Building Human Resource for Microfinance Industry : Issues and

Concerns - Dr. Sankar Dutta  +

W

ith the recognition that financial services, making capital

have been developed in this area. Though a large majority of

available to the poor, is an essential though not sufficient

them are not applicable in the context of microfinance, it does use

condition for alleviating poverty. Microfinance has emerged as a

some of the very concepts of time-value-of-money. As

growing area of development intervention across the world. As

methodologies deployed in micro-finance use regular small

capital will continue to be required for any economic activity, it is

payments, it involves large number of small sized transaction. As

likely to remain an important area of intervention for years to

large majority of the poor are not organised, their economic activities

come. Thus, the growth that this sector has witnessed is likely to

are dispersed requiring service at dispersed locations.

sustain for quite some time.

As it involves using collateral substitutes and involving peers,

As quality of services in the microfinance industry depends on

ability to build and maintain rapport with the poor community,

person-to-person contact, it is human resource intensive.

assess their needs (which are often not articulated) and assess

Therefore, with this rapid growth of the sector, availability of

their non-physical assets. Often the involvement of peers is in

human resources will play a critical role for sustaining the growth

groups. Therefore, this work often requires group work. People

of this industry.

with little exposure to financial systems are often involved in the

This note attempts to examine some of the concerns that need to

credit decisions. Often, these interventions involve training people

be addressed to meet the challenges of human resources for the

to take up financial management functions on behalf of the group.

sector. It looks into some of the features of the sector and the

nature of the task. It looks into the attitude-skills-knowledge

Most agencies involved in micro-finance have or plan to have a

necessary for taking up the task and examines their availability.

fairly large size operation. On one hand, this becomes necessary

for them to meet their expenses from the spread, which in the

Nature of the Microfinance Industry

competitive world of finance is coming down. A minimum scale of

operation also becomes imperative from the viewpoint of risk

The breakthrough in micro-finance came from the recognition

diversification.

that financial services can be made available to the disadvantaged

people, if

One significant area of contribution of microfinance to reach out

the disadvantaged has come from simplification of the lending

Ø

Banking is made easy for them, with simplified procedures;

process. Very simple procedures have been adopted by these

institutions that are easy for the people to follow. Usually these

Ø

Attention is paid to reducing transaction cost for both the

simple procedures reduce attempts to reduce transaction costs

borrower and the lender;

for the borrowers.

Ø

Collateral requirements are replaced with collateral-

Most microfinance institutions (MFIs) have developed standard

substitutes, recognising that intangible social assets may

operating procedures for extending their services. This helps

have a higher value for a poor than physical assets which

them address two issues. On one hand, it enables them to achieve

s/he rarely has;

the scale that is required to attract mainstream resources. On the

other hand, given the manpower intensity in its operations, it

Ø

The person is financed and not the project;

helps in reducing transaction cost for the lender.

Ø

Peers in the community are involved in appraisal and follow-

It has also been recognised by many MFIs that the poor, who did

up;

not have an opportunity to use their own capital before, often

needs to be supported with a variety of support services for

Ø

Repayments are designed to fit the cash-flow of the

effective use of the funds. There are many MFIs who provide a

borrower, and

wide variety of services, including identifying opportunities,

business design, backward and forward linkage, capacity building

Ø

Borrower is made to pay small sums at regular interval

and so on, popularly known as Credit Plus, as an integral part of

than paying a large sum at any one point in time, either for

their services.

savings or for repayment of loans.

Microfinance is an emerging industry. Though it has been

These therefore, define the contour of the industry that makes

established that financial services can be made available to the

financial services, especially savings and credit, available to the

disadvantaged people, it has also been argued that `poor people'

disadvantaged sections of the society, also commonly referred to

are not a monolithic mass. Different products are required for

as the poor.

servicing the needs of different segments of the population. Though

Microfinance services by definition are financial services. Finance

some of the methodologies of extending financial services have

as a science has evolved over time. Many tools and techniques

been developed in the recent past, many more need to be

+The author is Vice President (Operations), BASIX

2