Factors prompting clients’ dropout in microfinance institutions: A case of small enterprise development agency and presidential trust fund in Morogoro Municipality, Tanzania

Abstract

This paper compares factors prompting clients’ dropout from the Small Enterprise Development Agency (SEDA) and Presidential Trust Fund (PTF) using a qualitative approach. Both qualitative and quantitative data were collected using a_ semi-structured interview, supplemented by documentary reviews. A total of 136 respondents were selected using a stratified purposeful sampling procedure. Data were analysed descriptively and were presented in tables and %ages. Lee’s push and pull theory and the five-step analysis procedure developed by Powell and Brenner (2003) guided data analysis in this study. The study found that 35 and 38 factors have prompted clients’ drop out from SEDA located in urban and PTF located in rural areas respectively, with the implication that, there are more factors responsible for clients dropouts in rural areas as compared to town. Thus it is relatively difficult for MFI to facilitate achievement of MDG one in rural areas as compared to urban areas. The paper argues that an appropriate loan package must be developed to suit economic activities in rural areas, as well as systematically follow up with the clients, so as to ensure good performance and hence retain them as Clients.