Client Exits (Drop-outs) Amongst Tanzanian Microfinance Institutions

This paper discusses different aspects of client dropouts from Tanzania's MFIs. It selects three institutions for its research.

The study of the three MFIs suggests the following features of dropouts:

• There are two categories of dropouts - voluntary and forced;
• There are some clients who "rest" from taking loans, but borrow again in the future;
• High dropout rates are expensive due to the cost of recruiting and training new clients;
• Dropouts adversely affect group cohesion.

Major reasons for dropouts include:

• Rigidity and narrow range of products and services;
• Expectations of grants;
• Time consuming weekly meetings;
• Natural calamities;
• Competition;
• Seasonality factors and overall poor economic conditions.

As per the paper, the MFIs:

• Tend to perceive their clients as homogenous entities, rather than as individuals, each with her/his own peculiarities and needs;
• Fail to acknowledge that a variety of factors impact the demand for their services and, thus, the retention of clients;
• Have just one product (credit) in spite of the wide range of clients' needs.

The paper concludes that to prevent dropouts, MFIs need to:

• Develop a wider range of products;
• Target the poorest sections by providing them with savings services appropriate for their savings capacity;
• Understand the changing needs of their clientele and the products of their competitors;
• Identify trends, reasons, causes and relationships of factors that influence clients to leave the program.