Paper
Client Drop-outs From East African Microfinance Institutions
Finding out reasons behind clients drop-out from East African MFIs
44 pages
This report studies thirteen large and medium-sized MFIs in East Africa to determine client drop-outs, and the reasons responsible for it. It uses qualitative and quantitative methods to study the operations, clients and their drop-outs from MFIs in both urban and rural areas.
The document states that:
- East-African MFIs target vulnerable not-so-poor and (upper) poor micro and small entrepreneurs. The (lower) poor and the very poor receive limited or no services;
- The reasons behind the poor not joining MFIs are their exclusion by other group members, self-exclusion, MFI staff and unattractive products;
- Drop-out rates are high in East Africa;
- Clients drop-out for many reasons including:
- Downturn in the national economy and/or adverse climatic conditions for agriculture;
- The initial period of member training;
- Expense stress during predictable periods such as festivals, near dates of submission of school fees;
- Phases of change in agency policy when concerns about default or sustainability lead to a rapid, forced exit of large numbers of clients;
- Management problems in MFIs;
- Multiple memberships to MFIs.
Further, the report argues that client exit is a significant problem for MFIs as it:
- Increases the MFI's cost structure;
- Discourages other clients;
- Reduces prospects for sustainability.
Finally, the report suggests that in order to overcome this problem, MFIs need to monitor drop-outs more systematically and need to move away from the rigid, credit-driven, group based products that dominate their services.
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