Hitherto, assessments of the effectiveness of Indian microfinance institutions in achieving their economic and social goals have largely identified only limited success. Critics of Indian regional rural banks (RRBs) and their prevailing culture have argued that a product‐focused rather than a market‐oriented approach to new service development (NSD) is responsible for their inadequate performance. With this in mind, this work aims to develop a conceptual understanding of the factors influencing market orientation in these institutions, and to assess its impact on outreach performance.
Following an extensive review of the literature on the Indian microfinance sector, market orientation and new service development, a model framework for understanding the relationships between the factors affecting outreach performance in Indian RRBs is developed. Research propositions for further evidence‐based investigation are posited.
The attitudes and behaviours of managers, along with institutional characteristics, are identified as influences on market orientation, service innovation, customer satisfaction and outreach performance within RRBs.
This paper is theoretical in its nature and as such proposes a basis for a detailed empirical examination of the proposed model and its associated propositions.
Banking practitioners need to be aware that market orientation may influence NSD and performance in this and related contextual situations.
The conceptual relationships proposed inform those seeking to enhance the performance of RRBs of some of the key internal marketing issues involved in their success, and thus give direction to the development of policies to reduce poverty. In particular, cultural issues relating to perceptions of customers and their effect on effective NSD are examined.
