Determinants of borrower dropouts in microfinance institution in Tanzania

This study was designed to investigate the determinants of the client dropouts in institutions namely; microfinance institutions in Tanzania group lending schemes in three microfinance SEDA, PRIDE assessed whether and FINCA in Tanzania. Specifically, the study them and rates evidenced and their respective causations differed among these programmes under study. The loan folio structures of the programmes were scrutinised in relation to the clients' attitudes o towards individual MFI. In all, 150 respondents, made up of 10 staff from each of the three MFIs and 120 current and former SEDA, PRIDE and FINCA Tanzania clients even drawn from the MFIs tookart p in the survey. The data was collected using , structured questionnaires with the data generated analysed using descriptive statistics of cross tabulations, frequency distributions and percentages to establish the impacts of dropouts on the social mission of these MFIs under study. The study revealed that the average dropout rate in the MFIs under study was as high as 43 percent. Moreover, the data on dropouts were not well-organised. The MFIs appeared to fail to integrate such data in their strategic and corporate management plans since the clients' exits were not monitored on daily basis and the MFIs had not internalised the previous recommendations on the topic. Most of the dropout determinants can be grouped as "Negative drop outs" rather than as "Positive drop outs". Five factors contributed to MFI client dropout categorised as institutional, personal, family, group and business factors. The clients left either dissatisfied or satisfied with the MFIs' products and service, hence the respective labels of negative and positive dropouts. Generally, the MFIs' weaknesses included poor management of dropouts, poor customer care and failure to align their social mission with their daily operations. On the basis of these findings, the study recommends for products refinement, and reduction of loan processing time and interest rates as well as payment frequency. The VIFI also needs to improve their tracking and management of the dropouts and establish effective means for getting customer feedback on their services. Other strategic actions include the improvement of customer care skills.