Client Desertion in Microfinance: How to Diagnose it Successfully?

This paper identifies key principles in investigating client desertion. The paper explains how to define, measure and understand client desertion. It also introduces an exit monitoring system to investigate and act on client exit.

The paper emphasizes that client desertion undermines financial and social performance of MFIs and hence, requires proper diagnosis, understanding and management. In the process of investigating client desertion it is important to:

• Define client drop based on all characteristics of the institution, since each institution is different in terms of its products, policies and institutional design;
• Select exit rates according to the organizational need to measure the number of exits;
• Understand the circumstances of drop-outs; this will enable the organization to address specific issues and develop effective drop-out reduction strategies.

The paper presents exit monitoring System (EMS) as a systematic and organized approach to measure and understand client exit. It provides a holistic background for managers on strategies to reduce drop-out.

The paper concludes that:

• A systematic approach to collect, analyze and use information on drop-outs can help in client retention; however, the focus should be on developing client loyalty strategies;
• Special attention should be paid to dissatisfied clients to prevent their dropping out.