Microfinance Reports

Human Resource Management Practices among MFI’s in India

Access Development services has released a report on the state of Human Resource practices in India’s Microfinance sector after studying the policies and practices of 25 Microfinance companies in India’s. The report is titled ” Report on Human Resource Management in Microfinance Institutions: The State of Practice” and can be downloaded at the link below :

Human-Resource-Management-MFI

 

Download Report on Human Resource Management and Practices among MFI’s in India

at the link below:

Human-Resource-Management-in-Microfinance-India.pdf

Table of Contents 

Foreword Page No
Executive Summary 2
Chapter1:Terms of Reference 6
Chapter2:Overview—Functioning  of MFI 10
Chapter3: Organization Structure 17
Chapter4:  Manpower Planning 23
Chapter5: Overview—Functioning  ofMFI 30
Chapter6: Training and Development Process 38
Chapter7: Compensation and Benefits 52
Chapter8:  Performance Management System in MFIs 58
Chapter9: Career Growth and Promotions 64
Chapter10:Responsibility to Staff 67
Chapter11: Employee  Engagement 73
Chapter12: Attrition Levels 81
Chapter13: HR Practices to Improve Responsible Finance 86
Chapter14: BestHR Practices in MFIs 90
Chapter15: HR challenges faced by MFIs and Recommendations 95

 

List of Tables 

MFIs Covered (other than under NBFCs)
Products Offered by MFIs
Manpower Planning Parameters for MFIs
Percentage of Broad Categories of Staff to Total Staff in 25 MFI’s 2012-13
Select List of Technology Used inOperations, HR and other Departments of MFIs
Women staff as percentage at various level during 2012–13
Processes and Practices Followed for Identifying the TNA
Types of Training Programmes Conducted by MFIs for Different Levels of Staff
Process and Methods of Induction Programmes
List and Types of Refresher Training Programmes
Training Institutes /Universities for Training of Staff of MFIs
Legal Framework for Salary and Benefits
Salary Increment— Methods and Practice
Performance Incentive Parameters
Objectives of Performance Appraisals
Goals of Performance Management System
Balance Scorecard Factors
Illustrative List of Levels of Field Staff
Career Growth / Promotion Prospects for Field Officers in MFIs
Criteria for Promotions
Contents of HR Manual
Working Hours in Branch Offices
Employee Engagement Practices at a Glance in MFIs
Methodology for Calculating Attrition
Best HR practices in MFI’s

 

List of Figures

2.1 MFI—Business Process, Model I 11
2.2 MFI-Business Process, Model II 12
2.3 MFI-Business Process, Model III 12
2.4 MFI- BusinessProcess, Model IV 13
2.5 Disbursement and Recovery Process under Model I 14
2.6 Cash Management in Branch office under Model II 14
2.7 Recovery Process under Model III 15
3.1 Organization Structure Type I 17
3.2 Organization Structure Type II 18
3.3 Organization Structure Type III 19
3.4 Organization Structure Type IV 20
4.1 Manpower Planning Process in MFIs 23
4.2 Role of HO/ RO/ BO in Manpower Planning 24
4.3 Total No of Staff in 25 MFIs Studied during 2011/12/13 26
4.4 No of Staff in 25 MFIs Studied during 2011/12/13 (Region-wise) 26
4.5 Break-up of Staff in 25 MFIs Studied 27
4.6 Percentage of Women Staff (Region-wise) 28
5.1 Pool of Applicants— Recruitment 33
5.2 Recruitment Process and Practice In MFIs 35
6.1 Training and Development Process 38
6.2 Training Methodology 41
6.3 Refresher Training Process 44
6.4 Training Expenditure of MFIs 48
6.5 Kirkpatrick’s Analytics and Philip’s Analytics on Evaluation of Effectiveness of Training 49
6.6 Improving the Learning Maturity Level by MFIs 50
6.7 Process and Practice Improvements Suggested for MFIs 50
6.8 Policy Framework for Improving ROI and Impact on Customers 51
7.1 Factors Influencing Salary Structure in MFIs 52
7.2 Compensation Benefits System 53
7.3 Job Evaluation and Grading Process 55
11.1 Model for Developing and Maintaining Engaged Work-force 73
12.2 Attrition Analysis of 2012-13 82

Executive Summary

A study on HR practices of 25 MFIs was conducted to understand various HR practices in vogue in the microfinance sector, the challenges confronting the sector, and to recommend ways to to improve the situation.

The key findings of the study are as follows.

1. HR practices are evolving along with business expansion, with bigger MFIs having better practices while the others are trying to catch up.

2. Most of the MFIs faced high attrition at field-officer level while the larger MFIs faced attrition even at Supervisory and HO level. Some practices that could be reviewed are as follows.

a. The policy of posting staff away from their village/hometown could be reviewed, as staff that was posted in home place was found to be more satisfied than those who were not. To begin with, a few of stafsf that have been with the MFI for long could be posted near their hometown.

b. Analysis shows that the attrition rate is low in organizations employing more women. To attract and retain women, MFIs need to have enabling policies and processes such as postings in nearby branches, secured accommodation, suitable working hours etc. As a strategy, more women could be posted in those Branch Offices which have reached maturity level and where the major part of the work involves maintaining the clients. Men could be posted in new or expanding Branch Offices or for sales in established Branch Offices.

c. The working hours and timings for the Branch Offices, just as that in HO, are defined and adhered to. The use of technology and support staff to take care of data entry, KYC checks, cashiers job etc., could be thought of to reduce the burden of the Field Officers.

d. Residential accommodation, which is typically in the Branch Office itself, is provided to staff at affordable rates. Although, staff benefits by this facility, it becomes difficult for them to differentiate between office and personal time and space. Proper ventilation, space for personal belongings, hygiene and cleaniess, were some important aspects of basic living that were found missing in staff accommodation. This raises a relevant question as to whether the responsibility towards the client was being discharged at the expense of the responsibility towards the staff.

e. Attracting professionals at HO level was another challenge faced by the MFIs. But with the industry in a growth trajectory, professionals were finding the Microfinance sector a good option for career development. Initiatives from investors / development agencies for promoting more professionals in the sector would help MFI’s to attract professionals and to expand faster.

2 Report of Human Resource Management in Microfinance Institutions: The State of Practice

f. Compensation and benefits (C&B) system in many of the MFIs is not attractive. The effort should be to match the market standards rather than the minimum wage. The C&B in the microfinance industry have to be scientifically structured and compensated and benchmarked with other related industries like banking, insurance, NBFC, FMCG etc. It is important at this point of time for the microfinance industry to appreciate the requirement of such a study, and work towards the common cause of its members.

3. Staff felt some incentive needs to be given as it boosts morale. Performance Incentive parameters based on adhereance to processes related to attending to clients, training, feedback of clients and audit with an upper limit to avoid an adverse effect on client services, could be thought of. Protecting incentive of the Field Officer who has been transferred for a period of one or two months till he/she settles, paying incentives over and above the salary and not deducting a percentage from it and paying later as deferred payments, are some of the policies that need to be followed to keep the staff motivated.

4. Audit Staff played an important role in MFIs, ensuring that policies formulated were implemented in the field in right earnest and all systems were adhered to. However, they too were under stress and were on tour most of the time. Facilities provided while on tour were inadequate, especially wherever field staff was given accommodation; the auditors were required to share the same. Technology support was available in larger MFIs but missing in smaller and medium ones. Proper support needs to be provided to the audit staff if a quality job is to be expected.

5. Very few MFIs had clear staff grievance redressal systems. Lack of awareness among staff of such systems and where aware, unwillingness to invoke the system needs to be tackled. It would serve better to have one person as a Grievance Redressal Officer, with whom the staff has built a rapport, such as a trainer rather than some unknown person. Direct contact with the CEO and Senior Management during Branch Office or region visit or just meeting them was a great motivator for the staff and this practice needs to be continued.

6. Training was taken very seriously by some of the MFIs and the result could be seen at the field-level orientation training of just two days. This is insufficient and there should be a very structured induction programme for new employees before they are placed in the field, for on-the-job training. Refresher programmes are a must at the level of Field Officers and should be conducted on a regular basis. Similarly, values and processes of the organization must be drilled into the field staff by conducting training and programmes each year. At the same time, exposure training for all HO staff to the field is to be made mandatory, so that they are sensitized to the challenges and issues on the field.

7. Multi-skilling field staff to equip them to do multiple tasks, and also developing trainers in the system—are other needs that have been identified. MFIs could also undertake evaluation of effectiveness of training as it would help them focus and link the training efforts towards assessing the ROI and its impact on their customers.

8. A concerted effort would be required by the MFIs to ensure that the staff grows along with the organization. The staff needs to be supported to develop themselves and become eligible for taking up higher positions. In the absence of such support, their growth will get stunted and result in frustration and disillusionment.

9. The industry needs to work with academic institutions on the right type of courses and practical experience that might prepare students for microfinance sector employment. It is recommended that the microfinance industry networks form bodies similar to the Indian Institute of Bankers, to promote Diploma/Certificate programmes relevant to the microfinance industry. This will be helpful in developing skill within the industry, rather than depending on banking, NBFC etc.

10. Industry associations/ stakeholders could also set up a training center in line with other industries such as banking, insurance etc. Such a training center, with pooled investment/ cost, can support member MFIs in a big way. Organizations such as National Skill Development Corporation can support such ventures by the MFIs.

11. Performance Management System (PMS) is weak in MFIs. The prevailing PMS needs to be relooked at from the point of suitability and relevance to each of the grades rather than the same system for all grades. The relevance of forced distribution method for field staff also is to be reviewed.

12. Restructuring the existing Branch Offices, especially matured Branch Offices can help reducing infrastructure and staff cost, improving their productivity. Use of technology like networked IT systems and mobile applications would be good tools for improving productivity and efficiency. MFIs also can undertake productivity audit and management audit as a practice for improving their operations.

13. The charisma and vision of promoters are driving organizations. However, now the need is to have a strong second-in-line. Some of the MFIs have started considering this as an important requirement for the growth of the company. Accordingly, professional Boards have been appointed and strong management teams are in place to drive the organization. But this transition has not happened everywhere. In few NGOs turned MFIs, the beginning has made with induction of professional CEOs. Many of the stakeholders have reiterated the need to have a clear succession planning for sustainability and growth of the organization.

14. Variety of engagement programmes were under implementation in MFIs and each one had some unique programme which attracted the staff. Need is to attend to the MUST factors, such as hygiene, reimbursement of full expenditure on conveyance incurred during duty, and simultaneously practice other engagement policies which suits the requirement of the employees.

15. Reward and recognition were found to be high motivating factors for the staff and a transparent system for rewarding and recognizing the staff could go a long way in driving performance this was a high motivator for the staff and a transparent system put in place could help in many ways.

16. There were MFIs with HR professionals as Board members who were taking special interest in the HR systems and practices. In some of the Boards, this representation was not so evident. The need is to constitute the Board in such manner that there is adequate representation of various professionals, women and Independent Directors who would take care of the interest of all the stakeholders.

While a host of changes have been suggested in the HR policies of the MFIs above, there are five critical areas that need immediate attention and improvement; working hours, residential accomodation and hygiene factors, training and development, performance management system and a staff grievance redresaal mechanism.

The crisis arising from AP has sent strong signals across the sector with telling effect on how staff are recruited, trained and rewarded. There is clarity among MFIs that the clients handled by them are unique. While the relationship between MFIs and customers has improved, the working conditions of the staff are yet to see similar improvements. MFIs should ensure HR policies achieve a balance between institutional interests, customer interests and employee interests.

On the regulations side, differential policies on margin cap for MFIs, based on turnover levels and geographical area of operation, should be brought out by RBI to ensure that cost is not controlled at the expense of staff.

HR is gaining importance and policies are being put in place. Medium MFIs are graduating to the next level by setting up exclusive HR departments that focus on all aspects of HR. Larger MFIs are taking the lead in benchmarking with other industries and are paving way for others to follow. With a little support, the smaller ones would also be able to take up HR initiatives in right earnest.

Treating employees in the same caring and transparent manner that the organization expects clients to be treated will go a long way to improve the staff ’s commitment to the institution and reinforce the customer values the institution stands for.

Download The Full Report  at the link below:

Human-Resource-Management-in-Microfinance-India.pdf

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