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.
“Compensation and benefits practices provide a unique lens through which we can assess the health of the microfinance industry and the motivations of its leadership,” said Sandeep Chaudhary, Hewitt Associates’ Rewards
Consulting Leader for South & West Asia. “Today and in times to come, we believe the insights offered in this report will influence HR strategy, organizational structures, and compensation and benefit design throughout a sector in constant pursuit of a balance between financial stability and social impact,” Chaudhary said. 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. 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 organization’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
measurable 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.
“We hope that the findings will allow for a more equitable and honest public discussion of key issues in the development of the microfinance sector,” Rengaswamy continued, “given the industry’s potential to offer the opportunity to those who might otherwise not have access, it is too important an issue to not be addressed effectively.” The survey provides a snapshot of the sector through the study of 15 participating MFIs representing over 10 million clients across India. It examines compensation and cash benefits for 25 critical positions at eight organizational 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 India: State of the Sector Report 2009.”
For more information or to speak with the Survey managers, please
Steve Schwartz Sushil Bhasin
Unitus Hewitt Associates
Unitus empowers the world’s working poor by advancing financial access and economic opportunity. Our work pushes the boundaries of existing microfinance by catalyzing the growth of emerging enterprises and markets to
create new financial pathways for the poor. Together with our partners on the ground and supporters around the world, we are dedicated to creating a future free of financial exclusion and economic hopelessness.
Unitus is a 501(c)(3) nonprofit organization with offices in Seattle (USA), Bangalore (India), and Nairobi (Kenya). In less than a decade, we’ve helped our microfinance partners grow to serve more than 10 million families throughout the developing world.
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and
related financial challenges. Hewitt consults with companies to design and implement a wide range of human resources, retirement, investment management, health management, compensation, and talent management strategies. As a leading outsourcing provider, Hewitt administers health care, retirement, payroll, and other HR programs to millions of employees, their families, and retirees. With a history of exceptional client service since 1940, Hewitt has offices in 33 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewittasia.com