the microbanking bulletin - Microfinance Information Exchange

FEATURE ARTICLESHow to Analyze DropoutsThere are many ways to collect and analyzeinformation on desertions. Each MFI must balancethe efficiency of collecting information with thequality or depth of the information. The downside ofconducting exit interviews with each lost customeris that it can add significant expenses to the lendingprocess. And if the interviewing process becomesroutine, as it often does, the value of the informationcollected is low. Ideally, someone other than thedeserter’s loan officer would interview the dropoutbecause there is a chance that the loan officer wasthe problem.Tim Nourse, CRS advisor in Gaza, believes that acost-benefit analysis of exit interviews reveals theimperative of interviewing every deserter for threereasons. First, if the organization does not intervieweach dropout, it may miss people who wouldhave indicated dissatisfaction with staff. Second,staff would rather not interview dropouts at all.Such interviews can be tedious and depressing,motivating staff to keep customers if for no otherreason than to avoid the tiresome task of interviewing.And third, the effort to ask people theiropinions is often sufficient motivation to encouragethem to return.Once the MFI decides how to gather information, itmust decide what data to collect. Reasons fordesertion fall into three categories depending on thelevel of control that the MFI can exert on them:• Can Control: Product competitiveness, staffattitude toward customer, generaldissatisfaction with loan product (terms, rates,payment schedules);• Might Control: Family problems, businessproblems, and delinquency;• Cannot Control: Customer unwillingness torepay own loan, family members stealing orforbidding loan payments.Regarding the “Might Control” problems, MFIs thatsee the value in customer retention will createsystems or products that do not force a customer todropout because of a family crisis, or will developmechanisms for supporting good customers whoexperience temporary business problems.The exit interview form in Box 1, a blend of toolsused in Gaza and Bosnia-Herzegovina, offers anexample of how broad areas of classifying dropoutsare organized to collect data. Initially, an MFI mayhave many write-in responses while developing anefficient tool. As patterns appear, those write-insmay become pre-written items for staff to check off,making the exit interview faster and data entrysimpler.Box 1: Sample Exit Interview FormCustomer Name:Loan Officer:Village:Date:Profile of Lost CustomerAmount of most recent loan:Amount of savings:Length of time with MFI:Length of time in business:Business Type: Trading food Trading non-foodFishing/farming Manufacturing ServicesPoverty Level: 1 2 3 4 5Were payments on recent loans delinquent? Y / NWas customer asked to leave MFI? Y / NReasons for Dropping Out and Rejoining1. If customer is not going to competition, check oneand skip 2:Unwilling to repay loan (bad customer)Dissatisfaction with loan amount…with loan payment schedule and term…with requirements or restrictions…with savings product…with staffMoving out of townProblems with businessFamily or personal problemsProblems making payments for groupOther___________________2. If customer is going to competition, the mostimportant reason is that competition has:Better staffBetter loan product (terms, payments, rate)Better savings productConvenience of locationLess restrictions or requirementsOther________________________3. I would rejoin if___________________________An Excel database can help analyze data.Management can filter for different information. Forexample, what percent of small-scale producersdrop out because of an inadequate loan product?Or what percent of customers who have been withthe MFI for more than three years leave because ofcompetition or because they had difficulty meetingrequirements? Do more start-ups drop out in tradeor in production? Are the poorest customers droppingout at a greater rate than the less poor?In Gaza, which enjoys a low dropout rate of 12percent, Nourse believes that the most importantpart of gathering desertion information is trainingstaff to collect data routinely, with care anddiligence. Since staff members are too willing toskip this activity in favor of something more enjoyable,the MFI should laud incentives or recognitionon the loan officers with best records of collecting18 MICROBANKING BULLETIN, APRIL 2001