Drop-out analysis

Freedom from Hunger

The document Freedom from Hunger analyses the reasons why customers of microfinance institutions drop out of their common banking and credit and loan group programmes.

The study aims to understand the underlying factors that trigger drop-out so that microfinance institutions can detect them in time and improve both the customer experience – through innovation and flexibility in designing products – and the sustainability and social impact of these institutions themselves.

59 former common banking customers from Bolivia, Peru, Ecuador, Mexico, Philippines and India were interviewed in order to prepare the analysis. A former customer was taken to be one who had dropped out of a programme and did not apply to the institution for any more loans.

One of the conclusions drawn from the interviews was that, in general, the drop out is not caused by a specific event, but rather a series of events. Ten common factors were identified:

  1. Business failure
  2. Problems with the savings assoc.
  3. Health crisis
  4. Problems with the credit agent
  5. Refusal of the new loan
  6. Default or delayed payment
  7. Dissatisfaction with the loan policies
  8. No need for a new loan
  9. Migration
  10. Others

The document concludes that understanding the main factors, especially health crises, business failure and problems with the association enable institutions to anticipate the needs of their customers and create a response capacity before customers drop-out.