KEY DETERMINANTS OF CUSTOMER LOYALTY IN MICROFINANCE INSTITUTIONS: EVIDENCE FROM TIEN GIANG PROVINCE, VIETNAM

Abstract

In an increasingly volatile business environment, customer loyalty is crucial in enhancing the competitive edge of financial institutions, particularly microfinance institutions. This study examines the factors that influence customer loyalty among active borrowers, including laborers and low-income workers, at microfinance institutions. Primary data were collected from 400 customers borrowing capital from microfinance institutions in Tien Giang Province, Vietnam. Cronbach’s alpha, exploratory factor analysis, and multiple regression analysis were employed to examine the impact of customer commitment, perceived interest rate, service quality, and switching barriers on customer loyalty. The results reveal that all four factors significantly affect customer loyalty, with customer commitment showing the strongest influence. Hence, to retain current clients, attract new borrowers, and limit reliance on informal lending practices, microfinance institutions should design targeted strategies to foster financial and social stability in the region.