Microfinance Banana Skins 2008 - Citigroup

C S F I / New York CSFI5. 5. StaffingStaffing is is a a perennial and and worsening risk risk for for most most MFIs. The The growth in incompetition, poaching, the the lack lack of of training and and rising salaries make this this one one of of the themost most intractable problems in in the the sector.Responses from from all all major regions told told a a similar tale tale of of staff staff shortages holding back backgrowth and and service improvement. “A “A critical issue…a huge huge problem…humancapacity is is a key a key constraint” were among the the comments made. The The lack lack of of locallytrained staff staff to to fill fill management positions is is widespread.“MFIs are are headed by byamazing visionaries and and leaders but but lack lack the the mid-management resources to to scale up,” up,”said said one one respondent.A perennial andworsening risk…Even when they they are are available, staff staff are are hard hard to to retain. Poaching is is rife, rife, particularlyby by well-heeled new new entrants who who can can outbid the the locals. Yousef Mousa Kandah,deputy general manager of of the the Ahli Ahli Microfinancing Company in in Jordan, said said that thatcompetition “will put put us us at at risk risk due due to to the the resignation of of field field loan loan officers who who are areattracted by by banks entering the the MFI MFI business”.Inadequate training is is a a serious bottleneck. An An Indian investor saw saw a a “lack of of focuson on quality and and training of of human resources, particularly at at the the field field level, and and on onbuilding a a strong second/third line line of of management”. In In Venezuela, Juan Juan Uslar-Gathmann, president of of BanGente microfinance institution, said said that that his his bank bank had had set setup up a a training institute and and opened it it to to the the competition in in order to to address the the staffingrisk. risk.The The staff staff requirements at at MFIs are are also also specialised: they they need need people who who are are“dedicated” but but also also able able to to handle the the new new pressures on on microfinance. A Apractitioner in in Angola said said “I “I strongly believe that that the the sustainability of of MFIs greatlydepends on on the the competence and and efficiency of of its its personnel”.Practitioners saw saw all allthese pressures steadily driving up up operating costs without delivering any anyimprovements.6. 6. Interest ratesTwo Two types of of risk risk are are identified here: market and and political.On On the the market side, side, many MFIs are are protected from from interest rate rate movements by by the theinsensitivity of of their their borrowers to to loan loan pricing, which can can also also encourage bad badmanagement practice. But But as as competition grows and and clients become financiallymore literate this this protection disappears, exposing MFIs to to stronger interest rate ratepressures. Can Can they they meet meet this this challenge?Respondents had had their their doubts. An An Egyptian practitioner said said that that high high interest rates rates“are “are covering inefficiency” and and many other respondents thought that that rates rates should be bemore market-driven to to instil cost-awareness into into MFIs. Bill Bill Harrington, an an advisorto to the the Mennonite Economic Development Associates in in the the US, US, said: said: “Competitivepressure to to lower interest rates rates will will hurt, hurt, but but will will benefit clients.”Anotherrespondent pointed out out that that high high interest rates rates merely attract “new profit maximizingplayers to to a field a field that that was was never meant to to be be for for ‘high profits’“. Several agreed that thathigh high loan loan rates rates bring in “the “the wrong type type of of competition”.18 CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk