This article attempts to summarise the process of designing incentive schemes for staff members of microfinance institutions (MFIs). It identifies certain basic principles for designing monetary staff incentive schemes, once the decision to implement such a scheme is taken by an MFI. After introducing some basic definitions from the human resource literature, this article looks at factors that influence the choice of staff incentive schemes. In addition, it presents several critical design issues for incentive schemes. It concludes with a list of common mistakes in designing incentive mechanisms and also derives some basic lessons related to it.
Blog
It Is Expensive to Be Poor: Losses Suffered by People Saving in Uganda
Presents the qualitative research data – the experiences of poor people trying to save using informal sector mechanisms – from the “Relative Risks to the Savings of the Poor” paper. The paper provides details of the richness and complexity of poor people’s attempts at saving in the informal sector and their successes, failures and losses as they do so.
The Feedback Loop- A Process for Enhancing Responsiveness to Clients Or, What Do We Do With All This Client Data?
MFIs usually undergo impact assessment reviews and evaluations but rarely do these studies leading to substantive changes within their institution.
This paper highlights the results of the feedback processes at five ImpAct partner institutions– a bank focusing on the low-income market, two group-based microcredit institutions, a set of member- owned financial institutions, and a savings and credit microfinance institution.
The paper builds on the Ford Foundation impact study and examines the lessons learnt for institutionalising the feedback into the MFIs’ systems and products. Further, it makes recommendations on how to complete the feedback loop and accordingly develops a toolkit/checklist to help MFIs use the data they (and their evaluators) collect to make and implement responsive decisions/changes within the organisation.
Key Questions that Should Precede New Product Development
Many MFIs are looking at new product development as a way of responding to their clients’ needs. This note suggests six essential questions to be asked prior to setting about new product development, which can generally be classified into—motivation, commitment, capacity, cost effectiveness and profitability, simplicity, and complexity. Moreover, it tries to build the understanding of the readers about the complexity and cost of product development. It advises the MFIs that client-responsive products would reduce drop-outs, attract increasing numbers of new clients and contribute substantially to their long-term sustainability.
Dropouts and Graduates: What Do They Mean For MFIs?
This note explores dropouts and graduates and their significance for MFIs. Clients drop out of microfinance programmes mostly because of poorly designed products that fail to meet their needs. Not only inappropriate products, but also replication of models and systems without even considering the economic or socio-cultural conditions of the area affects the customer base. It further highlights the implications—such as cost and time—of the clients’ dropout on the MFIs. Graduation and its benefits for NGOs seeking to establish permanent and sustainable MFIs are also discussed.
Use and Impact of Savings Services among Low Income People in South Africa
This paper discusses how low-income people in South Africa (SA) save, how they use different savings services/systems and the impact of these savings facilities on their household budgets/lives. It also discusses how these findings would improve Ithala Bank’s and other institutions’ efforts to mobilize savings. Specifically, the paper:
Studies savings services used and not used by low income people; Examines the perceived advantages and disadvantages of these savings services; Assesses the socio-economic characteristics of the people using them;
Explores how savings services are used to manage household income; Investigates why some people save in kind and which financial services may induce them to start monetary savings; Draws lessons for Ithala and other financial institutions seeking to develop poor-responsive savings services.
The methodology that the study uses is: Focus group discussions; Interviews with low-income people and Ithala officials.
The findings of the paper are:
35 savings products were in use – 17 were Ithala products. The most used products were: Short-term loans from moneylenders; Cash saving through Accumulating Savings and Credit associations (ASCAs); Targeted savings through Ithala; Funeral schemes or burial societies. Ithala had intense competition from informal sector products. Most Ithala clients were low-income people of low literacy, and a significant number were senior citizens; Use of informal sector products was greater than that of the Ithala products. The paper concludes by recommending that Ithala should incorporate some informal sector features into existing and future products.