Paper
Drop-Outs Amongst Ugandan MFIs
Why microfinance institutions in Uganda suffering high drop-out levels and how to address it
MFIs in Uganda have excessively high (often above 25% p.a.) levels of drop-outs compared to most African, Latin American and West African MFIs. This paper is a study on qualitative research undertaken with management, credit officers, clients and ex-clients of PRIDE, FINCA, Faula, FOCCAs and Centenary Rural Development Bank in both rural and urban areas. The paper suggests that the main reasons for drop-outs are related to socioeconomic and rural/urban status.
Findings demonstrate that:
- Relatively well-off urban drop-outs leave to seek higher loans and avoid locked-in compulsory savings;
- Not-so-poor drop-outs are forced out as weekly repayment size mounts. In rural areas, keeping up with a rigid loan system is difficult given seasonal variations;
- Poorer drop-outs pushed out have problems repaying loan and are more prone to dropping out due to illness and death;
- Drop-outs can find the system of attached savings unappealing and the decisions and leadership of credit officers unsatisfactory.
- No significant gender differentiation was found amongst drop-outs.
Recommendations are presented on how MFIs can design products for their clients' needs in the future.
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