© copyright 2003 rbap. all rights reserved. client retention or client desertion?

© Copyright 2003 RBAP. All Rights Reserved.

Client Retentionor Client Desertion?


Client Retention or Client Desertion?

Why do clients leave?

• Survey of 4 banks’ individual loan dropouts• Survey of one bank’s group loan dropouts

© Copyright 2003 RBAP. All Rights Reserved. 3


Why Clients LeaveAccording to AOsIndividual loan, 4 Banks

Bank1

(n=38)

Bank2

(n=33)

Bank3

(n=41)

Bank4

(n=44)

All

(n=155)

Had enough capital 3% 29% 0% 32% 16%

Resting 53% 9% 2% 32% 25%

Bank dropped client 30% 50% 98% 18% 48%

External Reasons (e.g., transfer of residence, pregnancy, had to attend to family concerns)

14% 12% 0% 18% 11%

Totals 100% 100% 100% 100% 100%



Why Clients LeaveSurvey of Dropout Clients Individual loan, 4 Banks

Bank 138 responses

Bank 242

responses

Bank 343 responses

Bank 459

responses

Bad business condition 37% 19% 26% 12%

Had enough working capital 18% 10% 0% 8%

Decided to close the business 5% 5% 0% 3%

Business is seasonal 0% 10% 2% 3%

Other circumstances of business 0% 4% 0% 5%

Problems with program policies 13% 12% 16% 24%

Problems with program implementation 0% 0% 12% 12%

Personal reasons 3% 24% 35% 20%

Community and economic reasons 0% 7% 5% 5%

Transferred to another provider 13% 0% 0% 0%

Other reasons 11% 10% 5% 7%



Business reasons• Bad business condition• Had enough working capital• Closed the business• Business is seasonal• Tricycle needs repair• Owner redeemed my rented store




Problems with program policies• Don’t like repayment schedule• Loan term too short• Loan amount too small• Loan became expensive, e.g., interest• Difficult to bring payment to bank everyday• Strict policies




Problems with program implementation• Don’t like treatment of me by staff/had

personal conflict with staff• AO is strict• Collector did not collect regularly• Inefficient disbursement• Inconsistent penalties




Personal Reasons• Spent the money on a crisis/celebration• Moving out of the area• Pregnant• Spouse/another income earner abandoned me• A family member told me to stop borrowing from the program• Family problems




Transferred to another loan provider• Transferred to loan program of City Hall with subsidized

interest rate

Community and economic reasons• Customers don’t have money to buy my goods• New competitor moved in

Other reasons• Dropped by the bank to pay another loan• Resting• Delinquent




• 43% of those who left are between 41 to 50 years old• Self-rated poverty: 37% are poor, 61% are on the line• Of those who exited the program, 72% closed their savings accounts • Amount of most recent loan of dropout clients: P3,000-P5,000• 58% exited after the 1st to 2nd cycle

Profile of Dropout ClientsSurvey of Dropout Clients Group loan, 1 Bank



• 62% left on their own volition, 38% were asked to leave either by the bank or by the group/center

• Of the 38% who were asked to leave, majority were asked to do so because they were unwilling to pay their loan

Profile of Dropout ClientsSurvey of Dropout Clients Group loan, 1 Bank



• Problems with Program Policies and Implementation: 40%• Personal Reasons: 25%• Business Reasons: 21%• Community and Economic Reasons: 14%

Why Clients Leave, SummarySurvey of Dropout Clients Group loan, 1 Bank



• Don’t like the tapal system: 34%• Did not like the treatment by the staff: 23%

• Client was scolded by the Development Officer• Loan term is too long/short: 13%• Loan amount is too small: 10%• Weekly center meeting too long: 9% • The loan became too expensive: 5%• Other reasons: 6%

- Dissatisfied with the information from the Development Officer

- Age is beyond age limitation/client is too old- Cannot find good co-makers

Problems with Program Policies and ImplementationSurvey of Dropout Clients Group loan, 1 Bank



• I am unable to repay because of weak condition of my business: 39%

• My business is seasonal; I will borrow again when I need it: 37%• Enough capital: 17%• I decided to close the business and do something else: 7%

Client’s Business ReasonsSurvey of Dropout Clients Group loan, 1 Bank



• I cannot continue because I spent the money on a crisis/celebration: 48%

• A family member told me to stop borrowing from the bank: 25%• I am moving out of the area: 15%• My spouse left me so I do not have the ability to continue: 8%• I am pregnant or now have another person to care for: 5%

Client’s Personal ReasonsSurvey of Dropout Clients Group loan, 1 Bank



• Poor economic conditions have left my customers with less money to buy my goods : 72%

• A major new competitor moved into the area: 14%• Others: 14%

- Husband’s salary is always delayed- Multiple obligations- Client is already employed

Community and Economic ReasonsSurvey of Dropout Clients Group loan, 1 Bank



Categories of reasons for desertion

Can Control• Product competitiveness• Staff attitude toward customer• General dissatisfaction with loan product (terms, rates, payment

schedule)

Might control• Family problems• Business problems• Delinquency

Cannot control• Client’s unwillingness to repay own loan• Family members stealing or forbidding loan payments



Monitoring Client Dropouts

Formula for Computing Dropout Rate



ACbegin + NC – ACend

ACbegin+ NC

Dropout Rate =

ACbegin = Active clients/borrowers at the beginning of the period

NC = new clients, or new loans disbursed, during the period

ACend= Active clients at the end of the period

ACend must always be equal to or less than (ACbegin + NC).

If ACend is equal to (ACbegin + NC), there were no dropouts during the period.

If ACend is less than (ACbegin + NC), there were dropouts during the period.

Computes dropout rates during a given period, ex. during a quarter, or during the year.



ACbeginning of quarter + NCduring the quarter – ACend of quarter

ACbeginning of quarter + NCduring the quarter

Quarterly Dropout Rate

Illustration: Compute for dropout rate for the quarter January to March 2003:ACbeginning of quarter = ACas of January 1, 2003 = ACas of December 31, 2002

NCduring the quarter = NCin Jan 2003 + NCin Feb 2003 + NCin Mar 2003

ACend of quarter = ACas of March 31, 2003

ACDec2002 + (NCJan 2003 + NCFeb 2003 + NCMar 2003) - ACMar 2003

ACDec 2002 + (NCJan 2003 + NCFeb 2003 + NCMar 2003)



ACbeginning of the year + NCduring the year – ACend of the year

ACbeginning of the year + NCduring the year

Annual Dropout Rate

ACDec2001 + (NCJan2002 + NCFeb2002 + NCMar2002 +… + NCDec2002) – ACDec2002

ACDec 2001 + (NCJan2002 + NCFeb2002 + NCMar2002 +… + NCDec2002)

Illustration: Compute for dropout rate for 2002:

ACbeginning of the year = ACas of January 1, 2002 = ACas of December 31, 2001

NCduring the year = NCin Jan2002 + NCin Feb2002 + NCin Mar2002 + ….+ NCin Dec2002

ACend of the year = ACas of December 31, 2002



Example: Annual Dropout RateJanuary 1-December 31

D J F M A M J J A S O N D

AC 430430 455 501 561 601 741 957 1150 1237 1220 1315 1562 17481748

NC 45 57 84 71 102 143 216 236 199 132 178 344 293

ACbegin= 430

NC = 2,055 (Sum of NC from Jan to Dec)

ACend = 1,748

Annual dropout rate = 430 + 2,055 – 1, 748 = 737 = 30%

430 + 2,055 2,485



Example: Quarterly Dropout Rate


AC 430430 455 501 561 601 741 957 1150 1237 1220 1315 1562 17481748

NC 45 57 84 71 102 143 216 236 199 132 178 344 293

Example: Compute for the dropout rate for the quarter October to December:

ACbegin= ACas of Sep 30 = 1,220

NC = NCOct-Dec = 178 + 344 + 293 = 815

ACend = ACas of Dec 31 = 1,748

Annual dropout rate = 1,220 + 815 – 1, 748 = 287 = 14%

1,220 + 815 2,035



Exercise 1


AC 119119 127 192 243 254 284 285 315 327 356 439 497 505505

NC 15 11 65 51 14 44 13 44 34 43 93 73 39

1. Given the above data, answer the following:

2. Compute for the annual dropout rate for the year 2002, i.e., from January 1 to December 31, 2002.

3. How many clients exited during the quarter April to June? What was the dropout rate for the quarter?



Exercise 2

M J J A S O N D J F M A M

AC 18 35 60 69 82 98 111 112 118 121 119 121 128

NC 18 17 25 13 13 16 17 8 9 10 6 5 13

The branch where you are the MFU Supervisor opened its microfinance operations on May 1, 2002. You want to compute for the dropout rate from the start of operations to May 31, 2003.

1. What was the total number of new clients who had been serviced by the branch from May 1, 2002 to May 31, 2003?

2. How many clients had exited the program from the start of operations to May 31, 2003?

3. What was the dropout rate from the start of operations to May 31, 2003?



Solution to Exercise 1

ACbegin = 119

NC, Jan-Dec = 524

ACend = 505

ACbegin + NC – ACend = 119 + 524 – 505 = 138 = 21%

ACbegin + NC 119 + 524 643

Annual Dropout Rate, January 1 to December 31:

Quarterly Dropout Rate for April to June:

ACbegin = ACas of Mar 31 = 243

NC, Apr-Jun = 14 + 44 + 13 = 71

ACend = ACas of Jun 30 = 285

ACbegin + NC – ACend = 243 + 71 – 285 = 29 = 9%

ACbegin + NC 243 + 71 314



Solution to Exercise 2

ACbegin = Active Clients as May 1, 2002 = 0

NC (Sum of NC from May 2002 to May 2003) = 170ACend = 128

ACbegin + NC - ACend = 0 + 170 – 128 = 42 = 25%

ACbegin + NC 0 + 170 170

1. The bank serviced a total of 170 new clients from May 1, 2002 to May 31, 2003.

2. 42 clients had exited the program from the start of operations to May 31, 2003.

3. The dropout rate from the start of operations to May 31, 2003 was 25%

© copyright 2003 rbap. all rights reserved. client retention or client desertion?

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