Microfinance

Despite economic slowdown, micro finance salary rates show positive growth

Brining Clarity to Public Discourse, Unitus and Hewitt Associates Announce Results of Microfinance Compensation & Benefits Survey

While daily reports of cost-cutting measures across the economic spectrum defined the global economic slowdown in 2009, the human capital-intensive microfinance industry has shown itself to be resilient as measured by trends in employee compensation practices according to the Unitus-Hewitt Compensation & Benefits Survey released today. However, while microfinance institutions (MFI) revenues have grown, the Survey also shows management forgoing salaries nearly three times larger in other sectors in exchange for an opportunity to make a genuine impact in the lives of India’s working poor.

Designed as a platform for MFIs in India to learn, share and network on human capital issues, the Survey is an aggregation of data collected through individual evaluations that, when compiled, provides valuable insight into key trends and comparisons across the sector.

Unitus survey micro

Available for download at http://advisory.unitus,com, the report highlights 12 key compensation and benefits considerations currently shaping the microfinance sector, and profiling its place in the overall national economy.  The study examines three key areas from which larger conclusions about the state of the sector can be drawn, specifically:

> How Microfinance Compares With the Broader Financial Sector, contextualizing the now INR12,000 crore microfinance sector against the backdrop of comparable industries across India.

> Compensation Costs, examining the costs associated with such a human resource-intensive industry with a need to maintain a balance between social mission and financial viability.

> Incentive Design, a look at the structures and how individual motivations can influence an organisation’s ability to reach unserved populations.

“In looking at the aggregated information and data, we can now confidently say that the industry has taken positive initial steps in professionalizing the management of human capital,” said Ganesh Rengaswamy, India & South East Asia Country Director for Unitus. “However, all players in the sector need to build upon that foundation to codify effective HR practices for sustainable success in serving India’s working poor,” he said.

Among the findings, the Survey reveals interesting—and sometimes surprising—conclusions about the sector, including:

– Despite the economic slowdown globally, the sector continued to realize steady growth and, as such, there was no urgency for drastic measures to be taken in 2009 to control salary costs.

– While the rate of salary increase becomes steeper while moving up the MFI management scale, Senior Management salaries are between one-half and one-third of comparable positions in the larger finance sector. Furthermore, employee stock options are found in one out of three MFIs.

– Most MFIs have structured incentive programs that are working well from an MFI operations perspective, however some MFIs are experimenting with the idea of no incentives for field staff as a means of affecting measureable performance on social objectives.

The study comes at a critical time for the sector as a decade of explosive growth has brought increased attention to the impact of microfinance on the lives of borrowers and the manner in which MFIs compensate staff.

The survey provides a snapshot of the sector through study of 15 participating MFIs representing over 10 million clients across India. It examines compensation and cash benefits for 25 critical positions at eight organisational levels, as well as looking at 10 popular non-cash benefits.  Following the survey, participants received detailed customized reports and participated in an implementation workshop discussing results and recommendations.

The Survey is the successor to the 2009 Benchmarking study that provided participants with valuable insights into their operations and was identified as a key industry HR initiative in “Microfinance IndiaState of the Sector Report 2009.”

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