Deconstructing Drop-Out: Uncovering the reasons behind attrition among village-banking microfinance clients

Clarity on the underlying factors contributing to client drop-out can be a launching point for an expanded discussion on the objectives and measurement methods of client retention. Freedom from Hunger used its “impact story” methodology to present the stories and reasons for dropping out from 59 village-banking microfinance clients representing seven countries and microfinance institutions (MFIs). An understanding of the most common contributing and root factors to dropping out, namely health, business failure and group issues, can help institutions anticipate and respond to client needs before drop-out occurs. Misdiagnosing reasons for dropping out by focusing on the last link in the chain of events leading to drop-out could result in the wrong interventions being applied. Consequently, opportunities could be missed for making small efforts early, versus large efforts later, in order to improve client retention.