Fairness and Relationship Commitment link in Developing Economy Context: Critical Evaluation with PLS-SEM Analysis Technique

Abstract

The Micro Finance Institution’s (MFI’s) creates huge economic and social impact in the development of Bangladesh for the last few decades. On the other hand, this sector is facing strong multifaceted competition and customer drop out (exit/switching) is taking place. In fact, to achieve sustainability, MFIs need to reduce the dropout rate and to retain customer by developing relationship commitment (RC). Hence, the aim of the empirical study is to find out how the clients drop out from the MFI can be prevented through developing relationship commitment in the relational exchange context. The study focuses on the service fairness as an antecedent of relationship commitment. Additionally, how happiness issue influence on fairness and relationship commitment link is also highlighted through this paper. The PLS-SEM technique is utilized for the analysis of data collected from 409 consumers of different MFI’s of Bangladesh. The study employed survey method for getting responses from MFI consumers about fairness (price fairness, distributive fairness, procedural fairness and interactional fairness), relationship commitment and happiness related statement. The study explores that price fairness, distributive fairness, procedural fairness and interactional fairness has significant effect on relationship commitment. Again, happiness mediates all the relationship between distributive fairness, procedural fairness, interactional fairness and relationship commitment except the relationship between price fairness and relationship commitment. Therefore, the findings of this model may be applied by the policy makers and the practitioners as an approach to enhance relationship commitment in the MFI’s in developing economy context.