Addressing increasing staff turnover


One of the criteria in social performance management (SPM) is the social responsibility of the microfinance institution to its staff.  MFIs cannot just be focusing on its social mandate without taking into consideration the plight of its staff.   The main assumptions are, on the one side, staff that enjoys working with an institution will have a tendency to work longer; and on the other side, the institution will try to keep the staffs who are effective in their work. These assumptions and the expectations of each side should match; otherwise, there will be conflict and tension in the workplace.

One of the indicators that reflect harmony in the workplace is the staff turnover rate. Among Cambodian MFIs, we can say it is manageable as data from annual reports showed the range of staff turnover rates. The table below shows the Number of Staff 2012 and Staff Turnover Rate which were directly quoted from the annual reports. From these data, the actual number of staff separated from the institution, for whatever reason,  was computed and placed in the column titled Number of Staff Separated.

 Table: Staff turnover rate of selected MFIs


Number of Staff 2012

Staff turnover rate

Number of staff separated





























Source:  MFI published 2012 annual reports

Separation may either be voluntary or involuntary.  Involuntary separation means termination of employment at the instance of the institution for reasons such as non-performance or violation of the provisions of the contract or internal code of ethics that requires penalty of dismissal. Voluntary separation is at the instance of the staff for whatever reason that does not violate his or her employment contract.

What would be the reasons for a staff to resign from an institution? The reasons can be considered as “guesses” as there are no studies yet on the issue. At best, what we get are anecdotal stories of people who left an institution or transferred to a new one. Among the personal reasons of staff in leaving their employment are the following:

  • Attraction of better working condition and remuneration package from other institution. This includes promotion from the present position of the staff;
  • Shift in another industry or another company in different line of business that is perceived to provide more benefits and professional satisfaction in the long run;
  • Realization of an entrepreneurial streak that led to the setting up of  own business, or if there is enough resources, own company;
  • Seeking personal enhancement by studying, taking graduate course or special courses; and
  • Simply resting from any kind of work.

Internal to the institution, the reasons boil down to staff performance.  Staffs resign, or if not, they are fired if their performance is below the expectations of the management.  Low performance can be traced to four main reasons:

  • First, the staff cannot do the work, which is a function of hiring. Even before the staff is hired, the officer responsible for hiring should have done its job of making sure that the staff is qualified, knows the position and work description.
  • Second, the staff does not know what to do, which can be attributed to   mismatched expectations. An institution may have expectation that the staff knows the whole gamut of his line of work, while the staff is specialized in only a part or a phase of his supposed work.
  • Third, the staff does not want to do the work, which results when there is no motivation for the staff to work.  Either there is no incentive for him to go beyond the normal output, or there is no leadership in the institution that provides inspiration for him to be motivated.
  • Finally, the staff does not know how to do the work, which is a function of skills. He knows the work theoretically but does not know how to do it properly. Here training and mentoring will address the need for enhanced skills.

So how do we address the issue of increasing staff turnover?  We should approach it from the point of view of social performance management where the institution takes good care of its staff as it is concerned with its clients. Your institution may be providing higher remuneration package and benefits, but it is also good to include the following staff-related actions:

  • Ask your staff.  Make sure that you get feedbacks from your staff using whatever means – satisfaction survey, small group talks, suggestion boxes, grievance mechanism and whatever means to get them to share what they think about how they feel about the institution.
  • Address their concerns. It is one thing to ask, and another thing to really resolve the issues raised. It does not mean that all the concerns raised will be dealt with in their favor, but there should be real efforts to understand and respond to the concerns. If the staff feels that the feedbacks are not even read, then say goodbye to staff satisfaction.
  • Give a clear career path. Merit-based promotion of the staff will motivate them to move upward.
  • Be transparent.  Share information about the institution. Some institutions provide regular updates to its staff on the latest developments either through a bulletin board or an electronic newsletter. Without updates, staff will be guessing and they will get their information from the grapevine, which in most cases are half-truths or may even be untrue.
  • Provide a mechanism for staff to be stakeholders. Most Cambodian MFIs have facility for the staff to buy equity shares of their institution. If it is possible to allow more shares to the staff, it would be one of the best means to make the staff develop loyalty.

These are but some actions points. Staffs are an investment, which is why we call them human resource.  If we have a continuing program to make our staff happy, turnover rates will further be lowered.



Cambodia’s economy is on the upward trend for several years, and has continued to grow and attract investors.  In the words of Eric Sedgwick, Asian Development Bank Country Director, “Private consumption, exports and investment, including strong and diversified foreign direct investment will all drive economic development in 2013 and 2014.”  Among the top contributors to the developing economy are the manufacturing sector, the service sector particularly tourism and the agriculture and fishery sector.  As the economy grows, its ripple effect infused fresh vigor to the informal sector and motivates entrepreneurship among the people.  Livelihood activities and small businesses mushroomed  throughout the country transforming once sleepy provincial towns into vibrant commercial centers.

Microenterprises are generally characterized by its informal nature:

  • family-based;
  • not registered with any government agency;
  • minimal recording system that cannot be used as a basis for financial analysis;
  • mixed funds for household needs and business operations;
  • absence of relationship with formal financial institutions that  will provide sustained financial resources;
  • perennial need for working capital, etc.

These features make microenterprises risky making them “non-bankable” and ineligible for loans from formal financial institutions.  Informal moneylenders fill-in the gap, until microfinance institutions (MFIs) entered the scene.  Initially started as development programs of international non-government organizations in the 90’s, the microfinance industry has matured and has attracted socially-responsible commercial investors, infusing much needed resources for the marginalized poor and emerging entrepreneurs.


The growth of the microfinance industry runs parallel with the increase in the number of microenterprises.  It was placed under the control of the National Bank of Cambodia (NBC) monitored and regulated just like ordinary banks in the country.  As of May 2013, there are 39 MFIs, with a consolidated loan portfolio of more than $1Billion servicing 859,772 clients. The potentials for microfinance are still huge considering the estimated 4million poor people in the country and the continuously increasing number of microenterprises.

Most MFIs are providing basic financial services to its microenterprise clients: loans, deposits (for those with licensed deposit-taking functions), and domestic money transfer. Financial education is one of the main non-financial service and some corporate social responsibility projects done in partnership with other development institutions.  Risk remains a major concern, but most of the MFIs were able to manage their portfolio-at-risk (PAR). Industry data as of May 2013 placed the PAR at 0.298%.   So how are the MFIs addressing the issue of risk among its microenterprise borrowers? The answer is simple – collateral. The credit staff, or the officers involved in loan assessment may require the borrower to provide details of how the enterprise operates and some financial data, but in the final analysis, the value of the collateral remains to be the basis for loan approval.  Over time, as the process becomes routine, there are possibilities that the assessment process may be glossed over, with the value of collateral taking precedence over the cashflow of the enterprise or the actual operating capital needs of the entrepreneur in deciding loan approvals.

This is what we call the “collateral lending trap”, when the primary basis for loan approval is the value of collateral instead of the capacity of the enterprise to generate profit.  The nature of the enterprise and the financial condition are but requirements to be complied with.  We may see MFIs with several  loan products – agricultural loan, small business loan, enterprise expansion loan, etc. – but if we look closely at the basis of for approval, it boils down to one main factor – collateral.

This is not to say that collateral is not important. It is important and necessary to mitigate the risk inherent in loans especially the bigger ones. Microenterprise loans however has to be viewed from the perspective of how it operates and its potential for growth. How the enterprise generates income, how well the inventory is being managed, how good is the entrepreneur in managing cashflow, these are but some of the things that should be the considered in providing loans to microenterprises.  Collateral comes only as safety net when the enterprise fail for reasons beyond the control of the entrepreneur.


This is what is lacking in most MFIs – the intervention to assist in enhancing and scaling-up operations of microenterprises is minimal or totally absent.  Risk, being inherent in microenterprises, can be addressed by providing business development services (BDS).  This means working out formal registration, setting up basic systems like inventory management, installing a financial recording system, segregating personal funds from business funds and other similar activities that will make it mainstream.  This will facilitate growth as hired workers can have specialized functions and the entrepreneur can be freed from functions delegated to staff and instead focus on higher level management responsibilities  and later, expansion.  Scaling-up of the enterprise will even result to increased absorptive capacity, and hence bigger loans to provide. It is in this context that the provision of business development services  should be part of the non-financial services of MFIs as it face the challenge of  increasing number of microenterprises.

The Cambodia Microfinance Association (CMA) in partnership with PF Technical Advisory Services (PFTAS) is offering a course that will address this issue.  The course titled How to Provide Business Development Services to MFI Clients will be conducted on August 21-22, 2013, designed to give an overview of the whole mSME sector and enable the MFIs to design a support program for its borrowers involved in enterprises. The course is divided into three modules.

Analysis of the market. This module covers the discussion of the current state of mSME in the country.  The picture of the mSME will be interfaced with the financial services provided to the sector.

The concept of BDS. The second module will be a discussion on the concept of BDS and the rationale for providing the service

BDS as a non-financial service of the MFI. The last module deals with the details on how an MFI can include BDS among the array of their non-financial services. Topics include:

  1. Types of BDS
  2. Determining the segment requiring BDS
  3. Instruments in providing BDS
  4. Basic considerations in providing BDS
  5. Options for MFIs in providing BDS