Staff Incentive Schemes - The International Experience

Do staff incentives work?

In this paper, the author provides a short and selective overview of the international experience with staff incentive schemes in microfinance institutions (MFI). Based on the data provided by Microbanking Bulletin, the author feels that there is a strong positive relationship between staff productivity and financial efficiency of MFIs that warrant a closer study of the design and efficacy of staff incentive schemes. The author cites examples to demonstrate that MFIs do implement some form of staff incentive schemes from:

  • Asia: Bank Rakyat Indonesia (BRI) and Acieda Bank;
  • Latin America: Banco Ademi;
  • MicroSave-Africa partner organizations: Action Research partners.

The empirical findings from the data used by the author suggests that there are many different systems in vogue from unit profits (BRI) to annual merit pay (Acieda Bank), performance based monthly bonus (Banco Ademi) and many more.

The author highlights some of the effects of implementing such schemes. For example, in Constanta Foundation Georgia, salaries of excellent loan officers, made it unattractive to apply for supervisor jobs.

Finally, the author draws the following conclusions:

  • Many, but not all, leading MFIs use some form of staff incentive scheme, though not supported in Asian context;
  • Majority of the schemes are designed to enhance asset quality and staff productivity;
  • The usage of staff incentive scheme is as varied and heterogeneous as the MFIs themselves.

About this Publication

By Holtmann, M.