Measuring price fairness and its impact on consumers’ trust and switching intentions in microfinance institutions

Abstract

Although price fairness has been intensively studied for decades, the measurement of its multidimensionality has not yet reached any consensus. Its impact on consumers' trust and switching intentions in financial institutions has been less frequently analysed. This paper fills both gaps and has two objectives. First, it aims to develop a reliable and valid measurement scale for price fairness in microfinance. Second, following the equity and social exchange theories, it tests the impact of price fairness on consumers' trust and switching intentions. Data were collected from 324 customers in six microfinance institutions (MFIs) in Bukavu, Democratic Republic of the Congo, and tested using exploratory and confirmatory factor analyses, as well as structural equation modelling. The results confirm that price fairness is a multidimensional construct with six dimensions, revealing that the construct has not been comprehensively captured in prior research. Furthermore, findings suggest that price fairness significantly affects customer trust and satisfaction, and that both variables mediate the relationship between price fairness and customer switching intentions. These results confer a strategic role of price fairness, trust and switching intention in the microfinance industry, which is currently subject to customer sensitivity to interest rates and mistrust towards MFIs.

When unethical practices harm relationship outcomes: testing the influence of consumer-perceived unethical behaviour on trust and satisfaction in the banking sector

“…These results are more apparent in the DRC banking context. Indeed, many banks and microfinance institutions have gone into bankruptcy and jeopardised consumer savings, leaving them in severe poverty (Chubaka et al. , 2021).…”

“…It also confirmed two dimensions among the four (disrespect and discrimination) that were identified in previous studies, while two (unresponsive behaviour and lack of consideration) appeared as new dimensions, and, therefore, pertained to banking and the context specificities. Such specific components are the manifestation of the absence of a service culture within bank services, characteristic of the banking sector in DRC where consumers are not valued and banks make little effort to improve their service quality (Chubaka et al. , 2021).…”

Data-Driven Discrimination, Perceived Fairness, and Consumer Trust–The Perspective of Consumer Attribution

“…Fairness perception is found to be an effective predictor of individual's trust in an organization (Hubbell and Chory-Assad, 2005). Furthermore, previous research shows that perception of fairness significantly increases consumer satisfaction and trust (Mushagalusa et al, 2021). Thus, the dominant research on trust and fairness indicates that trust is a result of fairness.…”

“…Recent research suggests that consumer perceived fairness is positively correlated with consumer trust (Hubbell and Chory-Assad, 2005;Lee, 2018). For instance, Mushagalusa et al (2021) examine the impact of price fairness in financial institutions and show that price fairness positively affects consumer trust and satisfaction, thereby reducing customer switching intentions. Therefore, we conjecture that the impact of controllability and locus of causality on consumer perceived fairness may be transferred to consumer trust.…”

Pengaruh Environmental Knowledge, Brand Image, Product Quality, Price Fairness Terhadap Purchase Intention

“…Price fairness secara langsung mempengaruhi persepsi konsumen terhadap produk dan dapat membimbing keputusan pembelian. Harga yang dianggap rasional dapat memengaruhi perilaku pembelian konsumen (Chubaka Mushagalusa et al, 2022).…”