Determinants of Clients' Exit from Micro Finance Organizations in Kenya: A Survey of Kenya Women Finance Trust in Nakuru County
Bagaja, Yussuf R.
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Client exit IS an important issue that microfinance industry faces. It affects the sustainability and outreach of the microfinanceinstitution and puts in question the ability' of microfinance to effectively reach and serve the poor. The aim of this research was to examine the reasons behind client exit from Micro Finance Institutions. While much attention has been paid to loan default or delay in payment, there has been little coverage on the issue of client drop out. The study objectives were to; determine whether terms and conditions of the loan contract lead to group client exit from microfinance, evaluate the influence of group dynamics on client exit from microfinance, to establish if staff influence client exit and finally evaluate how external competition contribute to client exit from microfinance institution. Target population was 7954 clients drawn from 9 districts in Nakuru County . Multi stage sampling technique was used on which 10% of the nine Districts was selected, from which 10% of the clients were further selected using simple random sampling. Same size therefore was 168 clients from Nakuru District. Structured questionnaires were used to collect primary data. Analysis was done using frequency counts, percentages, Spearman's rho, and Pearson Correlation analysis. The study found out that among the tenus of loan, there was a stronger relationship between clients exit and their opinion on the interest rates charged, followed by the speed of processing loans. Lack of members commitment to the groups and group activities led members to exit from the groups and ultimately exit from the KWFT. There was also a positive relationship between. staff practices and clients exit. Most of the respondents felt that the organization did 110tmonitor their client's loan utilization of their clients despite the critical role it plays especially in the micro and small scale business enterprises at startup. Other than internal factors specific to the institution, external factors also play a role in influencing clients exit from microfinance institutions. Competition highly affects the performance of any organization because it makes client leave the organization. The study concludes that client exit remains to be a key issue among Micro finance institutions. Dissatisfaction with product and its properties plays a key role in enhancing clients exit. It is therefore important to enhance interaction with clients, soften the tenus of payments and also monitor and respond to competition as a way to contain clients. The competition within the financial sector played only marginal role in causing client exit. The study therefore recommends that, loans are paid out on due time and also mobilization of clients' savings is vital for the operation and clients sustainance of the microfinance institutions. KWFT should pay more attention to client's credit record and give bigger loans or loans with smaller collateral to clients. who proved to be trustworthy borrowers. The findings of the study were limited to the area of study and thus there is need for another study on the impact of group on loan repayment period in microfinance institutions.