Causes of Voluntary Dropout of Microfinance Clients in Bangladesh

Abstract

The study of the causes of the MFI clients’ drop-outs conducted through a survey on 30 dropped out clients with the help of structured questionnaire revealed that there are not too many strong reasons for dropout. The clients and their family and relatives are found quite happy with the MFI loan amount, interest rate, and peer guarantee system.

The responses show that clients disinterest to take another loan is the most important cause of dropout. Other significant causes of dropouts are linked with stringent product features, especially the loan repayment procedures, which include no need for another loan, non-negotiable installment size, short repayment intervals, limited grace period, high interest rate, personal solvency, high savings rate, and strict overdue payment policy. On the other hand the least important causes of dropouts are non-beneficial savings scheme, more expensive than traditional money lenders, family or relatives’ disapproval, inflexible loan amount to business requirements, more expensive than other MFIs, the peer guarantee system, narrow range of loan packages.