“Dropout” is a common problem faced by most microfinance institutions (MFI). It threatens the viability and sustainability of the programs that are not able to keep it under control. The MFIs should try to be proactive in finding out why their clientele and staff drop out, how costly and damaging it is for their programs, and how they can prevent or reduce dropout rates; and in doing so, protect themselves from its negative impact.
Based on the experiences of Grameen Bank and Grameen replication partners worldwide, an attempt is made in this paper to identify as well as classify the reasons for members and staff dropout and suggest how it can be prevented or controlled.
There are two forms of dropouts in microfinance programs (MFPs). The clientele/members can dropout of the programs for various reasons. The staff can also leave the programs for several reasons.
Member dropout
The main reasons for clientele/member dropouts may be seen under the following three broad heads:
1.Personal reasons
2. Institutional reasons
3. Social reasons
1. Personal reasons
Inadequate motivation
Lack of skill or inability to gainfully use the loan
Loss incurring business.
Family factors
Seasonal or permanent migration to other areas for better earning opportunities or security reasons
The problem of overlapping
Improved financial condition/graduation out of poverty
2. Institutional reasons
Wrong/Inappropriate targeting
Products not meeting client needs
Misbehavior or disrespectful behavior of the staff
Uncertainty, delay in approval and disbursement
Unfavorable terms and conditions
Lack of proper training and mentoring
High interest rates and other charges
3. Social reasons
An overt class consciousness, especially of the children, their friends and relatives of the financially successful members
Social ills like dowry, marriage and other ceremonies
Culture of relief or handout
Religious influences restricting participation in MFPs that offer interest bearing loans
Staff dropout
In MFIs, the staff leave their jobs mainly because of the following reasons:
Disillusionment/frustration after joining because of the strenuous nature of work, its challenges and remuneration
No job satisfaction
No clear career development path and/or no future of the project/program/institution
Family factors
Sense of insecurity
Misbehavior of senior colleagues and lack of appreciation for good/outstanding performance
Better/lucrative offer from other organizations
Dropout costs
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 unwarranted 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 with hopes and determination of overcoming poverty, 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 contributing 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.
Dropouts of both members and staff contribute 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.
[Rest of this article with Strategies for Preventing Dropouts will be published in the next issue of Grameen Dialogue.] 
