Paper

Drop-outs Among Selected Zambian Microfinance Institutions: Causes and Potential Impacts on Product Design

Reducing the dropout rate among members of microfinance institutions

This paper makes an attempt to understand the reasons behind the high dropout rate in the microfinance institutions (MFIs) in Zambia. This study uses focus group discussions and participatory rapid appraisal for collecting data from members and clients of MFIs.

As per the author, easy entry in the microfinance sector and the prospect of donor funding resulted in the formation of a large number of MFIs most of which became inactive very soon. The study observes that the client drop-out is prevalent across different sections of the clients.

The paper identifies some reasons for high dropout rates:

  • Delay in loan disbursement;
  • Client relocation;
  • Lack of complete knowledge in case of loan insurance fund;
  • Unsuitability of repayment schedules;
  • Disbursal of inadequate loan amounts.

Further, the author points out that similar reason for high dropout rate can be found in other parts of eastern and southern Africa. Finally, the paper recommends that MFIs should make operational amendments for checking the dropout rates by:

  • Cutting down the bureaucratic procedures;
  • Providing product diversifications;
  • Giving the groups space and time to choose their own members;
  • Improving group training;
  • Giving clients the freedom to choose a repayment schedule.

About this Publication

By Musona, D., Coetzee, G.
Published