Research & Analysis

Those Who Leave and Those Who Don’t Join

Understanding client exit and nonparticipation can shed important light on the financial service preferences of clients and help programs learn about the limitations of their existing products and mechanisms. Such lessons can drive the development of innovative, demand-driven microfinance products and systems, benefiting both the institution and the clients.

MicroSave-Africa, a joint UNDP/DFID project based in Kampala, Uganda, studied 13 microfinance institutions (MFIs) in East Africa1 to address the “who and why” questions of exit and nonparticipation. This problem is of particular importance in East Africa for two reasons:

First, high dropout rates ranging from 13 to 60 percent per year plague the region’s microfinance industry.

Second, such high levels of client exit are adversely affecting the scale of outreach. It falls far below market potential—for instance, coverage equals less than 1 percent of the target population in Tanzania and not much more in Kenya. There are now more MFI dropouts in East Africa than there are active clients!