This note explores dropouts and graduates and their significance for MFIs. Clients drop out of microfinance programmes mostly because of poorly designed products that fail to meet their needs. Not only inappropriate products, but also replication of models and systems without even considering the economic or socio-cultural conditions of the area affects the customer base. It further highlights the implications—such as cost and time—of the clients’ dropout on the MFIs. Graduation and its benefits for NGOs seeking to establish permanent and sustainable MFIs are also discussed.

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