Understanding loan officer exit in microfinance
Research Paper Title:
“The challenges of supporting necessity entrepreneurs: Understanding loan officer exit in microfinance”
Authors:
Laura Doering (University of Toronto)
Tyler Wry (University of Pennsylvania)
Background:
We often expect that employees have greater retention when their jobs involve prosocial work. In this study of loan officers at a microfinance bank, the researchers find that officers are more likely to quit as their jobs involve more prosocial work (lending to poor clients). This effect appears to be driven by the challenges associated with performing fieldwork in low-income areas, as well as the fact that loan officers are not highly motivated by the prosocial aspect of their jobs. Further analyses show that poor clients have less of an effect on exit in non-profit (versus for-profit) microfinance institutions, suggesting that employees with strong prosocial motivations may be buffered against these effects.
Methodology:
Sample: Database of loan officers at a microfinance bank, along with qualitative interviews
Sample Size: 3142 officer-months
Analytical Approach: mixed methods
Hypothesis:
Loan officers are more likely to quit as they increasingly serve poor entrepreneurs (supported)
Results:
Loan officers are more likely to quit as their work involves more poor clients.
This effect appears to be driven by the on-the-ground, interactive challenges associated with serving poor clients.
Conclusion:
Based on prior research, the authors initially expected that loan officers would be less likely to exit a microfinance institution when they performed more work with the poor. However, their fieldwork suggested the possibility that extant findings may not apply in this context. Noting this discrepancy, the results more acutely capture the relationship between prosocial work and employee exit in developing-country organizations that support necessity entrepreneurs and other low-income consumers.