Dissertation (MA Business Administration)Because of high customer defections and switching between banks in Tanzania, the study focused on identifying the factors that influence customer retention in the banking sector in the country. Four specific objectives namely, to identify and study strategies used by NMB and CRDB to retain customers, to determine the effectiveness of the strategies used by NMB and CRDB to retain customers, to examine the challenges facing banks in retaining customers and to explore possible prospective measures to retain customers by banks were studied. Because of the nature of the objectives of the research, the study adopted a descriptive design and selected NMB and CRDB banks in Dodoma for convenience reasons. Using convenience sampling, a total of 50 respondents, that is, customers, staff and executives of the banks were selected for the study. Data was collected using interviews and questionnaires. Results of the study show that the banks have a range of strategies to retain their customers though they have not been effective. Customer defection rate was found to be as high as 5% to 7% annually. This meant banks were loosing between 1800 and 4000 customers annually. Further findings showed that 48% of the customers who were involved had switched from at least one bank in the past. This suggests that banks in Tanzania have not been effective in retaining their customers. The study recommends that banks should devise and implement strategies to retain customers rather than using more efforts to attract new customers, which is costly. The government also should review its fiscal and monetary policies so that inflation is checked to avoid raising bank charges and interest rates which cause customer defections.