1. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion?

2. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? Why do clients leave? Survey of 4 banks’ individual loan dropouts Survey of one bank’s group loan dropouts

3. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 3 Why Clients Leave According to AOs Individual loan, 4 Banks Bank1 (n=38) Bank2 (n=33) Bank3 (n=41) Bank4 (n=44) All (n=155) Had enough capital3%29%0%32%16% Resting53%9%2%32%25% Bank dropped client30%50%98%18%48% External Reasons (e.g., transfer of residence, pregnancy, had to attend to family concerns) 14%12%0%18%11% Totals100%

4. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 4 Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks Bank 1 38 responses Bank 2 42 responses Bank 3 43 responses Bank 4 59 responses Bad business condition37%19%26%12% Had enough working capital18%10%0%8% Decided to close the business5% 0%3% Business is seasonal0%10%2%3% Other circumstances of business0%4%0%5% Problems with program policies13%12%16%24% Problems with program implementation0% 12% Personal reasons3%24%35%20% Community and economic reasons0%7%5% Transferred to another provider13%0% Other reasons11%10%5%7%

5. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 5 Business reasons Bad business condition Had enough working capital Closed the business Business is seasonal Tricycle needs repair Owner redeemed my rented store Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks

6. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 6 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 Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks

7. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 7 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 Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks

8. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 8 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 Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks

9. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 9 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 Why Clients Leave Survey of Dropout Clients Individual loan, 4 Banks

10. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 10 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 1 st to 2 nd cycle Profile of Dropout Clients Survey of Dropout Clients Group loan, 1 Bank

11. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 11 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 Clients Survey of Dropout Clients Group loan, 1 Bank

12. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 12 Problems with Program Policies and Implementation: 40% Personal Reasons: 25% Business Reasons: 21% Community and Economic Reasons: 14% Why Clients Leave, Summary Survey of Dropout Clients Group loan, 1 Bank

13. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 13 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 Implementation Survey of Dropout Clients Group loan, 1 Bank

14. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 14 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 Reasons Survey of Dropout Clients Group loan, 1 Bank

15. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 15 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 Reasons Survey of Dropout Clients Group loan, 1 Bank

16. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 16 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 Reasons Survey of Dropout Clients Group loan, 1 Bank

17. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 17 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

18. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? Monitoring Client Dropouts Formula for Computing Dropout Rate

19. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? AC begin + NC – AC end AC begin + NC Dropout Rate = AC begin = Active clients/borrowers at the beginning of the period NC = new clients, or new loans disbursed, during the period AC end = Active clients at the end of the period AC end must always be equal to or less than (AC begin + NC). If AC end is equal to (AC begin + NC), there were no dropouts during the period. If AC end is less than (AC begin + NC), there were dropouts during the period. Computes dropout rates during a given period, ex. during a quarter, or during the year.

20. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? AC beginning of quarter + NC during the quarter – AC end of quarter AC beginning of quarter + NC during the quarter Quarterly Dropout Rate Illustration: Compute for dropout rate for the quarter January to March 2003: AC beginning of quarter = AC as of January 1, 2003 = AC as of December 31, 2002 NC during the quarter = NC in Jan 2003 + NC in Feb 2003 + NC in Mar 2003 AC end of quarter = AC as of March 31, 2003 AC Dec2002 + (NC Jan 2003 + NC Feb 2003 + NC Mar 2003 ) - AC Mar 2003 AC Dec 2002 + (NC Jan 2003 + NC Feb 2003 + NC Mar 2003)

21. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? AC beginning of the year + NC during the year – AC end of the year AC beginning of the year + NC during the year Annual Dropout Rate AC Dec2001 + (NC Jan2002 + NC Feb2002 + NC Mar2002 +… + NC Dec2002 ) – AC Dec2002 AC Dec 2001 + (NC Jan2002 + NC Feb2002 + NC Mar2002 +… + NC Dec2002 ) Illustration: Compute for dropout rate for 2002: AC beginning of the year = AC as of January 1, 2002 = AC as of December 31, 2001 NC during the year = NC in Jan2002 + NC in Feb2002 + NC in Mar2002 + ….+ NC in Dec2002 AC end of the year = AC as of December 31, 2002

22. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 22 Example: Annual Dropout Rate January 1-December 31 DJFMAMJJASOND AC430455501561601741957115012371220131515621748 NC45578471102143216236199132178344293 AC begin = 430 NC = 2,055 (Sum of NC from Jan to Dec) AC end = 1,748 Annual dropout rate = 430 + 2,055 – 1, 748 = 737 = 30% 430 + 2,055 2,485

23. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 23 Example: Quarterly Dropout Rate DJFMAMJJASOND AC430455501561601741957115012371220131515621748 NC45578471102143216236199132178344293 Example: Compute for the dropout rate for the quarter October to December: AC begin = AC as of Sep 30 = 1,220 NC = NC Oct-Dec = 178 + 344 + 293 = 815 AC end = AC as of Dec 31 = 1,748 Annual dropout rate = 1,220 + 815 – 1, 748 = 287 = 14% 1,220 + 815 2,035

24. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 24 Exercise 1 DJFMAMJJASOND AC119127192243254284285315327356439497505 NC15116551144413443443937339 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?

25. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 25 Exercise 2 MJJASONDJFMAM AC 183560698298111112118121119121128 NC 18172513 161789106513 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?

26. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 26 Solution to Exercise 1 AC begin = 119 NC, Jan-Dec = 524 AC end = 505 AC begin + NC – AC end = 119 + 524 – 505 = 138 = 21% AC begin + NC 119 + 524 643 Annual Dropout Rate, January 1 to December 31: Quarterly Dropout Rate for April to June: AC begin = AC as of Mar 31 = 243 NC, Apr-Jun = 14 + 44 + 13 = 71 AC end = AC as of Jun 30 = 285 AC begin + NC – AC end = 243 + 71 – 285 = 29 = 9% AC begin + NC 243 + 71 314

27. © Copyright 2003 RBAP. All Rights Reserved. Client Retention or Client Desertion? 27 Solution to Exercise 2 AC begin = Active Clients as May 1, 2002 = 0 NC (Sum of NC from May 2002 to May 2003) = 170 AC end = 128 AC begin + NC - AC end = 0 + 170 – 128 = 42 = 25% AC begin + 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%