Staff turnover and Productivity: the case of microfinance

Microfinance, the delivery of financial services to people who are excluded from the traditional banking system, continues to expand. However, human resource management represents a main challenge for microfinance institutions. Particularly, staff turnover, which is particularly high in microfinance, can negatively affect the growth of microfinance institutions and, as a consequence, limit financial inclusion. This study explores the impact of microfinance loan officers' turnover on organizational financial performance. In this paper, we apply the context-emergent turnover theory (CET), a recent theory on the effect of turnover on organizational performance, that enables us to consider the influence of staff turnover in a dynamic perspective. Our database, composed of 3,586 branch-month observations, concerns a microfinance institution active in Latin America over the period 2008-2012. Our results from fixed-effect regressions show that turnover rate negatively influences branch performance three months later. However, after 4 months, its effect becomes significantly positive. Our results highlight the importance for microfinance institutions facing a high staff turnover rate to manage adequately staff turnover in the short run.