [1998]‘SERVQUAL: A Multiple Item
Scale for Measuring Consumer Perceptions of Quality of Service‘, Journal of
Retailing, Vol. 64, no. 1
UNDP/UNDCF, ―Support to the Development of Sustainable Microfinance
Sector in Nigeria: Mid-term Evaluation Report‖, September 2007.
Central Bank of Nigeria, ―Regulatory and Supervisory Framework for
Microfinance Banks (MFBs) In Nigeria‖, December 2005.
Arthur Middleton, (2005) ―How Marketing strategy Builds Loyalty and Profits‖,
Database Marketing Institute.
Novo J. (2004)-―Drilling Down, Turning Marketing strategy into Profits with
Spread Sheets‖
30
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
Berry [1993] said that traditionally, the environment for financial services could be
characterized as having excess demand, with banks being product–led and passive,
waiting for customers to come to them. Fierce competition, along with other factors
such as technological progress, deregulation and re-regulation, and a demand-driven
marketplace have all meant that banks are now operating in very different business
environment. One consequence of these changes is the recognition that the customer
should be central to the focus of the business and its strategies.
However, the changed business environment has meant that implementations of
persistent improvement on existing products as well as design of new to the world
products, and a focus on the customer are crucial for business survival.
2.2 NEW PRODUCT DESIGN (NPD)
In business and engineering, new product design (NPD) is the term used to describe
the complete process of bringing a new product to the market. New Product design is
concerned with efficient and effective generation and development of ideas through a
process that leads to new products. A product is a set of benefits offered for exchange
31
and can be both tangible, as well as intangible (like services, experience, belief). There
are two parallel paths involved in new product design (NPD) processes:
The first involves the idea generation, product design and detail
engineering.
The other involves market stage research and marketing analysis.
Usually, organizations see new product design as the first stage in generating and
commercializing new products within the overall strategic process of product life cycle
management, which are used to maintain or grow their market share. Product life cycle
management (PLCM) is the succession of strategies used by business management as
a product goes through various stages in its life cycle. The condition in which a product
is sold (advertising, saturation) changes over time and must be managed as it moves
through its succession of stages. Product designers conceptualize and evaluate ideas,
making them tangible through products, in a more systematic approach. Their role is to
combine art, science and technology to create tangible 3-dimensional goods.
2.3 STAGES IN NEW PRODUCT DESIGN
The evolution of every product goes through series of stages. These stages often occur
in sequences. Each sequence is important and its completion often leads to the next
stage. The stages in new product design (NPD) include:
1. Idea Generation
This stage is often called the ‗Fuzzy front end‘ of the NPD process. Ideas for new
products are usually obtained from- Basic research using the SWOT analysis (Strength,
32
Weaknesses, Opportunities and Threats), Market and consumer trends, Company‘s
R&D departments, competitors, focus groups, employees, sales people, corporate
spies, trade shows, as well as Ethnographic discovery methods (which usually involves
searching for user patterns and habits). Idea generation process is also called
Brainstorming of new product process.
2. Idea Screening
The objective of the idea screening process is to eliminate unsound concepts prior to
devoting resources to them. Usually, the screeners ask several questions which may
include:
Will the customer in the target market benefit from the product?
What is the size and growth forecasts of the market segment/target market?
What is the current or expected competitive pressure from the product idea?
What are the industry sales and market trends the product idea is based on?
Is it technically feasible to manufacture the product?
Will the product be profitable when manufactured and delivered to the customers
at target price?
3. Concept Development and Testing
This stage involves developing the market and product details. It involves investigating
the intellectual property issues and searching patent data bases. This will lead to asking
the following questions:
33
Who is the target market and who is the decision maker in the purchasing
process?
What product features must the product incorporate?
What benefits will the product provide?
How will consumers react to the product?
How will the product be produced most cost effectively?
What will it cost to produce the product?
Testing the concept can also be carried out by asking a sample of prospective
customers what they think of the idea, usually via choice modeling
4. Business Analysis
This stage involves the following:
Estimate the selling price based upon competition
Estimate the selling price based upon consumer feedback
Estimate sales volume based upon size of market.
5. Beta Testing and Market Testing
At this advanced stage of the NDP, the following is expected:
Produce a physical prototype of the product
Test the product and its packaging in typical usage situations
Conduct focus group customer interviews or introduce at trade show
Make adjustments where necessary
34
Produce an initial run of the product and sell it in a test market area to determine
customer acceptance.
6. Technical Implementation
This advance stage usually entails the following set of activities:
Finalize quality management system
Resources Estimation
Product Requirement publication
Publish technical communication such as material data sheets
Operation planning
Department scheduling
Supplier collaboration
Logistic plan
Resource plan publication
Program review and monitoring
Contingency/ Sensitivity Analysis- These will involve ‗ what-if-Analysis‘
7. Commercialization
This is often considered a post NDP stage. It usually entails the following activities:
Lunch the product
Produce and place advertisements and other promotion strategies
Fill the distribution pipeline with products
Develop a critical path analysis
35
8. New Product Pricing
This post NDP stage usually involves the following:
Evaluating the impact of new products on the entire product portfolio
Value analysis (internal and external)
Influence of competition and alternative competitive technologies
Differing value segments such as price, value and need
Product costs( both fixed and variable cost elements)
Forecast of unit volumes, revenues and profit
2.4 FUZZY FRONT END (FFE)
This is the ‗getting started‘ period of new product development processes. It is at
the FFE that organizations formulate the concept of the product to be developed
and decides whether the organization formulates a concept of the product to be
developed and decides whether or not to invest resources in the further
development of the idea. It is the phase between first consideration of an
opportunity and when it is judged ready to enter the structured development
process (Kim and Wilemon, 2002). FFE includes the development of a precise
concept. The ‗FFE‘ ends when an organization approves the development cycle
time. Although the FFE may not be an expensive part of product development, it
can consume 50% of development time. It is at this point that major commitments
are typically made, involving- Time, money, and products nature; thus setting the
course for the entire project and final end product. Consequently, this phase
should be considered an essential part of development rather than something
36
that happens before development. Also its cycle should be included in the total
development cycle time.
Koen et al. 2001, distinguishes five different Front-End elements in no particular
order:
Opportunity Identification
Opportunity Analysis
Idea Genesis
Idea Selection
Concept and Technology Development.
2.41 Opportunity Identification
At this element of FFE, large or incremental business and technological chances are
indentified in more or less structured way. Using the guidelines established here,
resources will eventually be allocated to new projects, which the lead to a structured
New product & process development (NPPD).
2.42 Opportunity Analysis
This is done to translate the identified opportunities into implications for the business
and technology specific context of the company. Here, extensive efforts may be made
to align ideas to target customer groups and do market studies and /or technical trials
and research.
2.43 Idea Genesis
37
This is the evolutionary and iterative process which progresses from birth to maturation
of the opportunity into tangible ideas. The process of idea generation can be internal or
come from outside.
2.44 Idea Selection
The purpose of idea selection is to choose whether to pursue an idea by analyzing its
potential business value.
2.45 Concept and Technology Development
During this part of the FFE, the business case is developed based on estimates of total
available market, customer needs, investment requirements, and competition analysis
and project uncertainty.
It is important to note that FFE generally consist of three (3) important tasks:
Strategic Planning
Concept generation
Pre-technical Evaluation
Ironically, these set of activities are often chaotic, unstructured, and unpredictable, while
the subsequent new product development process is typically structured, predictable
and formal. The term FFE was first popularized by Smith and Reinertsen 91991).
However, in a more recent paper, Cooper and Edgett 92008) affirm that vital pre-
developmental activities include:
Preliminary market assessment
Technical assessment
38
Source-of-Supply-assessment
Market research
Product concept testing
Value-to-the customer assessment
Product definition
Business and financial analysis
These activities yield vital information to make ‗GO or NO-GO’ decisions.
Economic analysis, Benchmarking of competitive products, modeling and prototyping
are also important activities during the front-end activities.
2.46 OUTCOME OF FFE
The outcomes of FFE are:
Mission statement
Customer needs
Details of the selected concept
Product definition and specifications
Economic analysis of the product
The development schedule
Project staffing and the budget
Business plan aligned with corporate strategy.
39
2.47 PRODUCT LIFE CYCLE (PLC)
Every product has its own life cycle, just like living things. This cycle starts from birth of
the product to the death of the product. The life cycle goes through the following
pathways: Birth, growth, maturity, decline and death.
To say that a product has life cycle is to assert three (3) things:
Products have a limited life
Product sales pass through distinct stages, each posing different challenges,
opportunities and problems to the seller.
Products require different marketing, financing, manufacturing, purchasing and
human resource strategies in each life cycle stage.
The PLC is as shown below:
1) Introduction stage
2) Growth stage
3) Maturity stage
4) Saturation & decline stage
40
2.48: TABLE 1: STAGES IN PRODUCT LIFE CYCLE (PLC)
S/N
STAGE IN PRODUCT
LIFE CYCLE CHARACTERISTICS
1
2.481 INTRODUCTION
STAGE
1. Costs are very high.
2. Slow sales volumes to start.
3. Little or no competition.
4. Demands have to be created.
5. Customers have to be prompted to try the product.
6. Makes no money at this stage.
2
2.482 GROWTH
STAGE
1. Costs reduce due to economies of scale
2. Sales volume increase significantly
3. Profitability begins to rise
4. Public awareness increases
5. Competition begins to increase with a few new players in establishing market
6. Increased competition leads to price decreases.
3
2.483 MATURITY
STAGE
1. Costs are lowered as a result of production volumes increasing
2. Sales volume peaks and market saturation is reached
3. Increase in competitors entering the market
4. Prices tends to drop due to the proliferation of competition products
5. Brand differentiation and feature diversification is emphasized to maintain or
increase market share
6. Industrial profits go down
4
2.484 SATURATION &
DECLINE STAGE
1. Costs become counter-optimal
2. Sales volume decline
3. Prices & profitability diminish
4. Prices becomes more a challenge of production/distribution efficiency than
increased sales
41
2.49 CRITIQUE OF THE PRODUCT LIFE-CYCLE CONCEPT
Although the PLC model offers some degree of usefulness to business managers, in the
sense that it is based on factual assumptions, nevertheless, it is difficult for marketing
management to gauge accurately where a product is on its PLC graph. For instance, a
rise in sales is not necessarily an evidence of growth. Similarly, a fall in sales does not
typify decline. This is because; some products rarely experience a decline. Coca cola,
savings account and current accounts, medical and legal are examples of such
products and services that have existed for many decades, but are still popular all over
the world. Another factor is that differing products would posses PLC shapes. A fad
product would hold a steep sloped growth stage, a short maturity stage, and a steep
sloped decline stage. Conversely, a product such as Coca cola, legal, banking products
and services would experience growth, but also a constant level of sales over a number
of decades. Thus it may be said that a given product or collective products within an
industry may hold a unique PLC shape. Hence the typical PLC model can only be used
as a rough guide for marketing management. Furthermore, the duration of PLC stages
is unpredictable. It is not possible to predict when maturity or decline begins; hence
strict adherence to PLC model can lead an organization to misleading objectives and
strategy prescription.
Thus a fair comment is that in the short term, all products pass through the PLC stages,
as not all products and services die in the long run.
42
2.410 NEW PRODUCTS OF NIGERIAN BANKS IN THE 21ST CENTURY
The expectation of value, primarily establishes the cause of banking by customers in the
first place. This means that the most tactical way of attracting, retaining and ensuring
customers‘ loyalty is by developing and offering need satisfying products and services
that add real value to the customers. Some of the recent innovative products designed
and offered by Nigerian Banks in the 21st century include:
2.411 Custodian of Valuables- Bailee/Bailor
By these products, banks create a secured custody for safe keep of valuables for their
important customers, inside the strong room called vault. The commonly items often
vaulted by banks on behalf of their customers include: Certificates of occupancy (C of
O) of properties, expensive jewelries meant for future use, duly executed wills, etc. The
technical terms used to refer to this form of relationship between banks and their
customers are Bailee and Bailor. While Bailee refers to the Bank who has been
entrusted with the valuables for safe keep, Bailor refers to the customer entrusting his
or her valuables to another for safe keep
2.412 Temporary Overdrafts (TODS)
This is a product designed by Nigerian Banks at the wake of the 21st century, to allow
their trusted customers overdraw the funds in their account by certain amount for a very
short period of time. The aim of this product is to enable reliable customers to meet
immediate obligations, even when they don‘t have money in their account. They are
meant for short term funding needs. They are granted for short tenors usually spanning
few weeks to few months.
43
2.413 Collection Products & Services
Banks develop collection services to handle the challenges involved in managing cash
for large organizations with huge daily cash sales. Usually, the banks allocate secured
vehicles, with security personnel to pick-up cash for daily sales of these organizations.
In the case of big trading companies, such as big petroleum markers, whose
businesses are on cash and carry basis, banks often set up transient offices in such
premises to handle cash collection services and evacuate cash on regularly basis,
sometimes hourly evacuation, every three hours or once per day, thereby reducing the
inherent risks associated with handling huge cash.
2.414 Local Purchase Orders (LPO)
By LPO, Nigerian banks create and avails funds to customers with genuine contracts to
finance the supply of materials or execution of specific supplies and contractual
obligations. Most banks will only finance purchase orders of reputable organizations
referred to as Blue chips. Most Local purchase orders usually have payment clause of
14 days, 30 days, 60 days, sometimes up to 90 days. Thus, banks provide short term
finance to their customers, to execute such contracts and repay at maturity of the LPO,
while security is usually an irrevocable domiciliation of payment undertaking signed by
the blue chip, to domicile payment direct to the bank providing finance for that specific
transaction.
44
2.415 Bonds & Guarantees
Banks design several variants of bonds and guarantee products to act as guarantor on
behalf of their customers, in favour of third (3rd) parties. By so doing, they agree to
indemnify the 3rd parties in the event that their customers fail to perform their contractual
agreements with the principals. These are generally referred to as off-balance sheet
products, because they do not involve outright outlay of funds. Good examples of such
off-balance engagements include: Performance bonds, Advance payment guarantees
(APG), Bid bonds, Bills for collections (BCs). etc
2.416 Savings Mobilization
The banks develop reward systems as part of key strategies for mobilization of
deposits, among which are payment of interests, qualification to assess credit facilities,
raffle draws to win prizes. Etc. The banks open, maintain and operate extensive branch
networks as a means of reaching out to more number of clients. These deposits are in
turn given out as loans to entrepreneurs, with higher returns for the banks and their
shareholders.
2.417 Financial Intermediation
The banks now design innovative services that enable them perform the function of
financial intermediation. This is achieved by sourcing funds in form of deposits from the
surplus sectors and savings, and making same available to the deficit sectors in form of
credit facilities to their deserving customers.
45
2.418 Advisory Services
To increase their market share and remain relevant in a very competitive environment,
Nigerian banks, such as GT Bank Plc, UBA etc, now perform agency functions, largely
in raising funds on behalf of their customers for which they earn brokerage fees. The
bank also set up advisory departments, to guide customers engaging in turnkey
projects. This department works closely with the customer by providing consultancy
services to guide against major errors. In most cases, the banks now back up its
advisory service with financial support to consummate realistic business proposals of
the customers.
2.419 Local & Foreign Funds Transfer (LFT & FFT)
The financial services sector have further develop competencies in the area of
transferring funds between local bank to local banks as well as between local banks to
foreign banks. This involves mainly local or international movement of funds from place
to another, or from one account or person to another, by means of telegraphic or other
electronic devices. The popular western union money transfer scheme and Money gram
scheme operates through modern networks of the banking system world wide. Thus
with LFT & FFT, Nigerian banks have made it possible to settle financial obligations in
locations where they do exist. The ability of the banks to fulfill LTF & FFT on-line-real-
time remains a major success factor.
46
2.420 Foreign Exchange (FOREX) Products
It is no longer strange that banks now designed products tailored to meet the foreign
exchange needs of their customer, especially those that play actively in the importation
of goods and services. As one of the authorized dealers, banks source FX and sells
same to deserving customers, who may not have access to the official markets. For
instance, the Dutch Auction System (DAS) of FOREX bidding provides a window
through which the participating banks obtains FX at the government regulated price on
behalf of their key customers, for settlement of international trades obligations, thus
making huge savings for the customers, had they resort to purchasing the FX from the
parallel market (black market).
2.421 Customized Value Added Products
It is common in recent time to find banks associating their products and services with
extra specific value added products such as insurance benefits designed, especially for
the critically minded customers as a means of giving extra value, with the objective of
getting total loyalty from the customer. The justification for offering such products is in
the fact that the target audience would not only derive banking benefits, but are also
availed protection against certain insurable risks.
2.422 Attractive Cot Surrendering Products (CSP)
Originally, it was a common practice for Nigerian banks to charge customers
commission on turnover (COT), for several withdrawals as a means of maximizing their
incomes. However, with increasing competitive pressure, banks such as UBA, First
bank, GT Bank, now design innovative products that will make the bank forgo the COT
47
charge, with a view of attracting more deposits in form of patronage from the customers.
This product ensures certain categories of customers who receive huge funds are
encouraged to save them with the banks, knowing fully well that no charge will be
deducted from their account at the point of withdrawal. Usually, such accounts are
opened with certain fixed amount of money, and withdrawals below that threshold will
not be allowed.
2.423 Internet Banking Product
Nigerian banks have made giant stride in the area of ICT. Now banks develop internet
banking capabilities which enables customers to carry our certain transactions at the
comfort of their offices and homes. Such transactions include online account balance,
fund transfers, Request for new cheque book, confirmation of cheques. Etc. These
services prior to now must be done in the banking hall, but with the internet banking
facilities, customers have the ability to do carry out certain transactions on their own.
These activities can be done on any computer with internet facility.
2.424 Mobile Banking
Further breakthroughs have been made in the ICT sector to the extent that several
transactions can be consummate with hand held mobile phone (GSM). Banks such as
GT Bank have develop mobile banking products like GT-Connect, Zenith have Z-
mobile, Access Bank have Access-online, Even old generation bank like Wema Bank
have Wema-mobile. These newly designed products and services enables customers
adopt Do-It-Yourself (DIY) approach, by carrying out a number of transactions even
while on transit, eating, driving or exercising.
48
2.425 Design of Islamic Banking Products (IBP)
Islamic banking (or participant or non interest banking) is banking or banking activity
that is consistent with the principles of Islamic law (Sharia) and its practical application
through the development of Islamic economics. Sharia prohibits the payment or
acceptance of specific interest or fees (known as Riba or usury) for loans or money.
Investing in businesses that provide goods or services considered contrary to Islamic
principles is also Haraam (forbidden). While these principles were used as the basis for
a flourishing economy in earlier times, it is only lately that a number of Islamic banks
were formed to apply these principles to private or semi-private commercial institutions
within the Muslim population.
2.426 Principles
Islamic banking has the same purpose as conventional banking, to make money for the
investing shareholders by lending out capital. Because Islam forbids simply lending out
money at interest, Islamic rules on transactions have been created to avoid this
problem. The basic technique to avoid the issue of interest is the sharing of profit and
loss, via terms such as profit sharing safekeeping, joint venture, cost plus, and leasing.
For instance, in an Islamic mortgage transaction, instead of loaning the buyer money to
purchase the item, a bank might buy the item itself from the seller, and re-sell it to the
buyer at a profit, while allowing the buyer to pay the bank in installments. However, the
bank's profit cannot be made explicit and therefore there are no additional penalties for
late payment. In order to protect itself against default, the bank asks for strict collateral.
The goods or land is registered to the name of the buyer from the start of the
49
transaction. This arrangement is called cost-plus. Similarly, Islamic banks handle loans
for vehicles in a similar way (selling the vehicle at a higher-than-market price to the
debtor and then retaining ownership of the vehicle until the loan is paid).
2.427 History & Evolution of Islamic Banking Products in Nigeria
Interest-free banking seems to be of very recent origin. The earliest references to
banking on the basis of profit sharing rather than interest are found in Anwar Qureshi
(1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in the late forties, followed by
a more elaborate exposition by Mawdudi in 1950. They all recognized the need for
commercial banks and their perceived "necessary evil," of excessive interests‘ charges
and thus have proposed a banking system based on the concept of profit and loss
sharing, rather than interest charges.
In the pre-colonial Nigeria, especially within the caliphate, there were various means by
which business capitals were generated. Practice of money lending was evidenced in
some rural communities in the North as far back as 1903, although not so popular at
that time. Credit facility was also given in form of goods being sold by traders who paid
the principal sum with a mark-up or share of profit, only after sale. Individuals bound by
common interest also pooled their resources together to form partnership at a
predetermined share of profit or loss.
All these activities which were practiced under a strict interest-free policy of the
caliphate and continued long after the evolution of the conventional banks are what an
Islamic bank would set out to do today.
50
A case was reported of a successful Hausa business man in the 1930s-40s, Al-hajj al-
Hassan, who used to find outlets for surplus capital. He advanced money to young men
of sound business acumen requesting them to pay to him half their profit, or less or
none at times, if no profit was made. When he eventually banked with the conventional
banks, he was reputed to be one of the wealthy men of Kano who for religious reasons
stipulated that their deposit account shall be non-interest bearing but would only receive
good customer gift each year if given.
However, on a global scale, (Before its incursion into the Nigeria economic
environment), the first modern experiment with Islamic banking was undertaken in
Egypt under cover without projecting an Islamic image—for fear of being seen as a
manifestation of Islamic fundamentalism that was unacceptable to the political regime.
The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based
on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until
1967 (Ready 1981), by which time there were nine such banks in country.
Subsequently, stronger Islamic banks emerged, especially inform of Islamic
Development Bank. Compliant assets reached about $400 billion throughout the world
in 2009, according to Standard & Poor‘s Ratings Services, and the potential market is
$4 trillion. Iran, Saudi Arabia and Malaysia have the biggest sharia-compliant assets.
In 2009 Iranian banks accounted for about 40 percent of total assets of the world's top
100 Islamic banks. Bank Melli Iran, with assets of $45.5 billion came first, followed by
Saudi Arabia's Al Rajhi Bank, Bank Mellat with $39.7 billion and Bank Saderat Iran with
$39.3 billion. Iran holds the world's largest level of Islamic finance assets valued at
51
$235.3bn which is more than double the next country in the ranking with $92bn. Six out
of ten top Islamic banks in the world are Iranian.[24][25][26] In November 2010, The Banker
published its latest authoritative list of the Top 500 Islamic Finance Institutions with Iran
topping the list. Seven out of ten top Islamic banks in the world are Iranian according to
the list
2.4218 Constitutionality of Islamic Banking Products
It must be pointed out from the outset that there is no place in the Constitution of the
Federal Republic of Nigeria 1999 or the ones before it where provision is/was made for
Islamic banking or any other type. This may be explained by the fact that the
Constitution does not pretend to be capable of making provisions for all laws that need
to be. Rather, by its supremacy provisions, it portends to give validity to all the laws of
the land as the makers of such laws derive their law making powers from it. By these
provisions, the Constitution seeks to assume the status of Kelson‟s concept of Ground
norm. This is the basic norm, that is, the common source for the validity of all norms that
belong to the same order and the reason for their validity.
Thus, all the banking laws in Nigeria, including the one enabling Islamic banking have
their roots traceable to the Constitution through this means.
Even where any of these laws was made before the Constitution came into force, the
validity of such law is co-opted into the Constitution as if its makers, then, also derived
their powers from it. The laws in this category are referred to as the existing laws.
52
The aim of the provisions of section 315(4)(b) of the constitution was to bring all
Nigerian laws predating its coming to being into its ambit and deem them as having
been properly made under it. Thus, virtually all the laws regulating banking practices
presently in Nigeria fall within this category including Banks and other financial
institution decree (BOFID 1991), Banks and other financial institution act (BOFIA 2004).
2.429 A Case For Non-Interest Bearing Products
Aside from the need to redress the past religious discrimination or the exercise of
Fundamental Human Right to freedom of religion, Non interest or Islamic banking aims
at the overall prosperity for all the members of a society as well as the nation vide
equitable distribution of wealth and resource.
Furthermore, as a matter of general principle, a wider range of financial products would
benefit the whole of our Community and Islamic products could prove to be attractive
beyond the purely Muslim sector, especially as it has the potential to save excessive
interest expense for the SMEs. Thus, by giving the necessary political will to effect the
establishment of Islamic banking system, the government would only be fulfilling its
primary purpose of welfare of the people as directed by the Constitution.
2.430 Microfinance Bank Products
Microfinance refers to the entire flexible structures and processes by which financial
services are delivered to micro entrepreneurs as well as the poor and low income
population on a sustainable basis. It recognized poor and micro entrepreneurs who are
53
excluded or denied access to financial services on account of their inability to provide
tangible assets as collateral for credit facilities (Jamil, 2008) Microfinance can be seen
as a supply of loans, savings and other financial services to the poor. It is the practice of
delivering those services in a sustainable manner so that poor households will have
access to financial services so that they can build sustainable microenterprise. While
microenterprise is a business that is independently owned and operated by its owners
and does not meet certain standards of size which in most cases operated as informal
business.
The aim of microfinance is not only to extend credits to beneficiaries but to promote
entrepreneurship and boost rural financial markets that will provide sustainable access
to financial services by creating a relationship between those with financial resources
and those who need them.
The Microfinance Policy, Regulatory and Supervisory Framework for Nigeria developed
by the CBN in 2005 initiated an important turning point in the industry with the creation
of the Microfinance Bank (MFB) as an institutional vehicle for privately owned, deposit-
taking microfinance institutions (MFIs). Prior to this, a few notable Non Governmental
Organizations (NGOs) were established that have grown to provide microfinance in a
sustainable manner according to international standards of good practice. However,
until recently the majority of institutions have been smaller NGOs, community banks,
cooperatives, and non-bank financial institutions with uneven management capacity,
low outreach to clients, and challenges to becoming profitable.
54
The Framework is designed to unite the best of the NGO credit organizations, the
privately owned community banks, and new MFI initiatives under a common legal,
regulatory and supervisory regime. The Microfinance Framework catalyzed two driving
forces in the microfinance industry at an extraordinary pace and scale. First is the
immediate investment of capital by a large number of Nigerian and international
investors in newly created MFBs. The second force is the new regulation and
supervision framework for this emerging industry. The rate of growth in the microfinance
industry, measured by number of institutions, capitalization, or portfolio growth, is
among the fastest of any microfinance industry globally at similar early
stages of development.
Some common products offered by MFBs include: Leasing, Housing finance, overdrafts,
Asset acquisition loans, Asset Refinancing, corporative loans etc.
2.431 Objective & Goals of Microfinance Banks In Nigeria
Credit Delivery
This is perhaps one of the most important roles of Microfinance banks, as the loans
extended are used to expand existing businesses and in some cases to start new ones.
According to CBN (2008) microfinance loans granted to clients is increasing from 2007
to date and most of it goes to financing microenterprises in rural areas. Ketu, (2008)
observed that microfinance banks have disbursed more than N800 million micro credits
to over 13,000 farmers across the country to empower their productive capacities. As
such it is expected that agricultural output will increase with the increase in funding. The
entrepreneurial capacity of the farmers will thus improve.
55
Boosting Small Scale Enterprises/Agriculture
About 60 percent of poor people in the country live in the rural areas and 80 percent of
them are farmers and artisans (NBS, 2005). Microfinance banks have therefore been
the main sources of funding to these less disadvantaged groups. Rural people are
empowered through microfinance loans and services, and hence small scale
agricultural practice and microenterprise is developed. Governments go into co-
operatives to partner with the microfinance banks to raise bulk loans to be disbursed to
the beneficiaries, in so doing the banks are increasing and sustaining the number of
people going into small businesses.
Employment Generation
Agriculture and microenterprises contributes immensely to job creation, and are of
particular interest to all Microfinance Bank in rural areas. Microfinance banks have so
far engaged in extending credits and other services to many rural enterprise and hence
generating employment and promoting entrepreneurship. The promotion of employment
in rural areas by microfinance banks covers the following areas; blacksmithing, gold-
smiting, watch repairing, bicycle repairing, basket weaving, barbing, palm wine tapping,
cloth weaving, dyeing, food selling, carpentry, brick-laying, pot-making, leather works
and drumming. Even though found in urban areas, these industries are more prominent
in the rural areas. It has, therefore, been acknowledged that the rural setting is an arena
of many industries, which could be developed to contribute significantly to the national
economy, just as rural people are more frequently self-employed than urban people
(Ketu, 2008).
56
Improvement in Skill Acquisition
Improvement of the condition of women through the provision of, skills acquisition and
adult literacy is another role played by microfinance banks. This is done through
building capacities for wealth creation among enterprising poor people and promoting
sustainable livelihood by strengthening rural responsive banking methodology and the
introduction of simple cost-benefit analysis in the conduct of businesses. In most cases
a profit sharing agreement is entered between a bank and an entrepreneur and new
methods and innovations are passed to the prospective entrepreneur by the banks
professionals, while at the end of the production period the proceed is being shared and
the entrepreneur if so wishes can continue on his own after the necessary skills and
production techniques are acquired. (Umar, 2008)
Facilitates Poverty Alleviation
Employment and income generation are important aspects of poverty alleviation efforts.
Microfinance banks have accelerated the operation of government poverty alleviation
programmes and in doing that promising entrepreneurs are supported and new ones
emerged. The federal governments National poverty Eradication Programme (NAPEP)
and National Economic Empowerment and Development Strategy (NEEDS) to mention
a few aimed at achieving the United Nation‘s Millennium Development Goals (MDGs) by
2015 required these microfinance institutions for success. The success of these
programmes and projects for advancement of the MDGs are linked with the promotion
of entrepreneurs in rural areas and subsequent reduction in the level of poverty (Ketu,
2008)
57
Other roles played by microfinance banks include; reorientation of the rural populace on
a sound financial practices, as well as issues such as reproductive health care, and girl
child education. All these areas have a direct link with entrepreneurial capabilities of the
rural people.
2.432 Product Papers
These are manuals put together by financial institutions to run as a scheme with the aim
of providing credit facilities to certain categories of clients. The rules and regulations
contained in it are to be followed systematically during lending of credits to accredited
customers. These schemes are put together in other to overcome the challenges of
collateral requirements which act as barriers to the granting of loans to the real sectors.
Most credits which stems from the product paper are granted without collateral. The
product papers by its nature usually have a transaction dynamics. The dynamics serves
the purpose of a compass in field mapping and thus provides a step by step route which
must be followed in the entire credit process in other to ensure the credit does not go
bad. Typical examples of the product paper are regulated by means of Authority-To-
Collect (ATC), Authority-To-Lift (ATL)
2.433. Invention of Authority-To-Collect (ATC) In Distributive Trades Financing These are documents issued by large manufacturing companies, especially
commodities and beverages to customers who makes payment into their account, which
acts as a representation of the actual goods paid for. Access to the stock of goods or
inventories are granted when the holder of the ATC is ready totake possession of the
physical goods. He thus presents the ATC to the appropriate department in charge of
release of physical goods. The goods are released after confirmation of the
58
genuineness of the ATC. This have successfully been used to secure the loans granted
to accredited distributors of blue chips in the commodity trading and beverage sectors
such as Dangote Industries Plc, Flour Mills of Nigeria Plc, WAPCO Lafarge, Guiness
Nigeria Plc, Nigeria Breweries. Etc. By this means, financial institutions in Nigeria
designs product-paper and disburses funds to accredited distributors of blue chip
companies for trading in commodities. However, the banks providing the finance places
a lien on the ATC, by warehousing in their vault (strong room) for safe keep. Release to
the customers are done on case by case basis to enable them take ownership of the
physical goods, while adhering strictly to the transaction dynamics as stipulated in the
product-paper.
2.434 Authority-To-Lift (ATL)
The ATL is a document similar to the ATC described above in all angles. The objective
is to provide finance to small and medium scale enterprises in the real and downstream
petroleum sector, who do not have the requisite collaterals to access loan, but posses
the requisite experience in that giving sector. The ATL mostly used in the case of oil
trading have successfully been implemented by leading innovative banks among which
are UBA, Zenith Bank, GT Bank.
2.435 Idea of Receivable Refinancing
Receivable refinance are recent products designed by banks to solve the problem of
short term solvency for companies engaged in supplies on purchase order basis. This is
usually the type of finance provided when a supplier has successfully delivered on a
local purchase order, with his or her funds, but would have to wait for a certain period
say 30 to 90 days before they receive payments. During such waiting periods, the
supplier has tied up capitals in receivables on LPOs which can be used to execute other
59
businesses. When faced with such a circumstance, the company can approach a bank
to refinance or discount the receivable. When the bank has done all necessary checks,
they provide immediate finance to the company at a discount of the original value, while
they wait for maturity of the receivable at a future date.
2.436 Invoice Discounting
When service providing companies render services to reputable organizations, they
issue invoices demanding for payments. These invoices are keyed in to the systems of
the blue chips for record purposes. The companies can have a credit line in place from
a bank to discount all invoices from a given blue chip. This ensures the company does
not have much funds tied down as receivables. Thus Invoice Discounting are products
designed to provide funds for the invoices issued by blue chip companies.
2.437 Inventory Refinance
This is an asset-based finance, usually supported with stock warehousing arrangement,
known as inventory finance. In this case, the borrowing customer approaches the bank
to raise loans equivalent to agreed proportion of inventories (in-store stocks-in-trade) on
which critical working capital for his business is unduly tied down. As a rule, the bank
would probably not lend more than 60% to 75% of the total cost or market value of the
eligible inventories.
2.438 Contingent Liability Products
Contingent liability products are those exposures of banks whereby financial instituitions
provide one form of guarantee or the other to third parties or beneficiaries at the
instance of their customers. Such exposures do not involve parting with funds at the
60
onset, but mere undertakings by the banks. Because such products does not involve
initial capital outlay, rather parting with funds are contingent upon a default(s) or
triggered by an occasion of non-performance by the customer on whose request the
bank issued such guarantee. They are referred to as contingent liabilities, because their
occurrences are contingent upon a default. Several variants exist for various purposes.
2.439 Bid Bond
Bid bonds also refer to as Tender bonds are guarantees issued by a financial institution
to a third party at the instance of their customer who is expected to submit the bond as
part of requirement for application for award for a contract. The bond is issued as a
guarantee to the third party that the applicant possesses requisite technical experience
for the job and will also undertake the contract when awarded.
It is a common practice in the award of contracts by government, NGOs and
corporations to require prospective contractors to provide the tender bonds in respect of
advertised jobs for which they are bidding. This requirement is obtained mostly in
institutions that apply due diligence process in the award of contracts. The bid bond
fulfill a number of purposes for the parties to the contract which include: It represents
expression of interest by the prospective contractors in particular jobs advertised. It
indicates the costs preferred by the prospective contractors for executing the jobs if their
bid is successful. It also state requisite experience, work competencies as well as
resources at the disposal of the prospective contractor.
61
2.440 Performance Bond
The need for performance bond is to secure chances of failure by second parties to
secure jobs awarded to them by third parties. It is provided by a bank on behalf of their
customer to a third party to demonstrate that the customer possesses requisite
technical competence to execute the jobs. Assume that NNPC is concerned about the
ability of contractor to successfully complete a job. In other to mitigate the risk of failure
which will cause financial losses to NNPC, they will ask the contractor to provide a
performance bond from a reputable bank. The banks only provide a performance bond
to a trustworthy customer.
2.441 ADVANCE PAYMENT GUARANTEES (APG)
The Advance payment guarantee (APG) is an undertaking issued by a bank on behalf
of their customers to a third party to secure mobilization funds released to them to start
the execution of the job, which they have successfully bided and won. The bond
provides comfort to the owner of the fund that the fund will not be diverted, but will be
judiciously utilized for the awarded contract
2.442 BANK GUARANTEE (BG)
Guarantees are undertakings by the banks made at the request of a customer to a
beneficiary (third party) to assure them that the customer shall perform their obligations
as stated or envisaged in particular business transaction. The BG is mostly used by
individuals, businesses or other organizations such as governments, NGOs, schools etc
to secure agreements with third parties.
62
2.443 INDEMNITIES
Indemnities are advance forms of guarantees. They serve similar purpose, but they
further provide additional undertakings to be personally responsible for all liabilities of
their customer to a third party. By issuing an indemnity, the bank indemnifies the third
party of all losses, which they may suffer on account of transacting businesses with a
customer of the bank. Prior to issuing an indemnity, the bank usually takes adequate
security from their customer to act as a way out, should their customer default on a
contractual agreement.
2.444 THE NATURE & WORKINGS OF OFF-BALANCESHEET PRODUCTS
By their nature, off-balance sheet engagements are mere undertakings and do not
involve outlay of funds at the onset. Funds can only be disbursed to a third party when
the customer of the bank defaults to meet a contractual obligation. For this purpose,
they are referred to as contingent liabilities.
2.445 BANKER'S ACCEPTANCE (BA)
A bankers‘ acceptance is a financial product, instrument or bill used in financing short-
term trade obligations or asset-based, self-liquidating credit transactions. It establishes
the liability assumed by the bank that accepts the bill to pay its face value to the named
investor. However, the bank‘s liability crystallizes only in the event that issuer of the
instrument is unable to redeem it on maturity. It is therefore a guarantee by a bank that
63
the drawer (their customer) will honour their obligations on the bill and , in the unlikely
event that they fail to do so, the bank undertakes to offset the liabilities. Thus both the
issuing company and accepting bank shares the liabilities on BA.
2.446 COMMERCIAL PAPER (CP)
These are unsecured short-term promissory notes of blue chip companies, issued to the
investing public, usually through an issuing house such as a bank. Typically CPs has
short tenors ranging from 30 to 180 days. However, sometimes the bank may guarantee
a CP. Without such guarantee, the bank performs an agency role and earns a fee
without taking a direct exposure; however the bank is exposed to reputational risk.
2.447 CONSUMER LENDING PRODUCTS
These are financial products and services designed to take care of the needs of
individual customers of banks. They do not usually involve large amount of money,
since they are needed to meet short term personal needs. Details are discussed below
2.448 SALARIES BACKED-ADVANCES
Salary advances are retail products designed to enable salary earners have access to a
certain percentage of their income before the due date. Usually it is advanced to
individuals with verifiable monthly salaries, whose salaries are domiciled within a branch
of the bank where the request is made. The bank thus allows a customer to have
access to a part of his salary, and repayment is made through direct deduction as soon
64
as the salary is paid., while the borrower is only allowed access to the balance after
settlement of his indebtedness.
2.449 NAIRA (N) CREDIT CARDS
This is a naira denominated product designed to enable high net worth individuals
(HNIs), usually a credit card holder, access to fund via the card, with certain credit limits
maintained in the card. The card is safely secured via chips and pin, with the holder
equipped with the codes. The holder of such card can access funds via machines or
electronic platforms designed for such purposes. The card holder can however not
exceeds the credit limit of the card. Credit cards are more rampant in advanced
economies, but are recently gaining acceptance in Nigeria. A widely celebrate success
of the card was the one lunched by Eco Bank Nigeria Plc a member of Eco Trans-
international (ETI), a global player in the financial services sector.
2.450 ASSET ACQUISITION PRODUCTS- QLS, MPOWER, WAAS
These are products designed to make the acquisition of household and office properties
more convenient for reliable customers of banks. The need for these products arises to
enable customer use their fund for purposes while fulfilling their basic needs. Variants of
these products exist. Quality Life Scheme (QLS) was designed by United Bank for
Africa (UBA) to make asset acquisition more flexible for customers, while ‗MPOWER
was designed by Access Bank Plc, were as WAAS (Wema Asset Acquisition Scheme)
was designed by Wema Bank Plc for similar purpose.
65
2.451 SHARES PURCHASES & TRADING
These are margin facilities designed for companies and individuals dealing in the capital
market. The product enables organizations or persons purchase shares of reputable
companies, using loans from banks and selling as soon as the shares gains appreciable
values. Making a success of this product requires adequate capital market techniques,
including speculative and intuitive skills. This is perhaps because of the volatility of the
capital market, as many organizations have burnt their fingers by wrong investment
decisions in this product.
2.452 EQUIPMENT LEASE FACILITIES (ELF)
This is a product designed for lease facilities where the customer who is in need of
equipment for its business is giving the facility to purchase the equipment. The ELF as
is fondly called is designed to take care of more capital intensive equipments like
specialized construction, manufacturing and media equipments unlike the conventional
asset acquisition products designed to meet the acquisition of less expensive household
properties. Usually, the agreement is made under seal where the title to the equipment
is purchased for the use of the customer is vested in the bank, while the equipment is
leased to the customer with rental payments prescribed.
2.453 DEVELOPMENT OF MORTGAGE PRODUCTS
Mortgage products are financial products designed for the acquisition of landed
properties and buildings. By their nature, mortgages involves long term financing. There
66
are different reasons for the need for mortgage loans which includes: Land acquisition,
building construction, purchase of a house, home renovation, refinance of existing
mortgage. Recently financial institution have started setting up mortgage arms and
departments to develop better improved products to cater for this property needs of their
clients. Similarly mortgage banks are also being licensed for this purpose.
2.454 SYNDICATION PRODUCTS IN NIGERIAN BANKING INDUSTRY
Syndications are situations where several Nigerian banks come together to finance a
given project due its size and complexity. The need for loan syndication arises due to
regulatory requirement that a bank shall not lend fund in excess of 20% of their share
capital to a single obligor or related companies unimpaired by losses. Thus rather than
declining on providing finance for turnkey projects that will cause the banks break
regulatory rules, they come together to provide funds in different ratios whose
aggregate amount is sufficient to execute the project. Syndication loans are common in
financing projects in the upstream petroleum sector as well as major construction
projects such as the third mainland bridge in Lagos Nigeria.
2.455 CONTEMPORARY PRODUCTS OF NIGERIAN BANKS IN INTERNATIONAL
TRADE FINANCE
These are products designed by Nigerian banks to facilitate international trades. Such
products facilitates both import and export businesses. They are used for payment and
67
settlement of obligations for businesses involving parties in different countries. Several
products are designed to ensure settlements are made irrespective of differences
between countries of origin (exporting countries) to countries of imports.
2.456 LETTERS OF CREDIT (LC)
A letter of credit (LC) is a guarantee of payment issued by an importer‘s bank at the
instruction of an importer to a an exporter, stating that the importer‘s bank will be
responsible for making payment to the exporter, if certain terms and conditions
stipulated in the letter of credit are met. It is the most popular instrument used for
settlement of obligations under an international trades transactions. It is a contractual
undertaking issued by a bank (issuing bank), on behalf of the buyer (importer/applicant)
to a seller (exporter/beneficiary) or the exporter‘s bank (advising/confirming bank), to
pay for the goods and services. Several types exist which include: Unconfirmed LC,
Confirmed LC, standby LC, Irrevocable LC, Red clause LC, Transferrable LC, Back-to
Back LC. etc
2.457 BILLS FOR COLLECTION (BC)
These are products designed to facilitate the purchase of goods and payment of same
between and importer and exporter. With BC, the bank does not issue its guarantee of
payment to the exporter unlike in the case of LC above. Here the bank acts as a
collection and payment agent between the parties involved. It only collects documents
which are titles to the goods shipped from the exporter and release same to the
importer to enable him clear the goods, against payment or acceptance to make
68
payment on a future date based on the agreement between the importer and the
exporter as contained on the bill. In BC, the exporter dispatches the goods without
receiving payment, but sends the documents for clearing the good to his bank, which in
turn sends it to bank with correspondent relationship. The local bank only release the
shipping documents to the importer after he has met the conditions stipulated in the bill
by the exporter. Two types of BC exits- Clean collection and Documentary collection. In
clean collection, the bank collects the value of financial documents such as cheques,
promissory notes bills of exchange etc on behalf of the exporter. In documentary
collections, the bank collects financial documents accompanied by commercial
documents such as commercial invoices, documents of title, transport documents etc,
or collects the value of only commercial documents, not accompanied by financial
documents.
2.458 ADVANCE PAYMENT/TELEGRAPHIC TRANSFERS (TT)
This is a mode of transaction in international trades where the importer makes payment
to the exporter before goods are shipped to him. The importer is exposed to risk of non-
performance by the seller. Specifically, the buyer is exposed to the risk of the seller‘s
probable forwarding goods that do not meet the original specification. High level of trust
is required in this form of transaction.
2.459 OPEN ACCOUNT
An open account transaction commences when the seller dispatches goods to the
buyer, with an agreement that the buyer makes payment either immediately after taking
delivery of the goods or within a specified period. The seller delivers the underlying
69
documents relating to the goods directly to the buyer, without entrusting them to its
bankers. Here the greater risk is borne by the exporter, while trust is a basic
prerequisite for this method of transaction.
2.460 EXPORT FINANCE PRODUCTS
These are among the major credit products of banks from which foreign exchange
earnings are gained, upon the disposal of related export proceeds. The export item my
be agricultural produce or other commodities, such as rubber, cashew nuts, cocoa,
ginger, palm produce, shrimps. Etc. During export financing, the lending bank must be
satisfied that the items are of exportable by meeting international standards. In addition
to these considerations, the goods to be export must be easily assessed for value and
quality by reputable export-testing and inspection companies such as COTECNA, SGS,
Burea veritas, Intertek etc. Arrangement must also be made of bonded warehouse, with
reputable warehousing agent, under a tripartite warehousing arrangement between the
bank, exporter and the warehousing agent.
2.50 THE CONCEPT OF MARKETING AS AN INTEGRAL PART OF
PRODUCT DESIGN
Kotler [1991] explained that the marketing concept holds that ―the key to achieving
banks‘ goals consist of determining the needs and wants of the target market and
delivering the desired satisfaction more effectively and efficiently than competitors‖.
Fundamental to the marketing concept is having a customer focus and achieving
profitability through customer satisfaction.
70
Today many banks view marketing as a philosophy, which should permeate the entire
firm, encompassing the activities of the whole banks rather than just the discipline of a
departmental functions Drucker [1973] encapsulates this sentiment:
Marketing is so basic that it is not just enough to have a strong sales team and to
entrust marketing to it. Marketing is not only much broader than selling it is not a
specialized activity at all. It encompasses the entire business. It is the whole business
seen from the point of view of the final results, i.e. from the customer‘s point of view.
Concern and responsibility for marketing must, therefore, permeate all areas of the
enterprise.
This perspective elevates marketing to a strategic level so that marketing efforts must
be aligned with corporate strategy and be consistent with banks‘ goals. It involves
continuous analysis of the business‘s external environment and internal capabilities.
When a business takes marketing on board as philosophy, the central driver for the
business is to create customer values. This requires a shift from an inward looking bank
focus to an outward looking customer focus. Davidson [1978] describes this as an
‗outside in‘ perspective, which is aimed at securing business competitiveness and taking
advantage of new opportunities. It involves the process of balancing the bank‘s need for
profit against the benefits required by customers, so as to maximize long-term earnings
per share.
71
2.51 EVOLUTION TOWARDS THE MARKETING CONCEPT
The development of the marketing concept within a bank is an evolutionary process.
Kotler [1991] identified five distinct stages, which banks pass through in the process of
adopting the marketing concept and arriving at marketing enlightenment. The different
phases are:
[a] production stage [b] sales stage [c] marketing stage [d] total quality management
stage [e] customer service or relationship marketing stage
a. The production stage
The first in the evolution of marketing is the production stage. This was actually the age
of the industrial revolution. This era was characterized by mass production, improved
production technique to effect lower unit costs and prices. Thus manufacturers
maximized the advantage of the economy of scale. This stage in the evolution of
marketing was a failure. The expectation of every manufacturer or producer is to sell his
wares. This was not well realized during this era called the production era. The main
reason for the failure was the neglect of a key marketing and sales concept.
Now, when the manufacturers who had achieved economy of scale had warehouses full
of unsold inventories they began to proffer reason for the unsold inventories and
possible solution or what can be called the next line of action. This takes us to sales,
which was the proffered solution and the next in the evolution of marketing.
b. The sales stage
72
The failure of the production stage sent the manufacturers and producers to the drawing
board. At the end of it all, it was felt that the dismal performance of the production stage
to achieve sales patronage from customers was due to their (Producers/Manufacturers)
inability to engage the services of salesmen and women. This realization led to the
engagement of the services salesmen and women. This is the era referred to as the
sales stage.
Salesmen and women were now hired to undertake the daunting task of selling the
produced goods in inventory. In the evolution of marketing this era failed. It was
characterized by companies focusing energies on changing customer‘s mind to fit the
product. The famous marketing axiom that comes into relevance here is ―a bad product
can only be sold once‖. There is a limit to which you can change customer‘s mind to fit a
product. The opposite is the exact truth. The efforts of the sales people produced little
positive result due to lack of the same basic marketing ingredient that helped the failure
of the production stage.
Naturally, producers went back to the drawing board because the nagging problem
must be effectively diagnosed and appropriate prescriptions administered. What
evolved from this is the third stage in marketing evolution called the marketing
(department) stage.
c. The marketing (department) stage
Following the failure of the sales stage in the evolution of marketing, the need for an
appropriate diagnosis became more pronounced. This led to the concept of marketing.
73
This has been described as the first genuine effort towards finding a solution to the
intractable problems of poor sales and customer apathy.
The original conception was for producers to set up marketing department. The various
marketing department were among other functions charged with the duty of identifying
the needs of the buyers either as groups or individuals. In other words, they were to find
the missing link between unsold inventory and buyer apathy as a way of building long-
lasting bridge for buyer acceptance of future products. This became a nifty approach
and has endured the taste of time. Up till date, many organizations have marketing
department. In financial institutions, this is often referred to as credit and marketing
department. While the whole concept is applauded, the problem with this stage is its
myopic application. We will discover that the satisfaction of the need of the buyer does
not reside in one department.
The fact that this stage has lasted long with even greater relevance in recent marketing
principle and practices means that the manufacturers made great discovery and that
marketing is the hallmark of business and organization success.
As highlighter above, the narrowness of application of this stage (marketing stage) in
the evolution of marketing has been the sullen reason for the failing adoption of the
concept in today‘s marketing evolution and practice. Inadvertently, it has cryptically led
to the emergence of several other concepts and marketing practices. These are all in a
bid to meet customer expectations and needs.
74
d. The Total Quality Management (TQM) stage
Meeting buyers‘ expectations and needs require much more than the attainment of
lower cost of production due from economies of scale.
In an attempt to respond to buyer resistance, one of the recent widely accepted concept
was the total quality management popularly known by the acronym TQM.
TQM was well intentioned to attain, possibly, one hundred buyers. It aimed at zero error
rates. TQM was a product of competition. According to Kit Sadgrove [1990], ―TQM
increases customer satisfaction by boosting quality. It does this by motivating the
workforce and improving the way the company operates‖ (in the making TQM work).
Elucidating further in an attempt to justify TQM as a viable buyer option and competitive
tool, he says, ―the customer is more sophistical and knowledgeable. If you don‘t offer
good service, he will buy from another person‖.
The concept of TQM as a marketing and competitive tool has witnessed great de-
emphasis in the scheme of thing lately. This, perhaps, stems from the fact that it lays
more emphasis on product quality at the expense of customer needs and services
delivery quality.
Once TQM stopped being the toast of manufacturers as a production management tool,
the next concept that gained wide acceptance was customer service.
75
e. Customer service
Customer‘s needs are insatiable. In other words, needs are dynamic. The satisfaction of
a particular need creates another growth either as individuals or collectively as entities
making up an economy. When TQM became more or less like a common denominator,
effective and efficient customer service assumed the status of the head cornerstone that
energized marketing and an effective tool for wooing customer.
2.52 RELATIONSHIP MANAGEMENT
According to Bartel [1993] a bank can take alternative directions for their business with
regard to customers. The focus could be on, for example:
Acquiring new customers;
Retaining existing customers.
Moriarty [1993] confirmed that in periods of high growth the emphasis tends to be on
attracting new customers. However, in an environment where many market sectors,
including markets for financial services, face slow growth the focus will be on keeping
customers. Replacing lost customers is more difficult and expensive than retaining
them.
Linked to these alternative directions, a bank can choose to adopt a strategy that
ranges from a transactional emphasis at one end, to a relationship strategy at the other
end, with the position related to the industry and environment in which the bank
operates. Transaction marketing is where the focus is on one transaction at a time and
marketing revolves around creating a single transaction or exchange. relationship
76
marketing, on the other hand, is based on continuous buyer-seller relationships rather
than on discrete transactions, and is aimed at developing long-term enduring
relationships with customers.
Webster [1994] said that there is a realization that there are not an infinite number of
customers to help the bank grow. This has clearly put the focus back on developing
long-term relationships, rather than customer acquisition and price based strategies. It
is suggested that banks can increase earnings by maximizing the profitability of total
customer relationships over time, rather than by seeking to extract profit from an
individual product or transaction.
According to McKenna [1991] Relationship marketing is fundamentally concerned with
recruiting and retaining customers by nurturing customer loyalty. ―The attraction,
maintenance and enhancement of client relationships‖. The rationale is that the
resulting long-term retention and development of the existing customer base will lead to
significantly improved financial and business performance. To achieve this, a greater
emphasis must be placed upon the creation of customer value.
Within the context of relationship marketing the customer is viewed as an appreciating
asset. Customers become partners and banks must make long-term commitments to
maintain those relationships with quality, service and innovation. The primary goals of a
relationship marketing strategy are to:
Build and maintain a base of committed customers who are profitable to the
banks;
Provide customer enhancement to develop loyal customers who will then buy
more products and provide a solid base. This base represents a potential for
77
growth which should lead to increased market share and increased
profitability;
Improve effectiveness of marketing expenditure based on a cross sales focus;
Increase knowledge of customer needs.
A relationship marketing strategy is appropriate when the following characteristics
of the marketplace are present:
Mature growth;
No/slow growth;
No clear market leader;
Competitive environment;
Declining customer loyalty;
Emergence of sophisticated delivery mechanisms.
Most, if not all of these features are apparent in the financial services industry.
2.53 PROFITABILITY SEGMENTS
According to Berry [1993] the process of relationship marketing should start with the
attraction of customers who are likely to become future profitable long-term relationship
customers. However, a bank is limited in terms of its resources and competencies.
Therefore it must limit the market it chooses to service through market segmentation,
targeting and positioning strategies. The service delivered should be based on the
overall worth of a customer. The skill is to isolate those customers with long-term profit
potential. Using modeling techniques to identify those segments, which yield the best
potential return, an assessment can be made to ensure that profitable sectors are
chosen.
78
Customers within a market vary in terms of the needs they seek to satisfy, and it could
be argued that to be fully customer-focused a bank would need to adapt its offerings to
meet the needs of each individual. While for many banks this is not economically viable,
a strategy of market segmentation may be beneficial. Segmentation is essentially a
concept, which provides an understanding of the market and leads to the selection of
target markets. It can be defined as the process of dividing a market into smaller
markets and homogenous segments, which are then targeted with different,
appropriately designed, service offers. A segment describes a group of people who
have broadly similar needs, which differ in some definable way from the needs of other
segments.
Payne [1993] said that the rationale underlying a strategy of market segmentation is
that, from a bank‘s perspective, it should be possible to increase the profit contribution
when compared with using an undifferentiated approach. From a consumer perspective,
market segmentation should mean that they get a product more suited to their
requirements.
Ballantyne [1993] confirmed that within financial services the most obvious
segmentation is between commercial [corporate/business] and retail [personal] markets.
However, the developments of more sophisticated segmentation strategies have
emerged as a response to the competitive operating conditions. The development and
installation of advanced customer information systems have provided banks with access
to valuable background data on customers, which can be utilized for segmentation
purposes.
When determining appropriate segmentation strategies banks must consider:
79
Market attractiveness;
Organization‘s ability to serve the markets.
Once a profile of the possible target segment has been identified, it is useful if it is
within the company‘s capabilities to profit from getting the segment.
1. Geographic segmentation, which is based on where customers live. This
could involve, for instance, a global bank developing unique product
portfolios for different countries because of cultural influences impacting on
product design.
2. Demographic segmentation, which is where the market is divided into groups
based on variables such as age, gender, income, occupation or stage in the
family life cycle. The premise here is that the variables will provide accurate
predictors of the need for different financial services. For financial services
both age and the family life cycle concept have provided potent bases for
segmentation on the basis that financial circumstances, needs and priorities
change at different stages within the life cycle.
3. Geo-demographic segmentation, which is an approach which interlaces a
number of dimensions based on geographic and demographic terms such as
location of household, type of household, occupation and age of occupant.
The basis for this approach is that households within a particular area exhibit
similar purchasing behaviour. The implications of geo-demographic
segmentation for banks are significant in that it allows them to profile users
and potential users for service and then target customers who match these
profiles. The profiling will seek to identify the propensity to purchase specific
80
financial services. Geo-demographic segmentation has improved the ability to
discriminate markets efficiently and effectively for financial services. Particular
areas within cities/towns/rural areas can be used to target direct mailing
activity.
4. Behaviour segmentation, which is where the marketer aims to distinguish the
market in terms of user status, for example, heavy, medium, and light and
non-users of a service, and then determine whether the needs or wants differ.
Financial services are advancing this database-held information with the
development of sophisticated segmentation models. Behavioural scoring is
one example whereby predictions can be made and changes identified in
usage patterns. To illustrate this approach a credit card company can
determine through interrogation of its database how frequently a customer
uses a credit card. Customers can then be segmented by their behaviour
pattern and different marketing strategies formulated for the different
categories of users.
5. Lifestyle segmentation, which is where banking industry‘s customers are
segmented on the basis of broad attitudes determined by factors such as
values, lifestyle, personality traits, attitudes, interests and innovativeness. For
banks this method provides information on customer‘s attitudes towards a
variety of services, for example their disposition towards savings, investment
and use of credit. Whilst attitudinal data is more difficult to collect, it can be an
effective base to use when developing and shaping communication
messages, which will attract and influence target customer groups. For
81
example, when developing the promotional campaign for credit cards, it
would be beneficial to understand the motivations and attitudes of the target
group towards the services. So, for example, is a credit card just viewed as a
substitute for cash/cheques or as a symbol of financial success and prestige?
Pine [1993] confirmed that active relationship marketing requires a
comprehensive knowledge of the customer as an individual. One route
available to ensure efficient and effective management is to utilize
sophisticated customer databases that are designed to deal with the
complexities of the customer base and the significant volumes of customer
data. These systems can facilitate an in-depth understanding of consumer
behaviour. The utilization of database marketing techniques opens up new
opportunities for cross selling by spotting timely sales activity.
The ultimate goal in segmentation would be to design and tailor products to
the individual, and indeed this is often the strategy, which is adopted in the
corporate banking market. There are now similar developments in the
banking industry, and these are often discussed under the concept of mass
customization. This concept is essentially concerned with making tailor-made
products for each individual buyer. The rationale is that by employing mass
customization systems, banks can produce enough variety in
products/service so that everyone finds exactly what he/she wants at
reasonable prices. Within the financial service sector, product variety and
82
customization of products, such as cheque accounts and mortgages could be
offered, given the sophisticated information technology systems, which are
now available to support such innovations.
2.54 THE CUSTOMER RELATIONSHIP LIFECYCLE
According to Wilson et al [1992] there are several distinct phases in the development
of the customer relationship. The different phases are:
[a] production stage [b] sales stage [c] marketing stage [d] total quality management
stage [e] customer service or relationship marketing stage.
In another development, Schary [1979] developed another four phases in the customer
retention relationship. They are attention, purchase, consumption and post consumption
behaviour. Attention, which is the first stage is where contact is made with a potential
customer. Both parties will evaluate the benefits of forming the relationship [i.e. selling
the service/taking up the offer]. Following the purchase the onus is on the supplier to
maintain and enhance the relationship in a way that will ensure the customer remains
willing to do business with the bank and to purchase additional services.
Skjoyy- Larsen [1979] confirmed the importance of the above phases and added that
different strategies will be required at each stage. For example, at the initial stage
[attention stage] emphasis should be on customer relationship management and
promotion to make potential customers aware of and be interested in the bank and
services it offers. During the purchase stage of a financial service the focus will be on
the identification of the customer‘s needs/wants, and personal service will play a critical
role at this point. The distribution channel is also important, in that, the experience of a
branch visit or telephone call to the customer can cement or server the relationship.
83
Within the financial services industry, the success of purchase is often dependent upon
the staff/customer interface. Staffs have a key role in creating the sale, re-sale,
customer retention and nurturing.
During the consumption stage there are many opportunities to fulfill or fail to meet the
promises given to the customers. These opportunities are termed ―Moments of Truth‖ by
Carlzon [1987]. According to File [1992] this service encounter relates to the direct
interaction between the bank and the customers, and can take various forms. For the
financial services market the interaction could be:
Face-to- face with an employee;
By telephone
By letter;
With a self-service machine;
Electronic via PC or the Internet
Service encounters have a high impact on the customer, and the quality of the
encounter will be a critical determinant in the evaluation of the service received.
Whatever the nature of the encounter this will impact on the customer‘s impression of
the bank and the service. It is important to manage all the potential service encounters
effectively to ensure ultimate customer satisfaction with the bank.
According to Davidow [1989] the benefits a bank can gain from enhancing customer
relationships is shown in the relationship marketing Ladder of Customer Loyalty. The
ladder provides an illustration of how the customer relationship develops, and how the
customer progresses through a number of stages as the relationship becomes stronger.
The philosophy of the relationship marketing ladder is that as customers move up the
84
ladder their affinity with the bank is enhanced. The underlying proposition is that the
higher the customer moves up the ladder the less likely they will be to want to change
banks. Ultimately they could become ‗Advocators‘ and ‗Supporters‘, recommending the
products of the bank to potential customers, and as are rarely lost. In contrast
‗Customers‘ are more vulnerable to poaching by the competition.
2.55 CUSTOMER RETENTION STRATEGIES
Christopher et al [1993] said that a bank, which only concentrates on the recruitment
of customers, could develop the ‗leaking bucket effect‘. That is to say, if a bank does not
also concentrate on retaining existing customers all that happens is that those recruited
replace those who leave. The overall customer base will, at best, remain static, but the
cost of the bank will be inflated by additional promotional expenditure required to attract
new customers.
Recruitment through price led strategies may lead to the attraction of ‗footloose‘
customers with no loyalty. These customers may not stay with the bank for long enough
to become profitable. Therefore it can be an expensive strategy.
Bartell [1993] suggested that a key objective for a bank should be to generate repeat
from its existing customer base. Customer retention should be regarded as a key
business objective since a strategy of customer retention is cheaper than recruitment
strategies. Research conducted by Stewart [1996] suggested that it may be five times
as costly to attract new customers as to keep old ones. Reducing defections or
increasing retention by 5% can therefore dramatically improve profits:
85
Repeat customers may be willing to pay a premium for the service if they
value the bank;
They may provide additional business to the bank through word of mouth
recommendation.
Bartell [1993] continued that the concept of customer loyalty suggests that a
customer will remain loyal to a bank if that bank fulfills his or her needs and
preferences. The bank can return the loyalty by becoming knowledgeable about the
customer, enhancing the product offering, and providing greater value.
According to Tracy Brian [2002] loyalty stems from satisfaction and positive
reinforcement, and leads to repeat purchases. Loyal customers offer their supplier the
following benefits:
1. They visit bank and are more likely to be receptive to a sales offer, and this
reduces the costs of reaching them.
2. A good company that deals with a loyal customer has built up a relationship
with them and therefore knows their requirements, and this encourages
focused targeting.
3. A loyal customer is more likely to buy additional services, increasing customer
longevity, and reducing defection rates.
4. Benefits of word-of-mouth recommendation lead to new business
86
The establishment of loyalty schemes should be implemented to encourage customers
to remain with the bank and to purchase additional products. ―If customers have one
product with your bank, there is a 15% chance that they will stay loyal to you for five
years, with two products that rises to 45%, with three 80%. The commitment to
customer retention must be everywhere, and employees must be empowered and in a
position to make things right for the customer‖. The degree of loyalty will be affected by:
The perceived cost of changing banks [switching costs];
The availability of substitutes;
The perceived risk of the purchase;
The degree to which satisfaction has been obtained in the past.
Gronroos [1994] said that many banks are introducing incentive and loyalty schemes.
To distinguish between the two:
Incentives schemes are also known as continuous customer relationship
management drives. They are designed to encourage customers to take out
extra products or to increase usage of a specific product or group of products.
Many of the credit card companies have incentive schemes such as offering
airmiles or some other points system to encourage greater card usage.
Loyal schemes are designed to reward customers who remain loyal to the
bank, either by encouraging them to stay or by ensuring that products or funds
are retained over a period of time. A number of the building societies offer a
reduced interest rate on mortgages for long-standing customers as a reward
for loyalty.
87
2.56 CUSTOMER FOCUS AND SERVICE QUALITY
Gronroos [1994] said that ultimately, customer retention is driven by customer
satisfaction, which in turn can be directly linked to service quality. Therefore, central to a
relationship marketing strategy is the provision of a high quality of service. This is based
on the premise that if a customer is satisfied with the service received, they will more
readily consider the bank for other products and services and provide future sales
opportunities.
Intense competition, compressed industry margins, an expanded array of providers and
product options, and increased customer sophistication are all factors which have
contributed to making quality a key strategic issue for banks. Customer service and
quality should be viewed as key components of the overall ‗offer‘, and as competitive
weapons in the battle to provide differentiated and superior value to specific customer
segments. In a marketplace where product features can be quickly copied, it will be
quality where a bank can gain competitive advantage that is both sustainable and
profitable. This is because price-led competition is becoming more difficult and
customers are becoming much more demanding of the service they expect. Research
amongst banks has shown that it is not only price-driven reasons, which trigger the
transfer of business. The factors are frequently also related to the service experience.
Gronroos [1994] continued that since 1991, so many banks have introduced some
form of customer care programme, these have often amounted to little more than short-
term programmes, which were fundamentally flawed. The support processes were not
88
in place to uphold a quality culture. Pursuing a continuing journey, and not one-off
programmes.
A quality strategy should not just be about focusing on customers and competitors, but
should be expanded to include all stakeholders who have the potential to contribute to
the creation of superior customer value. To provide the best value, the banks must bear
in mind that the customer relationship can involve the buyer and seller in a network
consisting of different parties, for example:
Supplier;
Internal customers;
Influence markets [i.e. the government, regulatory markets, the media];
Referral markets [i.e. includes intermediaries, agencies, customer referral
sources].
Gronroos [1994] confirmed that the whole network is part of the customer relationship
and has an impact on the development of that relationship. Gronroos [1994] further
continued that, quality of service must start with understanding the customer and the
influences on buyer behaviour in order to determine how additional ‗value‘ can be added
to the service ‗offering‘.
2.57 THE CONCEPT OF VALUE
Zeithaml and Bitner [1996] said that generally, customers prefer to have an ongoing
relationship rather than continually switching between suppliers in search of value.
Delivery of superior ‗value‘ to the customer should drive the formulation and
implementation of relationship strategies. Customers will remain loyal when they receive
greater value from the bank compared to the competitors in the market. Perceived value
89
relates to the customer‘s overall assessment of the utility of a service, based on the
perception of what is received and what is given. Value reflects the growing customer
concern of getting more of the money, time and effort invested.
The customer‘s perception of total values will impact on their willingness to buy the
service. However, value is an amorphous concept and means different things to
different people. To create value the bank needs to understand, from the customer
perspective, how value perceptions are formed, influenced and evaluated. For example,
is value judged on the basis of quality, satisfaction, price or a combination of these
factors?
Zeithaml and Bitner [1996] continued that a value-driven strategy must be based on
some distinctive competence, which will provide a source of unique and substantial
competitive advantage. However, the bank must constantly monitor what constitutes
values from the customer‘s perspective. The charge card/credit card market illustrates
how value can change and the implications for the players in the market.
2.58 COMPONENTS OF QUALITY
According to Levitt [1960] the term quality can mean different things. For example, it is
concerned with conforming to requirements, zero defects, getting it right first time and
fitness for purpose. Essentially, service quality is about meeting customer‘s needs and
requirements, how well the service level delivered matches customer expectations.
Expectations in this sense are concerned with the standard of performance against
which services experiences are compared. They are based on what a customer
90
believes should happen, and will be judged on the customer‘s subjective assessment of
actual service experience. If there is a shortfall a service quality gap exists.
Extensive research by Parasuraman et al [1998] has been undertaken to identify the
key determinants banks use in forming expectations about and perceptions of service.
Parasuraman et al [1998] identified the five key components, which emerged as the
criteria used by banks, and which influenced their expectations and perceptions. The
five key components are tangibles, reliability, responsiveness, assurance and empathy.
The dimensions vary in terms of how easy or difficult it is to evaluate them, for example,
tangibles can be judged in advance, but most of the criteria relate to ‗experience‘
qualities and can only be evaluated during or after consumption.
The same research identified gaps, which prevent banks from meeting, or exceeding
target market expectations. In this context Parasuraman [1998] defined service quality
as the gap between customer‘s expectations of the service and their perception of the
actual service delivered by the banks [Gap 5]. She proposed that this gap is influenced
by other gaps [1-4], which may also occur in the banks. The five gaps are:
Gap 1: Difference between customer expectations and management perceptions of
customer‘s expectations. That is, the banks not knowing what the customer expects
Gap 2: Difference between management perceptions of consumer expectations and
service quality specification. That is, the banks not selecting the right service designs
and standards.
91
Gap 3: Difference between service quality specifications and the service actually
delivered. That is, the banks not delivering to service standards.
Gap 4: Difference between service delivery and what is communicated about the
service to banks. That is, the banks not matching performance to promise.
Gap 5: Difference between performance and expected service.
It is important that banks identify the gaps, which are in evidence in their banks,
determine the factors creating the gaps, and develop and implement appropriate
solutions.
2.59 MEASURING SERVICE QUALITY
According to Lewis [1994] a critical factor in the successful delivery of a quality
customer service is to have in place systems to monitor and evaluate the service quality
over time. This could involve programmes of market research amongst customers and
employees using focus group discussions. It could also use surveys and mystery
shoppers to evaluate the perceptions of the overall service delivered against the service
standards, and the overall satisfaction with service. In addition, the collection and
analysis of customer complaints along with surveys of ‗lost‘ customers is valuable
information.
Perceptions of service performance should also be benchmarked. This is assessed
relative to the performance of:
Competitors to seek out opportunities for achieving competitive advantage
through service leadership.
92
Non-competitors to avoid complacency and identify opportunities for adopting
innovative and up-to-date service strategies from outside the immediate
industry.
2.60 A SERVICE QUALITY CULTURE
According to Pine [1993] whilst there is no one ‗recipe‘ for delivering a quality strategy,
there are some fundamental requirements, which have implications across all of the
business areas. These encompass systems, structures and products, and are
underpinned by having competent and motivated staff who are committed to delivering
service quality. So delivering service quality has implications for:
Top management;
Management structures;
How work is organized and jobs designed;
Training;
Communications systems;
Recruitment and selection of staff;
Performance management and appraisal;
Reward systems;
Career development and promotion.
The foundation for creating a quality bank requires the right culture, along with a clearly
stated mission and commitment by senior management who should lead by example. It
must involve everyone in the bank. A quality service strategy must also include the
consideration of product design and delivery, and focus on zero defects.
93
The mission statement for the bank should articulate the desired long-term direction of
the bank by indicating products to be provided, markets to be served, and the means of
servicing. There should be explicit reference to the concept of ‗relationship‘. The
statement should be defined in a way, which reflects customer needs rather than
product features. It should also recognize the importance of customer service at a
strategic level and that a relationship strategy is a means of achieving business
strategy.
Wilson [1992] said that the factor underlying the development of a quality culture could
therefore be summarized as:
Top management commitment;
Highly trained staff to build and nurture customer relationships
Effective recruitment and training processes;
Process re-engineering to build superior services;
Measurement and reward systems, which emphasize relationship building.
Keltner [1995] said that the bank must align these platforms behind a single coherent
objective.
According to Kimbal [1992] one approach to improving bank effectiveness is a central
focus on quality, or Total Quality Management [TQM], which was first introduced into
Japanese companies in the post-war period by Deming and Juran. TQM is concerned
with developing a long-term quality culture in the bank based on the principle that to
achieve maximum profitability a bank must not only do things right, but do the right
things right consistently, and focus on prevention of errors rather than correction of
94
errors. The emphasis in on ‗getting it right first time‘. To achieve this quality must be
perceived as a company-wide issue, involving all levels of employees with a
commitment to total customer satisfaction through a process of continuous
improvement.
Kimbal [1992] continued, to encourage commitment to a quality culture, a number of
banks have introduced quality circles or quality action teams in order to generate
employee involvement and ownership, and so improve customer service. The teams
usually involve a small group of employees [say, five to eight members of staff] who
meet on a regular strategy. The purpose is to identify, analyse and suggest ways of
improving service quality.
2.61 THE ROLE OF STAFF IN SERVICE DELIVERY
Ensuring that the service delivered meets the specifications set depends upon all
employees, who must be able and willing to deliver the desired levels of service. As
Lewis [1994] states:
If a bank cares about its employees and their role in service delivery then success at
managing internal service encounters will precede success in managing relationships
with external customers.
So employees play a critical role in influencing customer perceptions of service, and this
is particularly the case in the financial services sector.
According to Berry [1993] the concept of ‗internal marketing‘ is fundamental to service
delivery. This concept views employees as internal customers and jobs as internal
products and is based on the proposition that the various functions of a bank have their
95
own internal customers. Staff in different departments and sections should treat their
employees as internal customers, because they are providing a service. In satisfying
internal customers the banks should be better placed to satisfy the needs of external
customer awareness and remove barriers to bank effectiveness. It is important to have
the systems, structures and people aligned to delivering a quality of service to the
ultimate customer.
The three objectives of internal marketing stated by Gronroos [1994] are:
Enablers Results
Leadership People Satisfaction
People Management Customer Satisfaction
Policy and Strategy Impact on Society
Resources Business Results
Business Processes
The ―enablers‖ cover what a bank does and how it does it. The other four criteria relate
to the ―results‖ and cover what a bank achieves. The link between the two is that
enablers cause results. Each of the criteria can be used to assess the bank‘s progress
along the journey to excellence. The model suggests that customer satisfaction, people
[employee] satisfaction, and impact on society are achieved through leadership which
drives the policy, strategy, people management, resources and processes, which leads
to excellence in business results.
96
2.62 CONSUMER PROTECTION
Whilst many banks are committed to a relationship marketing strategy, and provide a
high quality of service, attaching great importance to amicably resolving customer
complaints, there are sometimes situations where disagreement between the bank and
the customer cannot be resolved. One way to pursue these is through the courts. An
alternative would be to use one of the Ombudsman schemes such as the Banking
Ombudsman, Building Society Ombudsman, Pensions Ombudsman or Insurance
Ombudsman. The Ombudsman provides customers with the costs that would be
involved if done through litigation.
The Banking Ombudsman scheme was established in 1986 with the primary purpose of
acting as an independent arbitrator between banks and customers in dispute. This
scheme can be used by non-corporate customers and by small businesses for disputes
where the amount does not exceed £100,000.
The Banking Ombudsman scheme can be used to investigate a wide range of areas
within, although the Ombudsman does not have any statutory powers. However, the
Ombudsman can make awards of up to £100,000, which should include payments for
damages or loss and also for any inconvenience caused. The Ombudsman cannot deal
in any case relating to bank policies on commercial and lending decisions, nor in
disputes over banks investment services which have to be referred to the Securities and
Investment Boards or some other self-regulatory body.
97
In 1999 the different Ombudsman schemes will be replaced by a Financial Services
Ombudsman scheme which will have a wider remit in terms of covering disputes across
the financial services sector.
The Banking Code is a voluntary code followed by banks and building societies in their
relations with personal customers, and sets standards of good practice, which are
followed as a minimum by banks subscribing to it [The Banking Code]. The underlying
rationale is that the code will allow competition and market forces to operate encourage
higher standards which will ultimately benefits the customer. The Code sets out eleven
commitments, which apply to the conduct of business for all products and services
provided to customers. [Mortgages are covered in more detail in the Council of
Mortgage Lending Practice]. The standards of the Code are encompassed in the key
commitments. The subscribers promise that they will:
Act fairly reasonably in all dealings with the customers;
Ensure that all services and products comply with the Code, even if they have
their own terms and conditions;
Give the customer information on services and products in plain language, and
offer help if there is any aspect the customer does not understand;
Help the customer choose a service or product which matches their needs;
Help the customer understand the financial implications of:
a. A mortgage
b. Other borrowing
c. Savings and investment products
d. Card products;
98
Help the customer understand how accounts work;
Have safe secure and reliable banking and payment systems;
Ensure that the procedures staff follow reflect the commitments set out in the
Code;
Correct errors and handle complaints speedily;
Consider cases of financial difficulties and mortgage arrears sympathetically
and positively;
Ensure that all services and products comply with relevant laws and
regulations.
99
2.63 REFERENCES
Kimball R C [1992] ‗Relationship Versus Product In Retail Banking‘, Journal of
Retail Banking, 12, 1 – Spring
Keltner B [1995] ‗Relationship Banking and Competitive Advantage: Evidence
from the US and Germany‘, Californian Management Review, Vol. 37, N0. 4
Hansen J.J (2007) "The Poor as Producers in Rural Economy"
http//www.aclaim/inf/actr.htm
Jamil B (2008) "Microfinance as a tool for poverty alleviation in Nigeria" Paper
Presented at Sensitization Workshop on Microfinance Banking in Kano State.
Central Bank of Nigeria, ―CBN Prudential Guideline for Licensed Banks‖,
November 7, 1990.
Bank of Industry; Delivering our Mandate, Vol. 4, No. 1, April 2008.
Goldman Sachs New Markets Analyst: 08/35 ― New Markets: Banking sectors
put to the test-not all will emerge unscathed‖, October 9, 2008.
World Bank Group, Doing Business in Nigeria 2008. Doing Business.
Washington: World
Bank. See:
http://www.doingbusiness.org/subnational/exploreeconomies/Nigeria.aspx
World Bank Group, Doing Business in Nigeria 2009. Doing Business.
Washington: World Bank. See:
http://www.doingbusiness.org/ExploreEconomies/?economyid=143
100
Central Bank of Nigeria, ―CBN Guidelines on Advertisements by Deposit
Taking Financial Institutions‖, April 5, 2000.
Olaitan M.A (2006) "Finance for Small and Medium Scale Enterprises in
Nigeria" Journal of international farm management Vol 3 No 2 January
Olajide O.A (1980) "Financing Enterprises in Nigeria Through Cooperative"
Nigerian Institute of Social and Economic Research (NISER), Ibadan
Ketu A. A (2008) "Microfinance banks in Nigeria: An Engine for Rural
Transformation" West African Institute for Financial and Economic
Management, Lagos Nigeria.
Bartell [1993] ‗Building Strong Customer Relations‘, Bank Marketing, Vol. 25,
N0. 6
Berry L [1993] ‗Relationship Marketing‘, Emerging Perspectives of Services
Marketing, American Marketing Association USA
Carlzon J [1987] Moments of Truth, Ballinger Press Ltd. USA
Christopher M G, Payne A & Ballantyne D [1993] Relationship Marketing:
Bringing Quality, Customer Service and Marketing Together, Buterworth
Heinemann London.
Christopher M G ,Schary P P & Skjoyy-Larsen T [1979] Customer Service
and Distribution Strategy Prentice Hall Press Ltd. USA
Davidson H [1978] Offensive Marketing or How to Make your Competitors
Followers, penguin Ltd. USA
Davidson, William H. [1989] Total Customer Service – the ultimate weapon,
New York, Harper Perenmiah,
101
Drucker P. F. [1973] Management: Task, Responsibilities & Practices, Harper
& Row series Ltd. USA
File K M & Prince, R A [1992] ‗Positive Word of Mouth: customer stisfaction
and Buyer Behaviour;, International Journal of Bank Marketing, Vol. 10, N0.
1
Jane A K, Pinson C & Malhotra N K [1987] ‗Customer Loyalty as A Construct
in the Marketing of Banking Services‘, International Journal of Bank
Marketing, Vol. 5, N0. 3
Rammal, H. G. and Zurbruegg, R. (2007). Awareness of Islamic Banking
Products Among Muslims: The Case of Australia. Journal of Financial
Services Marketing, 12(1), 65-74.
Saeed, A. (1996). "Islamic Banking and Interest: A Study of the Prohibition of
Riba and its Contemporary Interpretation". Leiden, Netherlands: E.J.Brill.
102
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
This chapter explains the materials and methods used in this study. It discusses the
population of study, sample size, sampling design and procedure, data collection
instruments, methods of data analysis and limitation of the method.
3.1 RESTATEMENT OF RELEVANT QUESTIONS
The relevant research questions to be answered by the research hypothesis are as
follows:
How do banks develop customer focused financial products and services?
How will banks achieve increase in their Business share and shareholders
wealth using relevant strategies for the marketing of their financial products
and services?
Will development of new financial products and efficient services lead to the
increase in the satisfaction of customers?
How can banks achieve competitive edge over others in the marketing of
financial products and services?
What is the relationship between the development of new financial products
and services and the goal of profit maximization of the banks in the financial
service sector?
103
3.11 RELEVANT RESEARCH HYPOTHESES
The relevant hypotheses to be tested in the study are as follows:
HYPOTHESIS ONE
Ho: The development of new financial products and services in response to the
needs of their customers is not significantly related to increase in profitability for the
banks and maximization of wealth for shareholders.
Hi: The development of new financial products and services in response to the
needs of their customers is significantly related to increase in profitability for the banks
and maximization of wealth for shareholders.
HYPOTHESIS TWO
Ho: The development of effective marketing strategy for financial products and
services by the banks is not significantly related to achieving customer satisfaction.
Hi: The development of effective marketing strategy for financial products and
services by the banks is significantly related to achieving customer satisfaction.
.
3.2 STUDY POPULATION
The Nigerian banking industry, Stakeholders, customers, management and employees
constitutes the population of this study. The banking industry constitutes of all the
banks in the Nigerian banking industry. The project or study was focused on Zenith
bank, Guaranty trust bank and UBA Plc. The population of the study consists of
shareholders, customers, management and staff, of these banks. The selected
segments are:
104
Current account 200
Fixed deposit account 200
Savings account 200
Domiciliary account 200
Corporate accounts 200
The samples used were drawn from the list of customers of Zenith bank, Guaranty trust
bank and UBA Plc. The samples or respondents constituted the customers of the
banks. Two hundred respondents were drawn from five selected segments utilized by
the banks. The total sample {respondents} is one thousand.
3.3 DATA COLLECTION METHOD
The data needed for the study were collected through the use of both primary and
secondary sources.
Primary Source: The major source through which responses were elicited from the
respondents was administering of questionnaires. One hundred questionnaires were
administered on the respondents.
The questionnaire was divided into four sections. The first section was optional and
reviews the immediate bio data of the correspondents, while the next tagged section B
constitutes more detail questions on the Biographical data of the respondents, covering
areas such as age, sex, length of services, marital status, department etc.
The section C, tagged ‗for stakeholders in the banking industry only‘, constituted
questions on the journey so far in the development of new products as well as
innovative re-design of existing ones. The questions were programmed in a
chronological order to better understand the relationship between the investments in the
105
design of these products and creation of wealth for shareholders. Section D, tagged ‗for
customers of banks only’, probes the customers mind towards finding out the impact of
the new product design on their patronage of banks, and used to understand the impact
on the wealth of shareholders.
Secondary Source: The secondary sources of data were collected from journals,
newspaper, magazines, textbooks etc.
3.4 SAMPLING PROCEDURE
The questionnaires were administered on the shareholders, management, employees
and customers of the five selected segments of the banks mentioned above. The
method used in selecting the respondents is stratified random sampling. This sampling
procedure uses extra method of representatives by first identifying some characteristics
that are being researched and then using these characteristics as a basis for further
random sampling of the entire population.
In this study the customers of Zenith bank, Guaranty trust bank and UBA Plc are
stratified into:
Top customers
Middle level customers
Average customers
The researcher then proceeded to randomly select the samples from each level {3
strata} and the number of employees he selects from a particular stratum is proportional
to the stratum‘s share of the total population. The advantage of this method is that each
respondent have equal chance of being chosen within its stratum.
106
3.5 METHOD OF ADMINISTERING QUESTIONAIRE
The questionnaire was personally administered on the respondents selected by
stratified random sampling. To facilitate the ease and convenience of completion of the
questionnaire it was not retrieved from the respondents until after three {3} days thereby
providing enough time for full and thorough completion. The space of time also cushions
the tight schedule of customers. In the meantime, adequate follow-up was done through
constant visitation and telephoning.
3.6 ANALYSIS OF SAMPLES
The data collected by administering the questionnaire were first analyzed using
statistical package for social sciences (SPSS) and then the results were reviewed
through the use of simple percentages and frequency distribution.
The questions were also analyzed and the hypotheses tested using correlation analysis
statistical method. The pearson coefficient of correlation as well as Spearman rank
order correlation by which the values of dependent variable say ‗Y‘ is predicted from
knowledge of one or more independent variables say X1 X2, X3, ...Xn , were applied to
make inference.
The correlation coefficient (ƥ) between two random variables X & Y can be
defined by p = Cov. (X,Y)
Var(X) Var(Y)
Where: Var(X) = (EX2) – [E(X)]2
Var(Y) = E(Y2) – [E(Y)]2
107
Cov.(X,Y) = E(XY) – E(X)E(Y).
But for a large data set, such as the one collected during the sampling in this survey,
the estimate of correlation coefficient r = ṕ= ∑ (X- ẋ) (Y- Ẏ)
∑(X- ẋ)2 (Y- Ẏ)2
Where ṕ = sample estimate of pearson coefficient of correlation, a product of moment of
coefficient of correlation
The values of r = ṕ ranges from 0 to 1. For values of ṕ close to 1 (say 0.95, 0.9, 0.85),
the samples X & Y may said to be positively highly correlated. For values close to 0 (say
0.1, 0.2, 0.3), the samples X & Y are poorly correlated, and indicates there may be little
or no relationship between the variables.
Assumptions of Spearman Rank Order Correlation
The Spearman rank order correlation states that
r = 1 - 6∑D2
n(n2-1)
Where r = coefficient of correlation
D = rank difference
n = No. of values (X, Y) in the data.
According to Asika {1991} the assumptions of the Spearman Rank Order Correlation
are:
a. There are two variables of interest designated X {the assumed independent
variable} and Y {the assumed dependent variable}.
108
b. There is a random sample of n pairs of X and Y observations either numeric
and or non-numeric observations.
c. Each X and each Y is ranked relative to all Xs and Ys respectively and their
ranks and denoted R{X} and R{Y} respectively.
d. If ties occur, each tied value is assigned the mean of the rank for which it is
tied.
e. All the data or observation must be capable of being ranked.
Thus, for the test statistics of Spearman rank order correlation where r was given
above as:
r = 1 - 6∑D2
n(n2-1)
,
There are three {3} possible relationship that can result from the computation of
r . These are: i. Perfect direct relationship r= 1 where each pair of X and Y occupies the same
rank in it‘s respective X and Y ranking d = 0.
ii. Perfect inverse relationship, r = - 1 where the rank of one variable X and other
variable Y within each pair of observations is reverse of the order.
iii. No relationship at all between the ranking of the pairs of X and Y within their
respective observations.
3.7 DECISION RULE
For two- side hypothesis; reject Ho {the null hypothesis} at the appropriate X level if the
computed rs is greater than the critical X value corresponding to 1- /2
109
It is necessary to test if and ᵦ are significantly different from zero. We therefore test
hypothesis:
H0: ᵦ = 0
H1: ᵦ ≠ 0
The t statistic can be used when the number of sample pairs is equal to or greater than
10. Otherwise only Spearman rank order correlation is used.
3.8 LIMITATION OF METHODOLOGY
The study population which is the Nigerian financial institution, especially the banks, is
quite large to be completely sampled by the study, therefore beyond the scope of this
study. Thus only a few of the banks were actually sampled and energy concentrated on
them. The result obtained is assumed to be representative of the entire population of
the Nigerian banking industry. However, the result may not be a pure representation of
the other banks not sampled in the study.
The number of respondents used for the study which is about one hundred {100}, out of
these, about 90% of them are resident within a given geopolitical zone; West, and
specifically Lagos (though not necessarily indigenes). These have the tendency for bias
which will ultimately affect the result.
Enumerators bias was also a major limitation as some of the stakeholders that lost out
in the power equation during the restructuring that occurred in their organizations, which
was enforced by the central bank, and which was occasioned by the infamous global
financial meltdown, could not see anything good in the transformation agenda, new
product development and innovative product re-design of the new management.
110
3.9 REFERENCES
1. Asika N. {1991} Research Methodology in the behavioral sciences, Lagos:
Longman Nigeria Plc.
2. Babbie E.a. {1979} The Practice of social research, Belmont Calif:
Wadarsworth publishing co.
3. Larson H.J. {1983} Statistics: An Introduction, Krieger.
4. Guaranty Trust Bank plc and UBA plc Annual Reports 2005.
5. Okunmadewa, F., 1998. ―Domestic and international response to poverty
alleviation in Nigeria.‖ Proceedings of the 7th Annual Conference of the Zonal
Research Units Organised by Research Department, CBN at Makurdi, 8th -
12th June, pp: 296-309.
6. Oladeji, S.I. and I.O. Ogunrinola, 2001. ―Determinants of informal savings in
Southwestern Nigeria.‖ Savings and Development, No. 2-2001-XXV: 225–
249.
7. Olomola, A.S., 1999. ―Financial innovations in Nigerian microfinance system,‖
In: Olomola, A.S. and S.O. Akande (eds.), Agricultural Finance Issues in
Nigeria Ibadan, (NISER), pp: 149-164.
8. Olomola, A.S., 2001. ―The nature and determinants of rural loan repayment
performance in Nigeria: The case of FADU‘s microcredit programme‖. NISER
monograph series NO 3, (NISER), Ibadan, pp: 57.
111
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
4.0 INTRODUCTION
This chapter explains in details the relevant data used in the research work. It presents
the data collected via the questionnaire in tabular form to aid understanding. The data
so presented were thus analyzed and the results interpreted. These were then applied
in arriving at decisions, deductions, inferences and conclusions.
The data collected were subjected to rigorous statistical analysis, using several
statistical tools. First, using statistical package for social sciences (SPSS), the results
obtained were presented in tabular form. The data were further subjected to other
statistical treatments, using tools such as scatter diagrams, bar chart, pie chart, etc for a
simplified presentation. The results obtained are presented below, while references are
made to the corresponding figures, tables and charts in the appendix.
Appropriate interpretations and inferences were subsequently drawn.
Table 4.1: AGE OF RESPONDENTS
From table 4.1, Appendix ii, page 127, about 76% of the respondents are between 0 to
50 years old. Those between 31- 50 years constitute more than 46% of the entire
respondents interviewed; implying the largest age bracket of the entire population
sampled. Respondents with age less than 11 years constitute the fewest number of
respondents, representing about 8% of the total respondents.
112
Table 4.2 GENDER OF RESPONDENTS
About 56% of the entire respondents are male.( Appendix ii, page 128)
Table 4.31: MARITAL STATUS
Majority of the respondents are married (about 43%) while about 23% are single. About
95% of the respondents are either single, married, divorced or widow. (See table 4.31,
Appendix ii, and page 129)
Figure 4:41 EDUCATIONAL QUALIFICATION
From figure 4.41, Appendix ii, page 130, over 55% of the respondents have tertiary
education. About 41% of the entire respondents are graduates. The second largest
category of the respondents are those with secondary education.
Figure 4.51: RELIGIOUS VIEWS
From table 4.51, Appendix ii, page 130, almost half of the entire respondents are
Christians (about 48.3%), while Muslims (about 33%) constitute the second largest
category of respondents. About 91% of the entire respondents are either Christians,
Muslims or traditional religious views, while the rest have other forms of religious
believes.
Figure 4.61: GEOPOLITICAL ZONES
About 87% of the entire respondents are from one ethnic group or the other within the
Southern part of the country. The western Nigeria accounts for the highest number of
113
respondents within a single geopolitical zone (about 35%), while the east came second
(about 30%). See (Figure 4.61, Appendix ii, page 132)
Figure 4.7: OCCUPATION
About 23% of the respondents are engaged in one form of trade or the other (highest
number of a single category), while those in the Legal profession accounted for the
fewest number of respondents (<4%). Thus in descending order the number of
respondents followed the following pattern based on their occupation- Traders, Artisans,
Civil servants, Transporters, Students, Private sector, Banking and Legal. (Figure 4.61,
Appendix ii, page 133)
Figure 4.8 REPONDENTS WITH BANK ACCOUNT
From figure 4.8, Appendix ii, page 134, about 73% of the respondents have bank
account, in one or more bank(s) in Nigeria.
Figure 4.91: DURATION OF BANK ACCOUNT
About 73% of the respondents opened their bank accounts within the last decade. While
about 55% have their accounts opened within the last 5 years. Respondents who
opened their bank accounts prior to the last decade are quite substantial, constituting
slight above 26% of the entire population. See (Figure 4.91, Appendix ii, page 135)
114
Figure 4.92: DEVELOPMENT OF NEW PRODUCTS
See (Figure 4.92, Appendix ii, page 135). About 90% of the stakeholders in the banking
industry agreed that their bank have developed new products within the last decade,
about 1% do not agree, while 9% are uninformed.
Figure 4.93: FREQUENCY OF NEW PRODUCT DEVELOPMENT
About 94% of the banking industry stakeholders noted that the frequency of new
product development have become more. Less than 6.5% disagreed with this notion.
(Appendix ii, page 135)
Figure 4.94: EFFECT OF COMPETITION ON R&D
Over 89% of the management, staff and shareholders of the financial services sector
are of the opinion that competition have exerted good influence on R&D, and therefore
good for all. About 9% there are no relationship, while the rest are completely of
contrary view. See (Figure 4.94, Appendix ii, page 135)
Figure 4.95 EFFECT OF INNOVATION TO THE INDUSTRY
From figure 4.95, Appendix ii, page 136, less than 16% of the industry watchers are
biased against the recent pace of innovation in the banking industry, the greater
majority are of the opinion that the development are good for the industry.
115
Figure 4.96 EVOLUTION IN THE FINANCIAL INDUSTRY
Majority of the stakeholders (≈78%) are in affirmative that the Nigerian banking industry
is rapidly evolving, about 14% are undecided, while the rest minority are of contrary
opinion. See (Figure 4.96, Appendix ii, page 136)
Figure 4.97 IMPACT OF R&D TO CLIENT BASE
From figure 4.91, Appendix ii, page 136, overwhelming majority of the senior
management and staff of financial institutions (>85%) are of the opinion that investment
in R&D for new products have positive and incremental growth on the client base of
their respective organizations.
Figure 4.98 TREND OF CLIENT BASE
About 91% of the employees of Nigerian banks noted that their client base is witnessing
an incremental trend, due to investment in new product development, while the rest are
of different opinion. See (Figure 4.98, Appendix ii, page 136)
Figure 4.99 DIVIDEND DECLARATION, TWO DECADES AGO
See (Figure 4.99, Appendix ii, page 137), about 82% of the shareholders, management
and staff noted that their organizations rarely declare dividends, two decades ago.
116
Figure 4.100. RECENT TREND OF DIVIDEND DECLARATION
See (Figure 4.100, Appendix ii, page 137), About 90% of the shareholders,
management and staff noted that recent trend of dividend declaration by their respective
organizations have become frequent within the last 10 years; a sharp contrast to the
trend 20 years ago.
Figure4.101 REASON FOR DIFFERENCE IN PATTERNS OF DIVIDEND
DECLARATION
Over 78% noted that the sharp contrast in the pattern of dividend declaration between
the 20th and 21st century can be accounted for by the increase in R&D, which had led to
more wealth for shareholders, while less than 22% are of the opinion that increase in
R&D have led to loss of wealth for shareholders due to cost. (Figure 4.101, Appendix ii,
page 137)
Figure 4.102 PRESENT & PAST RETURN ON INVESTMENT (ROI)
About 89% of the shareholders, management and staff of the banks are of the opinion
that higher levels of returns are received in investment in recent times compare to the
last two decades ago. Less than one-quarter are of opposite opinion. (Figure 4.102,
Appendix ii, page 137)
Figure 4.103 R&D AWARENESS
From figure 4.103, Appendix ii, page 138, about 90% of the customers of the banks are
aware of the recent investment in R&D by their respective banks. About 9% are neither
here nor there, while those who are totally unaware are insignificant.
117
Figure 4.104 TIMING OF R&D
Over 9/10th of the customers said the current pace of aggressiveness in the industry is
very recent and became more common within the last decade. Less than 8%
acknowledged the trend extend beyond the last decade. See (Figure 4.104, Appendix ii,
page 138).
Figure 4.105 FREQUENCY OF NEW PRODUCT DESIGN
From figure 4.105, Appendix ii, page 138, about 70% of the customers noted that
introduction of new products by their banks have become rampant, while the rest noted
are of contrary opinion.
Figure 4.106 RELEVANCE OF R&D TO INDUSTRY
About 80% of the customers noted that research and development of innovative
products is very relevant to the industry, while less than 2% said is irrelevant, the rest
down played their relevance. See (Figure 4.106, Appendix ii, page 139)
Figure 4.107 COMPARISON OF R&D IN NEW AND OLD GENERATION BANKS
Over 85% of the customers of Nigerian banks agreed that development of new products
are more common with new generation banks, while about 4% said it false, the rest said
there is no pattern. See (Figure 4.107, Appendix ii, page 139)
118
Figure 4.108 PREFERNECE OF NEW GENERATION TO OLD GENERATION BANKS
About 63% of the respondents are categorical that they have a preference in doing
business with new generation banks than the old generation banks. While the rest share
other views. See (Figure 4.108, Appendix ii, page 139)
Figure 4.109 FACORS AFFCETING CHOICE OF FINANCIAL INSTITUTIONS
See (Figure 4.109, Appendix ii, page 140. About 70% of the customers noted that the
critical factor considered in their choice of financial institution to patronize is their
innovativeness in designing new improved products that suit their needs, about 16%
argued that proximity affects their choice, while about 13% are of the opinion that age of
existence of the banks are important to them due to safety of their funds. The rest
argued they have
Figure 4.110 BANKING IN THE 21ST CENTURY
From Figure 4.110, Appendix ii, page 140, only about 4% of the respondents noted that
banking in the 21st century is same as in the past two decades, while overwhelming
majority (about 95%) argued that a lot has changed. Those who sit on the fence are
insignificant.
Figure 4.111 RATE OF TRANSFORMATION
About 25% of the respondents noted that there was a gradual transformation in the
landscape of the Nigerian banking industry, while over 65% argued that the rate of
119
transformation was rapid. The rest argued it was slow. See (Figure 4.111, Appendix ii,
page 140)
Figure 4.112 DESIRABILITY OF TRANSFORMATIONS
See (Figure 4.112, Appendix ii, page 140), about 72% of the customers noted that the
overall effect of the transformations in the Nigerian banking industry is desirable and
therefore highly relevant to their needs. Less than 15% argued it is irrelevant to them.
The rest are either categorical in noting that there is no relationship between the
transformations in the industry and their needs or are sitting on the fence.
Figure 4.113 INFLUENCE OF TRANSFORMATION TO CUSTOMERS
Minority (about 7%) of the respondents are of the opinion that the transformations have
negative effect on them and their businesses. Majority (about 72%) said the
transformations have positive influence on their businesses. The rest argued there was
no effect on them. See (Figure 4.113, Appendix ii, page 141)
Figure 4.114 LEVEL OF PATRONAGE
See (Figure 4.114, Appendix ii, page 141), Over 50% of the customers noted that they
give greater patronage to the mpore innovative new generation banks. Greater than a
quarter are more loyal to the old generation banks, while the rest give equal patronage.
120
Table 4.115 INCREASE IN PATRONAGE BY CONTEMPORARIES
See (Figure 4.115, Appendix ii, page 141), Over 50%of the respondents also noted that
their contemporaries, (who may not have been sampled), also give more patronage to
the new generation banks. Thus indicating a consistent trend with the population
sampled.
Figure 4.116 JUSTIFICATION OF INVESTMENTS IN R&D
About 90% of the respondents are of the view that the investments in R&D are justified,
bearing in mind their benefits. Only a few minority are opposed to this view. See (Figure
4.116, Appendix ii, page 141),
Figure 4.117 PATTERN OF BANKS PROFITABILITY
See (Figure 4.117, Appendix ii, page 142). About 72% of the respondents are of the
opinion that the pattern of the Bank‘s profitability is an increasing one, while less than
20% argued profitability is static. The rest argued a declining fortune for the banks,
based on their individual activities with the banks.
Figure 4.118 INFLUENCE OF MOBILE & INTERNET BANKING
See (Figure 4.118, Appendix ii, page 141). Only about 11% of the respondents noted
they still make more frequent visits to the banking hall for their transactions, despite the
abundant internet and mobile banking solutions available. About 66% noted they now
make less frequent visit to the banking hall, as they now adopt the Do-it-yourself (DIY)
for less serious transactions, taking advantage of the myriads of available solutions.
121
Figure 4.119 FREQUENCY OF BANKERS VISITS
Nearly half of the entire respondents (about 48%) noted that bankers frequently visit
them. Those who said that bankers rarely visit them are very few (about 16%). Thus
about 78% of the respondents informed that bankers sometimes or frequently visit
them. (Figure 4.119, Appendix ii, page 142)
Figure 4.120 EFFECT OF BANK’s MARKETING ON THE RESPONDENTS
Clearly, more than 63% of the respondents agreed that marketing activities by the
banks have positively affected their choice of patronage to the banks. While about 20%
are undecided about the effect of relationship management as well as marketing by the
banks, the rest argued that their choice is not influenced by marketing activities by the
banks. Refer to (Figure 4.115, Appendix ii, page 143)
Figure 4.121 LENGTH OF MARKETING TREND
Refer to (Figure 4.121, Appendix ii, page 144). About 80% of the respondents noted
that the trend of aggressive marketing by the banks was noticed within the last decade.
This implies the trend is new to the Nigerian banking industry. While about 17% argued
that the trend was noticed within the last two decades, the rest of the minority noted the
trend long existed beyond the last 20 years.
Figure 4.122: CHALLENGES IN FINANCIAL PRODUCT MARKETING
Refer to (Figure 4.121, Appendix ii, page 145). About 80% of the entire respondents
either agreed or strongly agreed that marketing of financial has numerous challenges,
122
both to the internal as well as external stakeholders. About 7% and 5% disagreed and
strongly disagreed respectively. The rest were sitting on the fence.
Figure 4.123: RELEVANCE OF FINANCIAL PRODUCT MARKETING TO
BANKING INDUSTRY
About 82% of the respondents agreed in strong terms that marketing of financial
products have being of immense benefit to the Nigerian banking industry as well as the
stakeholders. This might be evidenced in the emergence of mega banks- UBA, Zenith,
GT Bank, First Bank within the last decade. The rest were on the contrary. Refer to
(Figure 4.123, Appendix ii, page 146)
Figure 4.124 VOLUME OF TRANSACTIONS IN RELATION TO NEW PRODUCT
DEVELOPMENT & ITS MARKETING BY BANKS
Refer to (Figure 4.124, Appendix ii, page 146). About 93% of the entire respondents
either agreed or strongly agreed that marketing of financial has affected the volume of
transaction they do. They argued that they tend to do higher volume business
transactions with the banks that show more aggressiveness in relationship management
as well as marketing effort.
The remainder were on the contrary.
Figure 4.125 CONTRIBUTION OF PRODUCT DEVELOPMENT & MARKETING TO
SHAREHOLDERS' WEALTH
See (Figure 4.125, Appendix ii, page 147). About 92% of the entire respondents either
agreed or strongly agreed that marketing of financial has positive contribution to the
123
wealth of shareholders. Their reasoning is based on the increment in the volume of
transactions which they do because of relationship management and increased effort in
marketing activities. The rest were opposed to this view.
TABLE 4.126: Respondents’ trend of agreement that development of new
products have led to increase in return on investment (ROI) on a progressive
basis within the last decade.
Refer to (Table 4.126, Appendix ii, page 148). Those who agreed that investment in
R&D have led to increase in ROI for shareholders increased on constant basis for the
past four years, with future prospect of same trend.
Table 4.126 (b) X-Y Statistical treatment of Respondents’ trend of Agreement
on impact of new product development to the increase in Return on Investment
(ROI).
A pearson coefficient of correlation of 0.77 indicates that a positive relationship exists
between the variables.Refer to (Table 4.126 (b), Appendix ii, page 148).
Analyzing the data in table 4.126, we have:
r = ṕ= ∑ (X- ẋ) (Y- Ẏ)
∑(X- ẋ)2 (Y- Ẏ)2
r ≈ 0.77
124
Figure 4.126 ( c ):
Respondents pattern of agreement that development of new products in Response to
customers need have led to increase in profitability & wealth maximization, showing a
positive correlation between the level of agreement
Figure 4.126 (d): Respondents pattern of disagreement that development of new
products in Response to customers need have led to increase in profitability & wealth
maximization.
125
4.127 FACTOR ANALYSIS
When the data were subjected to factor analysis are using statistical package for social
sciences (SPSS) the following parameters and results shown below were obtained:
Table 4.128: KMO Test
Refer to (Table 4.128, Appendix ii, page 149). A KMO of about 0.573 is classified as
fair. This implies that factor analysis is feasible and appropriate for the test. Also the
Bartlett‘s test of sphericity indicates that P<œ.
Also, since the value of coefficient of correlation r is positive, and α is and significantly
different from Zero, we reject Ho and conclude that, the development of new financial
products and services in response to the needs of their customers is significantly related
to increase in profitability for the banks and maximization of wealth for shareholders.
Table 4.131: COMMUNALITIES
The table of communalities shows high values close to 1, these indicate the variables
are well related. Refer to (Table 4.129, Appendix ii, page 150).
Table 4.130: TOTAL VARIANCE EXPLAINED
See (Table 4.130, Appendix ii, page 150). The table shows that six principal
components can be used to explain about 62.4% of the relationship among the
variables, this is fair to good but not excellent, as over a quarter of the relationship are
not explained by these variables.
126
Table 4.131 COMPONENT MATRIX
Refer to (Table 4.131, Appendix ii, page 152). About 6 principal Components can be
identified-
i. Respondent‘s personal Details
ii. Respondent‘s social status
iii. Respondent‘s banking activities
iv. Respondent‘s assessment of Import of product design
v. The changes in the Banking industry
vi. Significance of product design to the Industry.
127
4.132 REFERENCES
Research Questionnaires.
Babbie E.a. {1979} The Practice of social research, Belmont Calif:
Wadarsworth publishing co.
Larson H.J. {1983} Statistics: An Introduction, Krieger.
Umar S.H (2008) "The Experience of Microfinance Banks Operation in their
Operational Location. Paper Presented at Sensitization Workshop on
Microfinance Banking in Kano State.
Parasuraman A, Berry L L & Zeithaml V A [1998]‘SERVQUAL: A Multiple Item
Scale for Measuring Consumer Perceptions of Quality of Service‘, Journal of
Retailing, Vol. 64, no. 1
Keltner B [1995] ‗Relationship Banking and Competitive Advantage: Evidence
from the US and Germany‘, Californian Management Review, Vol. 37, N0. 4
Zenith Bank plc, Guaranty Trust Bank plc and UBA plc Annual Reports 2005.
128
CHAPTER FIVE
SUMMARY, FINDINGS, DISCUSSION OF FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
5.0 INTRODUCTION
This chapter analyses the empirical findings of the study. It gives the summary of the
research work. It also provides an insight into the findings and thus gave a detail
discussion of the findings, by comparing what had existed with what currently exists.
The research went further to make useful suggestions that will beneficial to would-be
users for improved decision making. It also makes recommendations that will be
invaluable for further studies.
5.1 SUMMARY
The thesis seeks to answer four simple questions- How do banks design customer-
focused financial products and services? How will banks achieve increase in
shareholders wealth and profitability using relevant product development and marketing
strategies? How can development of new financial products and efficient services lead
to increase in the satisfaction of customers? How can banks achieve competitive edge
over others in a rapidly evolving and highly competitive developing market economy?
The thesis used the answers to the above four questions to establish a relationship
between the design of new financial products and services and the goal of profit
maximization and increase in shareholders wealth.
129
The study began with general introduction, stating the objectives and noting several
hypotheses to be tested. Thereafter, relevant materials, books and journals were
critically reviewed, to provide a guide into the future by reconstructing the past. The
models for statistical analysis were proposed. Subsequently data collected were
analyzed; results obtained were interpreted and summarized.
Several statistical tools such as SPSS, scatter diagrams, pie chart, bar chart, etc,
provided the framework for successful statistical treatment of the data, data analysis,
and interpretation of results.
A critical review of empirical findings from result obtained indicates that a positive
correlation exist between design and marketing of new financial products and sustained
profitability, as well as maximization of wealth for shareholders.
While one bank is designing a giving product, another is designing a combination of
products that better address the needs of customers, others are benchmarking with
additional objective of modifying certain features of the products that makes them cost
friendly.
The end result was a more vibrant industry, when compared to position of things two
decades ago. Those who invested heavily in ICT (example Zenith, GT Bank, UBA),
human capital, R&D; consequently witnessed positive and incremental growth in all
critical indices of performance. They also witnessed increasing trend in customer base.
130
Overwhelming majority of the senior management and staff of financial institutions
(>85%) were of the opinion that investment in R&D for new products exerted positive
and incremental growth on the client base of their respective organizations. This was
further observed in the frequency of dividend declaration, within the last decade.
Thus, the Nigerian banking industry has witnessed positive and incremental growth in
the last decade. The resources committed towards the design and marketing of new
financial products and services have yielded the desired results, and therefore created
wealth for shareholders, while ensuring profitability as well as sustainable growth and
development for the banks.
5.2 FINDINGS
It was observed that interesting relationship exist between new product design and
maximization of wealth for both the banks and their shareholders. The banks with better
improved products are also same as those that receive the highest patronage. Their
market share increased significantly in direct relation to their rate of innovation. Having
observed that market share also increases, they made effort to constantly design new
products, innovatively re-design existing ones to remain ahead of the competition.
Empirical findings showed that competition was a major driving force, which changed
the entire landscape of the Nigerian financial industry. Quantitatively, over 89% of the
management, staff and shareholders of the financial services sector are of the opinion
that competition has exerted good influence on R&D. Thus competition resulted to
131
setting of R&D units, resuscitating moribund ones, propelled huge investment in product
development & relationship management and ultimately increased the relevance of
R&D as an important department that will drive the future of banking business in Nigeria
and other developing economies.
5.3 DISCUSSION OF FINDINGS
It is axiomatic to say that the past is the key to the present; however, within the findings
of this research, the reverse was the case, as the present was the key to understanding
the ugly past.
Implicit in this assertion is that comparing the Nigerian banking industry in the last
decade to what is obtainable about twenty years ago, it is easy to see how growth in
R&D, innovation in design of new products, innovation in re-design of existing products ,
aggressive business development and marketing strategies have changed the entire
landscape.
In the past, Nigerian banks were less innovative, giving little or no emphasis to
committing resources to R&D towards arriving at more innovative products and
services. There was little or no major investment and strategy for human capital
development. Quality of labour and development of labour was less a priority. However,
all these did not come to bare, until the recent wave of aggression in design and
marketing of new financial products, means that sustainable growth, increasing market
share, remaining relevant in the industry, developing competitive advantage, meant
that it is now crystal clear to see the ugly past.
132
Respondents‘ trend of agreement that development of new products have led to
increase in return on investment (ROI) on a progressive basis within the last decade
was subjected to empirical statistical treatment using covariance analysis. The objective
was to test the level of agreement versus disagreement among respondents that
constant design of new products in response to customers need have led to increase in
profitability for Banks and maximization of wealth for shareholders.
The analysis yielded a sample estimate of pearson coefficient of correlation of 0.77.
This is a positive correlation. This means that as new innovative financial products are
designed, profitability of the banks increases and returns on stakeholders‘ investments
(ROI) are also maximized, in direct proportion.
This also means that the banks acquire reputational advantages, as they are perceived
to be stronger than others, who are less innovative.
From the scatter diagrams (figures 4.37, pg.89), the positive relationship that exist
between the respondents‘ pattern of agreement that development of new products in
response to customers‘ needs, have led to increase in profitability & wealth
maximization; as we progress from one year to a more recent year within the last
decade, can easily be predicted with reasonable accuracy. For those that agree,
although the points do not fall exactly along a straight line, they fall within a narrow belt,
with coefficient of 0.77, implying that a positive, linear relationship actually exist
between product development and profitability as well as maximization of shareholders
wealth.
133
The study took a retrospect, and it was observed that about twenty years ago, old
generation banks were happy to subsist on a discreet mix of companies and individuals,
who were loyal to the banks, some of them a product of heritage, in the sense that their
fathers and great grand fathers were customers of the banks. These people became
emotionally attached to the banks. With the level of patronage enjoyed, they engage
more in armchair banking were bankers sit relaxed in the comfort of their office and
customers come to do business. Subsequently, empirical findings (figure 4.27, page
75) showed that, these status have since being challenged by the new wave of
aggression witnessed in recent time, as the study showed that over 70% of the
customers are beginning to consider innovativeness in the design new improved
products that suit their needs, as a factor critical in their choice of financial institution,
while primordial sentiment was an insignificant factor.
Thus it may not be out of place to say that within the past ten years, banks have both
expanded their repertoire and faced a new level of competition. Once viewed as
institutions of quiet contemplation and cultural ennoblement, banks have entered the
world of popular entertainment where the stakes are higher and the competition more
aggressive. In the process, banks are repositioning to adapt to the fierce competitive
environment through information technology (computerization), new products, better
packaging of old products.
The direction of responses, empirical observations, results of findings, etc thus shows
that the pattern of correlation can be used to predict the future trend of the Nigerian
banking industry.
134
5.4 CONCLUSION
New product design is of prime importance to the achievement of the primary goals of
profitability, customer satisfaction and maximization of shareholders‘ wealth within the
Nigerian banking industry. The importance of investment in R&D as strategies for
sustainable growth and development cannot be over-emphasized.
As the year progresses, it is expected that the stake will be further raised, Nigerian
banks will keep evolving to meet the challenges of the business environment.
Aggressive product development, further investment in Research & development,
customer-focus marketing, development of competitive edge, increase in wallet share,
profitability and maximization of returns on shareholders‘ investments, will occupy top of
the medium to long term strategic (MTLS) plans and priorities of major banks within the
next ten (10) years.
5.5 RECOMMENDATIONS
Research and development of innovative products and services, design of effective
marketing strategies and marketing-mix, creativity in the re-design of existing products,
development of competitive edge and entrenchment of total quality management (TQM)
should be the preoccupation of management of financial institutions, especially
management of Nigerian Banks.
135
Commitment to the above would enable banks ascertain the level of satisfaction
received by their customers, evaluate how the quality of services rendered affect their
customers‘ loyalty and how that in turn affect their bottom line. These would also enable
the management understand the significant contribution of new product design (NPD),
effective marketing of their products and services to the growth of the banks and thus
assist them develop more relevant customer focused strategies.
Furthermore, banks should invest more in human capital development, engage high
quality labours, and enhance the quality of employees by providing requisite on-the-job
trainings. They should engage workforce with good relationship management skills and
excellent interpersonal qualities.
Target setting strategy is recommended as perhaps the best way of getting the best out
of both staff and management within a short time lag. More emphasis should place on
business promotion and excellent quality services by all concerned.
As we take a journey into the next decade, these strategies will prove to be the sure
pathways towards sustained profitability, maximization of shareholders wealth and
hence achievement of the overall goal of the Nigerian banks in a highly competitive
environment.
136
5.6 REFERENCES
1. Moriarty R T [1993] ‗Relationship Versus Product In Retail Banking‘ Sloan
Management Review Vol. 7, N0. 1
2. Bank of Industry; Delivering our Mandate, Vol. 4, No. 1, April 2008.
3. Goldman Sachs New Markets Analyst: 08/35 ― New Markets: Banking sectors
put to the test-not all will emerge unscathed‖, October 9, 2008.
4. World Bank and African Development Bank, ―Nigeria Investment Climate
Assessment Report‖, 2008.
5. Equipment Leasing Association of Nigeria, ―Leasing Today‖,. Vol. 9, No. 1,
May 2007.
6. Manufacturers Association of Nigeria, Annual Report and Accounts, 2007.
7. Kotler [1991] Marketing Management: Analysis, Planning & Control, Prentice
Hall USA
8. Gronroos C [1994] ‗From Marketing Mix to Relationship Marketing: Towards a
Paradigm Shift‘ Marketing Management Decisions, Vol. 32, No. 2
137
APPENDIX I
RESEARCH QUESTIONNAIRE
UNIVERSITY OF LAGOS - QUESTIONNAIRE
Hello, my name is Kingsley Ananwude, a postgraduate student of University of Lagos.
I‘m carrying out a research on the topic ‗Design and marketing of new financial
products- A case of Nigerian Banks’.
This is to understand how Nigerian Banks design improved new products, as part of
strategies they adopt towards the achievement of overall target in the 21st century and
thus create wealth for shareholders who takes the risk of investment in a rapidly
dynamic and turbulent industry, and also understand the changes through time that has
taken place in the Banking industry environment.
To help in doing this we are seeking the views of various stakeholders- customers of
various Nigerian Banks (happy & aggrieved customers inclusive), shareholders, staff
and management of Banks. We would be grateful if you could spend 5-10 minutes
answering some questions below by putting (x) in the boxes accordingly.
138
SECTION A (FOR ALL) OPTIONAL
Name of Respondent________________________________
Date__________________
Location________________________ City________________________________
SECTION B (FOR ALL)
Age
0-10 years 11-30 years 31-50 years >50 years
Gender- Male Female
Marital Status
Single Married Divorced Widow others(specify)-------
Educational Qualification
Primary Secondary Graduate Postgraduate others(specify)----
Religious view
Christianity Islamic Traditional Others (Please specify)---------------
Geopolitocal Zone of Respondents
West East South-South North
Your Occupation
Trader Artisan Banking Civil Servant private sector
Transporter Legal Others (Please specify)______________
Do you have account with any Bank in Nigeria
Yes No can‘t remember
139
How long was the account opened
< 1 year 1–5 years 6 – 10 years >10 years
SECTION C (FOR ALL)
FOR STAKEHOLDERS IN THE BANKING INDUSTRY ONLY (shareholders,
Management & staff)
Have your bank develop any new product within the last ten (10) years
Yes No don‘t know
What is the frequency of new product development by your organization and other
banks in the country
More Frequently Rarely Static
What is the effect of competition to the innovations and proliferation in new financial
product design?
No effect increase in R&D and good for all decrease in R&D and
bad for all
What is your opinion on the recent pace of innovation in the industry?
Good for the industry Undesirable
Banking in Nigeria is rapidly evolving
Yes No static undecided
What is the impact of the new product development to the client base of your
organization
None Negative & declining Positive & incremental growth
140
What is the trend of your customer base in relation to innovative product development in
your organization
Declining same Increasing
How many times did you declare dividends to stakeholders in the last two decades
Frequently Rarely None
How many times have you declare dividends to stakeholders in the last ten years
Rarely None Frequently
How do you account for the difference in the pattern of dividend declaration to
shareholders in the last two questions above?
Increase in R&D have led to more wealth for stakeholders Increase in R&D have
led to loss of wealth for stakeholders due to costs
How do you compare the recent returns on investment (ROI) in the banking industry
with what is obtainable two decades ago
Less returns same level of returns Higher level of returns
SECTION D (FOR ALL)
FOR CUSTOMERS OF BANKS ONLY
Have you been aware of the introduction of new-to-the world product by any Nigerian
bank?
Yes No undecided
How long ago did you start noticing the current trend of aggressiveness in design and
marketing of new products by these Banks?
1-10years 11-20 years >20 years
141
In your opinion, how frequent do you observe introduction of new products within the
last ten years
Rarely sometimes Rampant
To what extent do you consider the aggressive design of products by banks relevant to
the industry.
Irrelevant Relatively relevant Very relevant
Innovation in existing products & design of new products are more common with new
generation banks than in old generation banks
True false no pattern
Do you have preference to do business with new generation banks than the old
generation banks or vice versa?
Yes I do No I don‘t I chose randomly
What are the factors influencing your choice of institutions to patronize
Age of existence proximity Primordial sentiments
Innovative products
Banking in the 21st century is same as in the past two decades
Yes, no difference No, a lot has changed can‘t say
To what extent do you rate the transformations that have taken place in the financial
industry?
Gradual Rapid transformation very slow
What is the desirability of these changes to meeting your banking needs and hence
your satisfaction
142
Irrelevant to my needs undecided No relationship Highly
desirable
What kind of influence do these innovations have in your business
Negative influence No influence Positive influence
What level of patronage do you give to banks
Equal patronage More to innovative new generation banks More
to old generation banks
How many of your contemporaries & associates have increase their patronage to banks
with more innovative products
None Many can‘t remember Few
How do you rate the investment by banks into new product design bearing in mind the
cost and benefits?
Justified Unjustified Waste
Based on your banking activities and patronage to banks, as well as that of your
associates, how can you rate banks profitability now against before in relation to the
innovative changes taking place?
Same level Declining Increasing
In consideration of abundant mobile & internet banking facilities, what is the frequency
of your visits to banking halls within the recent times
More Frequently Frequently Less Frequent
How often do staff of different banks come to market you within new financial products
Never Rarely Sometimes Frequently
143
Would you say that the aggressive product development & marketing of same by these
Banks have had any influence in your choice or decision at any time?
Yes No Undecided
Design and Marketing of new financial products is capital intensive and has many
challenges
Strongly Agreed Agreed Disagreed Strongly disagreed
Do you consider this trend good for the industry?
Yes No
I do more volume of transactions with those banks that visits frequently
Strongly Agreed Agreed Disagreed Strongly disagreed
This trend helps bank achieve their goals/target since it influences me to do more with
those banks that come more often and thus increases stakeholders wealth.
Strongly disagreed Disagreed Agreed Strongly Agreed
Thank you for your time
144
APPENDIX II
List of Tables, Charts, Graphs & Figures
Table 4.1 AGE OF RESPONDENTS
Frequency Percent Valid Percent Cumulative Percent
Valid 0-10 5 7.8 8.3 8.3
11-30 13 20.3 21.7 30.0
31-50 28 43.8 46.7 76.7
>50 14 21.9 23.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.11: AGE OF RESPONDENTS
Figure 4.12: AGE OF RESPONDENTS
145
Table 4.2 GENDER OF RESPONDENTS
Frequency Percent Valid Percent Cumulative Percent
Valid MALE 34 53.1 56.7 56.7
FEMALE 26 40.6 43.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.21: GENDER OF RESPONDENTS
146
Table 4.3 MARITAL STATUS
Frequency Percent Valid Percent
Cumulative Percent
Valid SINGLE 14 21.9 23.3 23.3
MARRIED 26 40.6 43.3 66.7
DIVORCED 11 17.2 18.3 85.0
WIDOW 6 9.4 10.0 95.0
OTHERS 3 4.7 5.0 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Table 4.31: MARITAL STATUS
Figure 4.31: MARITAL STATUS
147
Table 4.4 EDUCATIONAL QUALIFICATION
Frequency Percent Valid Percent
Cumulative Percent
Valid PRIMARY 5 7.8 8.3 8.3
SECONDARY 21 32.8 35.0 43.3
GRADUATE 25 39.1 41.7 85.0
POSTGRADUATE 8 12.5 13.3 98.3
OTHERS 1 1.6 1.7 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4:41 EDUCATIONAL QUALIFICATION
Figure 4:41 EDUCATIONAL QUALIFICATION
Table 4.5 RELIGIOUS VIEWS
Frequency Percent Valid Percent
Cumulative Percent
Valid CHRISTIANITY 29 45.3 48.3 48.3
ISLAMIC 20 31.2 33.3 81.7
TRADITIONAL 6 9.4 10.0 91.7
OTHERS 5 7.8 8.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
148
Figure 4.51: RELIGIOUS VIEWS
Figure 4.51: RELIGIOUS VIEWS
4.6 GEOPOLITICAL ZONE OF RESPONDENTS
Frequency Percent Valid Percent Cumulative Percent
Valid WEST 21 32.8 35.0 35.0
EAST 18 28.1 30.0 65.0
SOUTH -SOUTH 13 20.3 21.7 86.7
NORTH 8 12.5 13.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
149
Figure 4.61: GEOPOLITICAL ZONES
Table 4.7 OCCUPATION
Frequency Percent Valid Percent Cumulative Percent
Valid TRADER 14 21.9 23.3 23.3
ARTISAN 10 15.6 16.7 40.0
BANKING 4 6.2 6.7 46.7
CIVIL SERVANT 9 14.1 15.0 61.7
PRIVATE SECTOR 5 7.8 8.3 70.0
TRANSPORTER 8 12.5 13.3 83.3
LEGAL 2 3.1 3.3 86.7
STUDENT 8 12.5 13.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
150
Figure 4.7: OCCUPATION
Table 4.8 REPONDENTS WITH BANK ACCOUNT
Frequency Percent Valid Percent Cumulative Percent
Valid YES 44 68.8 73.3 73.3
NO 16 25.0 26.7 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
151
Figure 4.8 REPONDENTS WITH BANK ACCOUNT
Table 4.9 DURATION OF BANK ACCOUNT
Frequency Percent Valid Percent
Cumulative Percent
Valid <1 YEAR 16 25.0 26.7 26.7
1-5 YEARS 17 26.6 28.3 55.0
6-10 YEARS 11 17.2 18.3 73.3
>10 YEARS 16 25.0 26.7 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
152
Figure 4.91: DURATION OF BANK ACCOUNT Figure 4.92: DEVELOPMENT OF NEW PRODUCTS
Figure 4.93: FREQUENCY OF NEW PRODUCT DEVELOPMENT
Figure 4.94: EFFECT OF COMPETITION ON R&D
153
Figure 4.95 EFFECT OF INNOVATION TO THE INDUSTRY
Figure 4.96 EVOLUTION IN THE FINANCIAL INDUSTRY
. Figure 4.97 IMPACT OF R&D TO CLIENT BASE
Figure 4.98 TREND OF CLIENT BASE
154
Figure 4.99 DIVIDEND DECLARATION, TWO DECADES AGO
Figure 4.100 RECENT TREND OF DIVIDEND DECLARATION
Figure 4.101 REASON FOR DIFFERENCE IN PATTERNS OF DIVIDEND DECLARATION
Figure 4.102 PRESENT & PAST RETURN ON INVESTMENT (ROI)
155
Figure 4.103 R&D AWARENESS
. Figure 4.104 TIMING OF R&D
Figure 4.105 FREQUENCY OF NEW PRODUCT DESIGN
156
Figure 4.106 RELEVANCE OF R&D TO INDUSTRY
Figure 4.107 COMPARISON OF R&D IN NEW AND OLD GENERATION BANKS
Figure 4.108 PREFERNECE OF NEW GENERATION TO OLD GENERATION BANKS
157
Figure 4.109 FACORS AFFCETING CHOICE OF FINANCIAL INSTITUTIONS
Figure 4.110 BANKING IN THE 21
ST CENTURY
Figure 4.111 RATE OF TRANSFORMATION
Figure 4.112 DESIRABILITY OF TRANSFORMATIONS
158
Figure 4.113 INFLUENCE OF TRANSFORMATION TO CUSTOMERS
Figure 4.114 LEVEL OF PATRONAGE
Table 4.115 INCREASE IN PATRONAGE BY CONTEMPORARIES
Figure 4.116 JUSTIFICATION OF INVESTMENTS IN R&D
159
Figure 4.117 PATTERN OF BANKS PROFITABILITY
Figure 4.118 INFLUENCE OF MOBILE & INTERNET BANKING
Table 4.119 FREQUENCY OF BANKERS VISITS
Frequency Percent Valid Percent
Cumulative Percent
Valid RARELY 10 15.6 16.7 16.7
SOMETIMES 21 32.8 35.0 51.7
FREQUENTLY 29 45.3 48.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
160
Figure 4.119 FREQUENCY OF BANKERS VISITS
4.120 EFFECT OF BANK MARKETING
Frequency Percent Valid Percent
Cumulative Percent
Valid YES 38 59.4 63.3 63.3
NO 10 15.6 16.7 80.0
UNDECIDED 12 18.8 20.0 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.120 EFFECT OF BANK’s MARKETING ON THE RESPONDENTS
161
Table 4.121 LENGTH OF MARKETING TREND
Frequency Percent Valid Percent
Cumulative Percent
Valid 1-5 YEARS 15 23.4 25.0 25.0
6-10 YEARS 33 51.6 55.0 80.0
11-20 YEARS 10 15.6 16.7 96.7
>20 YEARS 2 3.1 3.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.121 LENGTH OF MARKETING TREND
162
Table 4.122 CHALLENGES IN FINANCIAL PRODUCT DEV. & MARKETING
Frequency Percent Valid Percent
Cumulative Percent
Valid STRONGLY AGEED 29 45.3 48.3 48.3
AGREE 19 29.7 31.7 80.0
DISAGREED 4 6.2 6.7 86.7
STRONGLY DISAGREED 3 4.7 5.0 91.7
UNDECIDED 5 7.8 8.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.122: CHALLENGES IN FINANCIAL PRODUCT MARKETING .
Table 4.123 RELEVANCE OF FINANCIAL PRODUCT MARKETING TO BANKING INDUSTRY
Frequency Percent Valid Percent
Cumulative Percent
Valid YES 49 76.6 81.7 81.7
NO 11 17.2 18.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
163
Figure 4.123: RELEVANCE OF FINANCIAL PRODUCT MARKETING TO
BANKING INDUSTRY
Table 4.124 VOLUME OF TRANSACTIONS IN RELATION TO NEW PRODUCT DEVELOPMENT & ITS MARKETING BY BANKS
Frequency Percent Valid Percent
Cumulative Percent
Valid STRONGLY AGREED 37 57.8 62.7 62.7
AGREED 18 28.1 30.5 93.2
DISAGREED 3 4.7 5.1 98.3
STRONGLY DISAGREED 1 1.6 1.7 100.0
Total 59 92.2 100.0
Missing System 5 7.8
Total 64 100.0
164
Figure 4.124 VOLUME OF TRANSACTIONS IN RELATION TO NEW PRODUCT DEVELOPMENT & ITS MARKETING BY BANKS Table 4.125 CONTRIBUTION OF PRODUCT DEVELOPMENT & MARKETING TO
SHAREHOLDERS' WEALTH
Frequency Percent Valid Percent
Cumulative Percent
Valid STRONGLY DISAGREED 3 4.7 5.0 5.0
DISAGREED 2 3.1 3.3 8.3
AGREED 23 35.9 38.3 46.7
STRONGLY AGREED 32 50.0 53.3 100.0
Total 60 93.8 100.0
Missing System 4 6.2
Total 64 100.0
Figure 4.125 CONTRIBUTION OF PRODUCT DEVELOPMENT & MARKETING TO
SHAREHOLDERS' WEALTH
165
TABLE 4.126: RESPONDENTS’ TREND OF AGREEMENT THAT DEVELOPMENT OF NEW PRODUCTS HAVE LED TO INCREASE IN RETURN ON INVESTMENT (ROI) ON A PROGRESSIVE BASIS WITHIN THE LAST DECADE
S/N YEAR
Respondents who agreed that development of new products in response to customers need has led to increase in profitability for Banks and maximization of wealth for shareholders (X)
Respondents who do not agreed that development of new products in response to customers need has led to increase in profitability for Banks and maximization of wealth for shareholders (Y)
1 2000 40 60
2 2001 45 55
3 2002 48 52
4 2003 50 50
5 2004 53 47
6 2005 56 44
7 2006 65 35
8 2007 70 30
9 2008 75 25
10 2009 78 22
11 2010 82 18
Table 4.126 (b) X-Y Statistical treatment of Respondents’ trend of Agreement on impact of new product development to the increase in Return on Investment (ROI)
S/N X Y X-ẋ
(X-ẋ) 2
Y-Ẏ
(Y-Ẏ) 2
(X-ẋ)( Y-Ẏ)
1 40 60 -20.18 407.31 20.18 407.31 407.31
2 45 55 5.18 26.85 55.00 3025.00 285.00
3 48 52 48.00 2304.00 52.00 2704.00 2496.00
4 50 50 50.00 2500.00 50.00 2500.00 2500.00
5 53 47 53.00 2809.00 47.00 2209.00 2491.00
6 56 44 56.00 3136.00 44.00 1936.00 2464.00
7 65 35 65.00 4225.00 35.00 1225.00 2275.00
8 70 30 70.00 4900.00 30.00 900.00 2100.00
9 75 25 75.00 5625.00 25.00 625.00 1875.00
10 78 22 78.00 6084.00 22.00 484.00 1716.00
11 82 18 82.00 6724.00 18.00 324.00 1476.00
∑ 662 438 562.00 38741.16 398.18 16339.31 19270.69
ẋ = ∑X = 662/11 ≈ 60.2
n Ẏ = ∑Y = 438/11 ≈ 39.8
n ∑(X-ẋ)( Y-Ẏ) = 19,270.69 ∑(X-ẋ)
2 = 38,741.16
∑(Y-Ẏ)
2 = 16,399.31
166
Recall that: r = ṕ= ∑ (X- ẋ) (Y- Ẏ)
∑(X- ẋ)
2 (Y
- Ẏ)
2
r ≈ 0.77
Figure 4.126 ( c ): Respondents pattern of agreement that development of new products in Response to customers need have led to increase in profitability & wealth maximization
Figure 4.126 (d): Respondents pattern of disagreement that development of new products in Response to customers need have led to increase in profitability & wealth maximization.
Table 4.128 KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .573
Bartlett's Test of Sphericity Approx. Chi-Square 156.040
Df 120
Sig. .015
167
Communalities Initial Extraction
AGE OF RESPONDENTS 1.000 .740
SEX OF RESPONDENTS 1.000 .529
MARITAL STATUS 1.000 .584
EDUCATIONAL QUALIFICATION
1.000 .679
RELIGIOUS VIEWS 1.000 .451
GEOPOLITICAL ZONE OF RESPONDENTS
1.000 .620
OCCUPATION 1.000 .635
REPONDENTS WITH BANK ACCOUNT
1.000 .780
DURATION OF BANK ACCOUNT
1.000 .781
FREQUENCY OF PRODUCT DESIGN
1.000 .477
EFFECT OF PRODUCT DESIGN
1.000 .620
LENGTH OF TREND IN PRODUCT DESIGN
1.000 .678
CHALLENGES IN FINANCIAL PRODUCT DESIGN
1.000 .654
RELEVANCE OF FINANCIAL PRODUCT DESIGN TO BANKING INDUSTRY
1.000 .485
VOLUME OF TRANSACTION IN RELATION TO BANKERS VISITS
1.000 .529
CONTRIBUTION OF PRODUCT DESIGN TO SHAREHOLDERS' WEALTH
1.000 .742
Extraction Method: Principal Component Analysis.
Table 4.129 Communalities Table 4.130 Total Variance Explained
Component
Initial Eigenvalues Extraction Sums of Squared Loadings
Total % of Variance Cumulative % Total % of Variance Cumulative %
1 2.530 15.813 15.813 2.530 15.813 15.813
2 2.076 12.972 28.785 2.076 12.972 28.785
3 1.722 10.760 39.545 1.722 10.760 39.545
4 1.417 8.857 48.402 1.417 8.857 48.402
5 1.167 7.296 55.698 1.167 7.296 55.698
6 1.073 6.708 62.406 1.073 6.708 62.406
7 .964 6.023 68.429
8 .861 5.381 73.810
9 .752 4.701 78.511
10 .692 4.325 82.836
11 .631 3.945 86.781
12 .561 3.506 90.287
13 .513 3.209 93.496
14 .409 2.558 96.053
15 .380 2.375 98.429
16 .251 1.571 100.000
168
Communalities Initial Extraction
AGE OF RESPONDENTS 1.000 .740
SEX OF RESPONDENTS 1.000 .529
MARITAL STATUS 1.000 .584
EDUCATIONAL QUALIFICATION
1.000 .679
RELIGIOUS VIEWS 1.000 .451
GEOPOLITICAL ZONE OF RESPONDENTS
1.000 .620
OCCUPATION 1.000 .635
REPONDENTS WITH BANK ACCOUNT
1.000 .780
DURATION OF BANK ACCOUNT
1.000 .781
FREQUENCY OF PRODUCT DESIGN
1.000 .477
EFFECT OF PRODUCT DESIGN
1.000 .620
LENGTH OF TREND IN PRODUCT DESIGN
1.000 .678
CHALLENGES IN FINANCIAL PRODUCT DESIGN
1.000 .654
RELEVANCE OF FINANCIAL PRODUCT DESIGN TO BANKING INDUSTRY
1.000 .485
VOLUME OF TRANSACTION IN RELATION TO BANKERS VISITS
1.000 .529
CONTRIBUTION OF PRODUCT DESIGN TO SHAREHOLDERS' WEALTH
1.000 .742
Extraction Method: Principal Component Analysis.
169
Table 4.131 Component Matrixa
Component
1 2 3 4 5 6
AGE OF RESPONDENTS .714 .389 -.101 .181 -.020 .188
SEX OF RESPONDENTS .185 -.261 .293 -.566 -.133 .060
MARITAL STATUS .699 -.191 .211 -.052 .108 -.007
EDUCATIONAL QUALIFICATION
.546 .356 .316 .110 .375 .048
RELIGIOUS VIEWS .246 .392 .437 .051 -.143 -.150
GEOPOLITICAL ZONE OF RESPONDENTS
-.441 .368 -.248 .380 -.290 -.022
OCCUPATION -.392 .130 .639 .006 .187 -.145
REPONDENTS WITH BANK ACCOUNT
.022 -.546 .241 .487 .426 -.069
DURATION OF BANK ACCOUNT
.135 .809 -.075 -.291 -.123 -.052
FREQUENCY OF PRODUCT DESIGN
.080 -.137 -.590 .131 .287 .063
EFFECT OF PRODUCT DESIGN
-.274 .384 .046 .324 .153 .517
LENGTH OF TREND IN PRODUCT DESIGN
.133 .337 -.380 -.222 .595 -.013
CHALLENGES IN FINANCIAL PRODUCT DESIGN
-.461 .186 .069 -.455 .404 -.177
RELEVANCE OF FINANCIAL PRODUCT DESIGN TO BANKING INDUSTRY
.575 -.008 .062 .255 -.166 -.243
VOLUME OF TRANSACTION IN RELATION TO BANKERS VISITS
-.337 .221 .498 .214 .064 .263
CONTRIBUTION PRODUCT DESIGN TO SHAREHOLDERS' WEALTH
.130 -.267 .078 -.303 -.079 .741
Extraction Method: Principal Component Analysis.
a. 6 components extracted.
170
Bibliography
Kimball R C [1992] ‗Relationship Versus Product In Retail Banking‘, Journal of
Retail Banking, 12, 1 – Spring
Central bank of Nigeria (2008) "Guidelines and Procedures for the
establishment of Microfinance banks in Nigeria" Published by the CBN
Bankers Committee‘s Draft Report on Enhancing the Efficiency of the
Nigerian Payments System, August 2004.
Charles C. Soludo, Keynote Address by the CBN Governor, delivered at the
inauguration of the National Payments System Committee, May 31, 2005.
World Bank, Diagnostic Report of the Payment and Settlement Systems and
Reform Strategy in Nigeria (Draft dated August 2008).
Central Bank of Nigeria, ―CBN Guidelines on Advertisements by Deposit
Taking Financial Institutions‖, April 5, 2000.
Hansen J.J (2007) "The Poor as Producers in Rural Economy"
http//www.aclaim/inf/actr.htm
Jamil B (2008) "Microfinance as a tool for poverty alleviation in Nigeria" Paper
Presented at Sensitization Workshop on Microfinance Banking in Kano State.
National Bureau of Statistics (2005) "Social Statistics in Nigeria" Published by
NBS
Olaitan M.A (2006) "Finance for Small and Medium Scale Enterprises in
Nigeria" Journal of international farm management Vol 3 No 2 January
171
Olajide O.A (1980) "Financing Enterprises in Nigeria Through Cooperative"
Nigerian Institute of Social and Economic Research (NISER), Ibadan
Ketu A. A (2008) "Microfinance banks in Nigeria: An Engine for Rural
Transformation" West African Institute for Financial and Economic
Management, Lagos Nigeria.
Umar S.H (2008) "The Experience of Microfinance Banks Operation in their
Operational Location. Paper Presented at Sensitization Workshop on
Microfinance Banking in Kano State.
Parasuraman A, Berry L L & Zeithaml V A [1998]‘SERVQUAL: A Multiple Item
Scale for Measuring Consumer Perceptions of Quality of Service‘, Journal of
Retailing, Vol. 64, no. 1
Keltner B [1995] ‗Relationship Banking and Competitive Advantage: Evidence
from the US and Germany‘, Californian Management Review, Vol. 37, N0. 4
Levitt T [1960] ‗Marketing Myopia‘, Harvard Business Review, July-August
Lewis B R [1994] ‗Service Quality; An International Comparison of Bank
customers‘ Expectations and Perceptions‘, Journal of Marketing
Management, Vol. 7, N0. 1
Pine II B J [1993] ‗Mass Customization, the New Frontier in Business
Concepts‘, Harvard Business School Press USA
Stewart Mark[1996]: keep the right customer – The Key Steps to Profitable
Customer retention, London, McGraw-Hill.
The Banking Code [1997], 3rd ed. BBA Enterprises Limited USA
172
Tracy Brain[2002]: Be a sales superstar – 21 great ways to sell more faster,
easier in tough markets, London, Berrett – Koehler Publishers Inc.
Webster F E [1994] ‗Defining the New Marketing Concept‘, Marketing
Management, Vol. 2, N0. 4
Wilson R M S, Gilligan C, Pearson DJ [1992] Strategic Marketing
Management, Butterworth-Heinemann London.
Rammal, H. G. and Zurbruegg, R. (2007). Awareness of Islamic Banking
Products Among Muslims: The Case of Australia. Journal of Financial
Services Marketing, 12(1), 65-74.
Saeed, A. (1996). "Islamic Banking and Interest: A Study of the Prohibition of
Riba and its Contemporary Interpretation". Leiden, Netherlands: E.J.Brill.
Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of
Economic History 29 (1), p. 79-96 [81, 83, 85, 90, 93, 96].
ADB, 2000. Finance for the poor: Microfinance development strategy. Rural
Asian study: Beyond the Green Revolution. Manila: Asian Development Bank,
pp: 52.
ADB, 2005. ―Microfinance development strategy update.‖ Manila: Asian
Development Bank.
http://www.adb.org/Documents/Policies/Microfinance/microfinance0100.asp?
p=microfnc
Adebayo, A.A., 1997. ―The role of NGOs in poverty alleviation: A case study
of Farmers Development Union.‖ In poverty alleviation in Nigeria, selected
173
papers for the 1997 Annual Conference of the Nigerian Economic Society,pp:
397- 414.
Adetunbi, O., 1999. "Microfinance market in Nigeria,‖ Journal of the
Community Development Foundation, Vol. 1: 5-6.
Adeyeye, V.A., 2003. ―Impact of cooperative-based NGOs on rural poverty: A
case study of Farmers Development Union (FADU) in Osun State, Nigeria.‖
NISER Monograph series No 10, Ibadan, NISER, pp: 73.
Chirwa, E.A., 1997. ―An econometric analysis of the determinants of
agricultural credit payment in Malawi,‖ African Review of Money Finance and
Banking, Vol. 1-2: 107-122.
Dichter, T.W., 1999. ―NGOs in microfinance: Past, present and future.‖ In
Microfinance in Africa, Breth, S. A. (Ed.) Mexico City Sasakawa Africa
Association, pp: 12-37.
Gujarati, D.N., 1995. Basic econometrics, 3rd edition, New York, McGraw-Hill,
Inc., pp: 838.
NPC, 1998. 1991 Population census of the Federal Republic of Nigeria:
Analytical report at the national level. Abuja- Nigeria. The National Population
Commission, pp: 455.
Ogundipe, E.A., 1999. ―The Role of non-governmental organizations in
poverty alleviation in Nigeria," Bullion, publication of the Central Bank of
Nigeria Vol. 23: 58-65.
Okunmadewa, F., 1998. ―Domestic and international response to poverty
alleviation in Nigeria.‖ Proceedings of the 7th Annual Conference of the Zonal
174
Research Units Organised by Research Department, CBN at Makurdi, 8th -
12th June, pp: 296-309.
Oladeji, S.I. and I.O. Ogunrinola, 2001. ―Determinants of informal savings in
Southwestern Nigeria.‖ Savings and Development, No. 2-2001-XXV: 225–
249.
Olomola, A.S., 1999. ―Financial innovations in Nigerian microfinance system,‖
In: Olomola, A.S. and S.O. Akande (eds.), Agricultural Finance Issues in
Nigeria Ibadan, (NISER), pp: 149-164.
Olomola, A.S., 2001. ―The nature and determinants of rural loan repayment
performance in Nigeria: The case of FADU‘s microcredit programme‖. NISER
monograph series NO 3, (NISER), Ibadan, pp: 57.
Oni, T.K., 1999. ―Bank credit facilities for smallholder farmers: Implications for
food security in Nigeria.‖ In Fabiyi, Y.
Zeller, M., M. Sharma, A.U. Ahmed and S. Rashid, 2001. Group-based
financial institutions for the rural poor in Bangladesh: An institutional-and
household-level analysis, Washington, D. C., IFPRI, pp: 100.
L. and E. O. Idowu (eds.) Poverty alleviation and food security in Nigeria,
Ibadan, NAAE, pp: 342-348.
UNCDF, 1997. ―Micfinance: Nigeria country report, ― United Nation Capital
Development Fund,
http://www.uncdf.org/english/microfinance/reports/country_feasibility/
Women‘s World Banking, 2003. ―Nigeria - Community development and
microfinance roundtable,‖
175
World Bank Group, Doing Business in Nigeria 2008. Doing Business.
Washington: World
Bank. See:
http://www.doingbusiness.org/subnational/exploreeconomies/Nigeria.aspx
World Bank Group, Doing Business in Nigeria 2009. Doing Business.
Washington: World Bank. See:
http://www.doingbusiness.org/ExploreEconomies/?economyid=143
Central Bank of Nigeria, ―CBN Guidelines on Advertisements by Deposit
Taking Financial Institutions‖, April 5, 2000.
Central Bank of Nigeria, CBN Circular BSD/26/2005, Framework for Risk-
Based Supervision of Banks in Nigeria, December 13, 2005
Central Bank of Nigeria, ―CBN Prudential Guideline for Licensed Banks‖,
November 7, 1990.
Bank of Industry; Delivering our Mandate, Vol. 4, No. 1, April 2008.
Goldman Sachs New Markets Analyst: 08/35 ― New Markets: Banking sectors
put to the test-not all will emerge unscathed‖, October 9, 2008.
World Bank and African Development Bank, ―Nigeria Investment Climate
Assessment Report‖, 2008.
Equipment Leasing Association of Nigeria, ―Leasing Today‖,. Vol. 9, No. 1,
May 2007.
Manufacturers Association of Nigeria, Annual Report and Accounts, 2007.
Central Bank of Nigeria, ―CBN Guidelines on Electronic Banking in Nigeria‖,
August 2003
176
NCC Review and Analysis of Complaints Received from January to
December 2007
Bun, Chinyere & Hernández-Coss, Raúl ―UK-Nigeria Remittance: Challenges
of Embracing Formal Transfer Systems in a Dual Financial Environment‖,
2007.
Boleat, Mark & Walley, Simon, ―Nigeria Financial Systems Strategy 2020:
Housing Finance‖, March 2008
EFInA, ―EFInA Access to Finance Survey in Nigeria 2008: Key Topline
Findings‖, October 2008.
Gronroos C [1994] Strategic Management in Marketing in the Services
Sector, Chartwell Bratt USA
Mckenna, Regia [1991]; Relationship Marketing – Successful Strategies for
the age of the customer Cambridge, Perseus books.
USAID/Central Bank of Nigeria, ―OFID Technical Collaboration Trip Report‖,
2007
USAID, M-Banking Quick Feasibility Assessment presentation, December
2006
Akanbi, Festus, ―Microfinance: Stakeholders Call for Policy Review,‖
THISDAY, p. 31 (August 31, 2008)
Atitebi, Tajudeen, ―Microfinance Banks Take Centre Stage,‖
www.allAfrica.com, January 7, 2008
Chemonics/USAID,―Assesment of the Micro, Small, Medium Enterprises
(MSME) in Nigeria‖, 2004.
177
Olaleye, O.,―Nigeria‘s Micro-Financing Sector‘s Under-Developed?‖,
THISDAY, August 5, 2008.
Obajemu, Moses, ―Micro Finance: Oceanic to Partner Grameen Bank,‖
THISDAY, Vol. 13, No. 4881, p.
USAID, ―Micro, Small and Medium Enterprises, Financial Services Demand
Survey‖, July 2005.
World Bank, ―Rural Finance in Nigeria, Integrating New Approaches‖, April 4,
2008.
FAO, ―Federal Republic of Nigeria: Assessment of Community Banks‖,
September 20, 2004.
UNDP/UNDCF, ―Support to the Development of Sustainable Microfinance
Sector in Nigeria: Mid-term Evaluation Report‖, September 2007.
Central Bank of Nigeria, ―Regulatory and Supervisory Framework for
Microfinance Banks (MFBs) In Nigeria‖, December 2005.
Central Bank of Nigeria, ―CBN Circular to All Banks and Other Financial
Institutions Re: appointment of Money Laundering Compliance Officers,
(BSD/8/2002)‖, August 23, 2002)
Central Bank of Nigeria, ―CBN Circular to All Banks re: Alert Notice of
Activities of Fraudsters (BSD/DO/05/2004)‖, May 5, 2004
Central Bank of Nigeria, ―CBN Circular to Banks and Other Financial
Institutions re: Compliance with KYC Requirements and Banks Weekly
Money Laundering Reports to NFIU