We define the client retention rate as:
Number of borrowers at end of period / (Number of borrowers at beginning of period + Number of borrowers during the period)
In understanding client retention levels, it may be important to distinguish between permanent exits and temporary exits (also known as ‘resters’) – those that have a plan or intention to return.
Importance of client retention monitoring
The client retention rate is a key proxy measurement of performance – both financial and social – that is essential for all MFIs to capture, understand and take a targeted approach to improve.
The cost of attracting new clients and servicing them is generally high. Clients are a long-term investment, and the growth of clients’ loan portfolios is vital to long-term financial and social benefits.
Losing a client early reduces the ability of your MFI to recover the costs of this initial investment. Exiting clients are also beyond the development reach of your MFI, which might jeopardise your social mission.
Beyond understanding client retention rates, clients should be profiled to understand why they are leaving. Monitoring exits through exit surveys is essential practice in understanding client needs, their satisfaction with different aspects of your products and services, and retaining your investment in them. Once you understand the reasons behind why clients leave, you can determine how to adjust products and services to improve benefits to clients.