| Abstract: | Client exit is one of the challenges that microfinance industry is currently facing. It affects the outreach and growth which finally compromises the sustainability of MFIs. The thesis is primarily aimed at examining the reasons behind client exit in MFIs in general and Oromia Credit and Saving Share Company (OCSSCO) in particular. Second, to reveal the implications of the exit in the overall performances of OCSSCO and to identify and recommend areas that need change and improvements. The relevant data and information were collected through questionnaire, interviews, and Focus Group Discussions. The open and closed questions were used to gather both qualitative and quantitative data pertaining to causes of dropout. The study revealed that OCSSCOs’ loan policy, lending methodologies, Personal reasons of the clients and client’s business that manifested by different segments of problems were the main causes of exit from OCSSCOs’ loan programs. Last but not least the study identified unlike commonly known in other countries, socio-economic problems were not a common reason for exit. Active clients of OCSSCO who were interviewed and covered under this study also complained OCSSCOs’ loan policies and methodologies and requested for changes and improvements on the major policies and procedures. The study also identified the commercial and social implications of dropout which are manifested by different multidimensional adverse effects. It was concluded that clients are encouraged to stay longer in the banking relationships when they have got relatively larger loan size, discouraged by large group/center size and preferring individual loan than group loans due to the attached joint liability. It was also understood that the self initiated dropout rate is higher at the 1st and 2nd loan cycles where clients are still unfamiliar with policies, lower loan size and the pressures of the group liability. |
