DETERMINANTS OF BORROWER DROPOUT IN MICROFINANCE: THE CASE OF WASASA MICROFINANCE S.C

Abstract

The purpose of this study was to assess the determinants of borrower dropout in microfinance in Wasasa Microfinance S.C. Mainly; descriptive survey design was used to attain the objectives of this study. The study samples were the ex-clients of the organization in the year 2013 from the selected 15 branches of the organization with the highest dropout rate. Out of the total number of 9283 dropouts, 370 ex-clients were selected through random sampling technique. Questionnaire was administered to the ex-clients selected. In addition to the questionnaires, data were collected through in-depth interviews conducted to the management of the organization. The data gathered were analyzed using frequencies and percentage results. The interviews to the management were used to complement and validate the data gathered through the questionnaire. Among other things, the study revealed that the main cause to leave the Wasasa MFI is mainly related to the in-adopted products. Even if the respondents have said that there are reasons related to demand, supply and environmental reasons individually, the combination of reasons which are the Loan size, delays on loan disbursement, stringent criteria and repayment schedule reasons account for major reasons for clients’ dropout. The clients’ length of stay in the organization was also studied and most of them leave in the first few years after they joined the program. Their profile was also considered and most of them are farmers who live in rural areas who want to improve their productivity. The clients were asked to provide their suggestion to improve the services provided by the organization and to achieve better results most of them suggest that increasing loan size, providing loans individually, minimizing the interest rate and giving them enough time to return the loan are some of the suggestions they made. This researcher also suggest to Wasasa and other MFIs that they should properly study & identify need of their customers before they leave them and should make appropriate measures like tailoring products to the need of their customers. Besides, they should have exit customers’ follow-up and monitoring mechanisms including their reason of exit to use it for decision making.