Staff Incentive Schemes in Practice: Findings from a Global Survey of Microfinance Institutions

Publication Date: Sep 2005
Published by: Microfinance Network(MFN) and The Consultative Group to Assist the Poor (CGAP)
Document Type: Paper

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Why are staff incentive schemes important?

This paper reports the primary findings of a large-scale research project on the utilization and design of staff incentive schemes among microfinance institutions (MFIs). The paper discusses:

• The methodology of the survey;
• Limitations, in terms of sample selection bias, whereby the MFIs that responded were those most interested in staff incentive schemes (SIS);
• The summary statistics of survey respondents.

The paper explores the utilization, design and perceptions about SIS. It finds that:

• SIS are a relatively new technology that has been adopted rapidly;
• They are more likely to be adopted by Latin American MFIs, banks, profitable MFIs and larger MFIs;
• Lack of financial resources and technical knowledge are the primary reasons cited by respondents for not adopting a SIS;
• The most popular type of scheme is the monetary individual scheme for credit officers;
• SIS had a very high positive effect on performance; they had few negative effects;
• MFI managers are not fully satisfied with their current SIS; there is strong demand for further training and action research;
• Differences in the design of SIS between regions are greater than differences between banks and non-bank financial institutions and non-government organizations.

The paper concludes that staff incentive schemes work and should be considered by MFIs as a method to increase productivity.