Employee turnover and the depth of outreach of microfinance institutions: a non-linear approach

By utilizing data of 1,336 Microfinance Institutions (MFIs) from 91 emerging and developing countries for the period 2010–2018, this study investigates the non-linear/quadratic relationship between employee turnover and the depth of outreach of MFIs. The data were analysed using conventional panel data econometric tools and techniques. In general, the findings revealed that employee turnover has an inverted U-shaped relationship with the depth of outreach of MFIs when proxied by the proportion of female borrowers. The study outcomes imply that a low to moderate level of employee turnover is good for MFIs, as it may overcome organizational blindness and groupthink, and favours the replacement of unproductive and inefficient employees that lack social or human capital related to their job. However, after a certain threshold, employee turnover was observed to generate an adverse impact on the depth of outreach of MFIs. Therefore, the management of MFIs should give due consideration to ensuring an optimal level of employee turnover that is beneficial for the intended organizational goals.