7

Scaling Up in Microfinance - Issues and Challenges

Efficient Recruitment and High

Expanding Operations at SKS

Staff Retention

300

30

SKS recognises that microfinance is

primarily people oriented and that it is

250

25

necessary to recruit field staff who are

200

20

motivated to service the clients and

Staff

Strength

capable of managing the a high volume

150

15

Branches

of transactions. Therefore, SKS recruits its

100

10

field staff from the same socio-economic

profile as that of its clients. The rigorous

50

5

recruitment process tests for numerical

0

0

ability, public speaking, interpersonal skills

2001 2002 2003 2004 2005

and motivation. Investments in staff

training, skill building and an appropriate

Year

compensation structure have ensured

to delegate both responsibility and

high annual retention rates of between

decision-making authority to the second

95 and 98 per cent, at both the central

rung. The result was a decentralised

office and the field level.

decision-making structure, yielding quick,

i n f o r m e d  decisions  by  capable

Securing Access to Debt and

managers.

Equity to Fund Growth

Realising the need to move away from

In the same manner, multiple layers of

grant-based financing, SKS addressed

management were introduced at the

capital constraints to growth and scaling

field level. At each level, boundaries for

up by building strong relationships with

decision-making were defined so that

commercial funders. Hence, it initiated

there was common understanding of

relationships with new banks, took

roles and responsibilities. Capacity

advantage of new financing options

building was taken up at each level with

with existing banks, and also entered into

training in management principles along

partnerships with multilateral financing

with a wide range of portfolio tracking,

institutions.

reporting, and monitoring functions. With

t h e introduction of such planned

Adopting a Systems Approach to

decentralisation, SKS was able to grow

Managing the Organisation

rapidly without facing bottlenecks and

The organisation recognised the fact

compromising on quality.

that to manage the expanding

operational and strategic requirements

b) Adequate attention to control

for growth, it would have to adopt a

systems:

systems approach to management. This

SKS recognised early on that tight control

involved  early  investments  in

systems needed to be in place prior to

automated management information

rapid growth. To this end, SKS recruited

systems (MIS) and an emphasis on

a consultant who designed an internal

p u t t i n g professional management

audit process and trained the initial

systems in place. Specific challenges

team. Each audit report was followed

faced during the scaling up phase

by mandatory compliance reports. This

included:

bolstered the control systems that

already existed in the automated MIS,

a) A p p r o p r i a t e modification of

which  included  password-based

institutional  management

restricted access and automated audit

structures:

tracking. In addition to these measures,

At SKS, this was

One of the significant challenges to

SKS introduced a range of supplemental

attempted

scaling up is to develop appropriate

measures. For example, when a branch

through planned

institutional management structures to

grew very fast in a short period of time,

decentralisation

handle increased capacity with

the branch staff internally conducted a

and simultaneous

minimum disruption to the core

100-per cent peer-audit of each others'

capacity building

organisational culture. At SKS, this was

portfolios. Also the monitoring system was

at various levels

attempted

through

planned

strengthened by making it mandatory

of organisation

decentralisation and simultaneous

for branch managers to randomly visit

capacity building at various levels of

all the centres within their purview within

organisation. At the central office, SKS

a specified time frame. This was

invested in developing a strong second-

supplemented by surprise visits to the

line of management by providing them

centres by unit and area managers.

with management training, exposure to

other microfinance institutions, and

c) Standardisation:

opportunities to learn from invited

While scaling at multiple points

industry experts. This enabled the CEO

simultaneously, it is extremely important