Determinants of Clients' Exit from Micro Finance Organizations in Kenya: A Survey of Kenya Women Finance Trust in Nakuru County
Loading...
Date
2013-10-25
Authors
Bagaja, Yussuf R.
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
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.
Description
HG 178.33 .K4B3