Estimating Client Exit Rate

This M-CRIL technical note suggests a practical definition of client drop-out in microfinance, and proposes a working formula to calculate the drop-out rate. Client exit is a major factor affecting the sustainability and growth of MFIs. Monitoring trends in exit rate provides insights on the MFIs performance and credibility. M-CRIL defines drop-out as any client who has had no significant transaction with the MFI for the last six months. Other practitioners and researchers have defined drop-out according to various criteria. These include:

• Withdrawal of compulsory savings;
• Non-attendance of compulsory meetings;
• Not taking a follow-up loan within a certain number of days;
• Client decision not to remain in the group.

The paper looks at various formulas by ACCION, CGAP and Waterfield to calculate drop-out rate. It presents M-CRILs formula that calculates drop-outs as a proportion of all the clients that the MFI has come across during the period. The formula does not take clients at the beginning of the period as the base, as drop-outs could occur from new as well as old clients.