Dropouts in Northern Province, South Africa

This paper discusses the dropout situations at two MFIs, Provident South Africa (PSA) and Small Enterprise Foundation (SEF), based in South Africa's Northern Province. The aim of the research is to better understand clients' needs and improve the products and services designed to meet those needs.

The paper identifies the following reasons for drop-outs:

• Rigidity of the products or policies;
• Dissatisfaction with recruiting methods;
• Lack of communication and transparency;
• High interest rates;
• Too much competition;
• Leniency of the programs towards delinquency and default.

The paper recommends the following steps to reduce dropouts:

• Determine improved recruitment and loan size;
• Be strict with defaulters;
• Offer greater choices within loan products at PSA;
• Change the delivery system at SEF;
• Improve communication between management, field staff and clients.

The paper concludes that:

• Clients would rejoin the institutions if the above changes were made;
• With slightly different target groups and locations, both institutions have the potential to remain leaders in the Northern Province.