Unfinished Business: The Need for More Effective Microfinance Exit Monitoring

This paper explores how exit rates adversely affect both commercial and social objectives of microfinance organizations (MFOs). It cautions that rising exit rate may indicate major problems for an MFO and even threaten its survival because:

• Users may be unhappy with terms and conditions or with relations with the MFO staff;
• Users may switch to competitors, or the overall demand may fall due to a change in the economic climate;
• In the longer term, changes in exit rates affect reputation and goodwill of the MFOs.

The paper argues that the issue of exit monitoring remains "unfinished business" for two reasons:

• Extent to which high exit rates affects both commercial and social goals of MFOs is still understated;
• Current exit monitoring practices are weak.

The paper concludes with a set of specific recommendations for MFOs and for the industry in general. These include:

• Increased investment in exit monitoring;
• Greater systematic and routine exit monitoring;
• More consistent definition and measurement of exit and related concepts;
• Improved reliability and cost-effectiveness of protocols for collection and analysis of data on why people leave.