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HRM Review Magazine:
HR Challenges in Microfinance Institutions
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In today's context, the whole business world has slowed down due to financial meltdown and recession but, the microfinance sector is recording continuous growth and touched the billion-dollar mark. Currently, the sector is attracting many entrepreneurs including youngsters to enter into business with an ambition to start a Microfinance Institution (MFI). Now there are more than 1,000 MFIs currently operating in India and have disbursed only for 10% of the potential demand of over $50 bn as a large proportion of Indians are living below the poverty line and this demand for credit for the poor is still expected to surge ahead.

 
 
 

The quality of service delivery in the microfinance industry depends on person to person contact and relationship. Hence, it is more human resource-intensive and sourcing of skilled and quality human resources will play a critical role for sustaining the growth of this industry. Unfortunately, HR is the most neglected function in Indian microfinance sector and HR planning is mostly run on ad hoc basis and used mostly for determining new recruitments or promotions to estimate the salary expenses. The most critical issue in HR planning is finding the right people for different MFI functions and their willingness to compensate adequately for people with relevant experience. There are very few people available with relevant experience because, the microfinance sector has scaled up recently and there are very limited training institutes or business schools to churn out people with required attitude and skill sets. Here the emphasis is on how the HR department should ensure to provide an effective workforce to meet the vision and mission of the organization. In this direction, it is recommended that, HR professionals should formulate ideal HR policies and procedures with reference to MFI business to make available the right number of people with the right attitude and skills in the right place at the right time.

Usually, MFIs provide credit and small loans to poor people for starting a business or for buying/consuming goods. At present, several MFIs are offering services like accepting small savings starting from Rs. 10 to 25 as well as customized insurance services. For such services, MFIs charge interest of 30% annually. In reality, this could be considered very high but many poor people are borrowing from private lenders who will not maintain transparency and are known to charge well over 100% annually. Still demand is plenty and available MFIs across the nation are not adequate to cater to the needs of many poor people in this direction. Contrary to what majority of people believe, bad loans or bad debts in micro credit are very rare as compared to the organized sector. Here only 2% of the total loan disbursement has shown bad so far.

 
 
 

HRM Review Magazine, HR Challenges, Microfinance Sector, Microfinance Industry, Human Resources, Insurance Services, Capital Market, Microfinance Business, Non-Banking Finance Companies, Economic Empowerment, Global Markets, Organizational Architecture, Human Resource Development, Human Resource Management, Institutional Culture, Organizational Wealth, Microfinance Market, Employee Stock Option Plans, Management Information Systems.