Factors affecting borrowers’ turnover in microfinance institutions: A panel evidence

Mia, MA, Banna, Hasanul, Noman, AHM, Alam, MR and Rana, MS (2021) Factors affecting borrowers’ turnover in microfinance institutions: A panel evidence. Annals of Public and Cooperative Economics, 93 (1). pp. 55-84. ISSN 0770-8548

Preview

Accepted Version Available under License In Copyright. Download (500kB) | Preview

Abstract

In the era of competitiveness, clients or borrowers remain an important asset for financial institutions, as they are the ultimate source of revenue. Although the departure of clients from one microfinance institution (MFI) to another is a common phenomenon, the manner in which organizational characteristics affect turnover is largely unknown in the context of the microfinance industry. Hence, by utilizing recent (2010–18) data on 235 MFIs from the global microfinance industry, this study investigates the factors affecting the borrower turnover rates (BTR) of MFIs by employing conventional panel regression techniques. To overcome endogeneity and ensure robust and dynamic results, the generalized method of moments (GMM) has also been used in this study. The findings reveal that the efficiency-wage and financial self-sufficiency of MFIs reduce BTR, while staff turnover rate, write-off ratio and average loan size increase BTR. Our results remain robust even after controlling for several market and macro-economic factors. The findings could be utilized to generate several policy implications to reduce borrowers’ turnover.