No matter whether it is the dropout of the clientele or the staff, there is a cost in both human and business terms; and it is not desirable for the institution. No MFI enrolls any member and recruits any staff just to say good bye. It invests time, energy, and money in selecting and training them so that it can have a well motivated clientele, and a professional staff who will serve the clientele with commitment and dedication.
When someone drops out, it is a loss for the program. In case a member drops out, it not only decreases the total number of members and borrowers, but also causes a decrease in the amount of loans outstanding and operating income for the MFI. Dropouts create incomplete groups and, in turn incomplete centers, leading to breakdown of credit discipline and contribute to low productivity of the staff. It sends a wrong signal to other members and a wrong message to the community.
Staff dropout is also a loss for the organization. It affects the MFI's operation and slows down its growth, decreases efficiency, increases costs and also damages its image. It delays sustainability and contributes to the overall lowering of morale within the program. Not only does the operation of the MFI suffer from the dropouts, but also its progress is hindered and its long-term plans disrupted.
Strategies for prevention or reduction of dropouts
Dropout is clearly a problem and should be taken seriously. Effective strategies must be developed from the very beginning to prevent or reduce member and staff dropouts. Every effort must be made to make certain that both targeting and recruitment are based on focused criteria, specific guidelines, and solid principles of neutrality, objectivity, and sincerity of purpose.
Appropriate targeting is very important in maintaining group solidarity and in retaining members. If the clientele do not come from the same socio-economic group, if they do not know each other well and if some of them are not poor, there is always the danger of misunderstanding and disintegration, resulting in getting out of the program.
The clear understanding of rules and requirements of the program and for that matter, the proper clientele training is very important in keeping the dropout rates under control. The amount of loan size, quick approval and disbursement of loans, are also important in reducing the number of dropouts. If members are really needy and if they are sufficiently trained and motivated that they can overcome poverty by availing microfinance opportunities, they will never quit the program except in dire circumstances. The problem of overlapping may be solved through regular communication, information sharing, dialogue and discussion with other microfinance organizations working in the same area.
If any member decides to leave for family reasons, she can be persuaded to change her decision and continue with the program by making the program flexible and by motivating her family, especially her husband, to support her. That this strategy works is evident from the experience of Grameen, which has brought down the drop out rate to a very insignificant level. It has done so by not only continuously motivating members, but also motivating their husbands, treating them respectfully and making the system more client friendly.
Grameen tries to understand the real problem of these members who want to drop out. Grameen staff maintains close contacts with the borrowers, visits their homes, uses the group and the center as the problem solving forum, and organizes workshops for husbands. Grameen also tries to find out whether the problem has arisen due to its own system and takes corrective measures for adjustments within the system without any delay.
The onus is on the institution to be innovative and to make its system and products client-friendly. One such innovative and flexible solution is the Grameen Generalised System (GGS), also known as Grameen Bank II, that introduced the ‘ Microcredit Highway’ concept.
Grameen Bank II offers basic and flexible loans, loan ceilings, student loans, housing loans, microenterprise loans, different savings products including a pension fund, loan insurance savings, and loan insurance fund. It also developed a life insurance fund and introduced scholarships for the children of its clientele. All these products are very attractive to the members. The provision of flexible loan provides so many options that even the defaulting borrower has the opportunity to be back on the microcredit highway to enjoy all the facilities associated with it.
In Grameen, the borrowers/clientele are the shareholders of the bank. They are the owners. So, why should they leave? It is their institution. They stay with it even if some of them are no longer borrowers of Grameen Bank. The sense of ownership encourages them to remain with the program.
The matter of retaining staff and ensuring best possible services from them depends on well defined service rules and job requirements, salary structure and benefit packages, incentives in terms of appreciation, promotion, and awards. No staff would want to leave an institution unless the institution fails to provide a congenial, competitive and creative working environment and gives a salary commensurate with those offered by others in the microfinance industry. A clearly defined career development path is also important in this respect.
A shining example of how appreciation even without any financial remuneration can really propel the staff to achieve and excel, may be seen from the working of the ‘Star System’ in Grameen Bank II. It has transformed their vision and glorified them with a sense of achievement, honor and distinction. It is very rewarding to earn a ‘Star’ in Grameen.
The problem of dropouts can be overcome. The number of dropouts can be reduced if the problem is clearly understood, identified, and analyzed early on by the MFIs; and the steps taken to resolve it are realistic.