Human Resource Management in Indian Microfinance Institutions

Introduction

About 238 million people in India live below the poverty line with the per capita income of less than one dollar per day. Since independence, policy makers and practitioners have been trying to improve the lives of these poor and fight against poverty. This got reflected in the successive five-year plans, which had the objectives of “growth with equity‟ and “social justice”. The planners, however, realized that rapid growth did not bring about “trickle down” effect, particularly so in rural areas. This realization led to the restructuring of institutions and schematic lending to facilitate better accessibility of credit for the underprivileged. Thus, initiatives in this regard were taken by building an institutional framework through nationalization of banks and creation of regional rural banks. Hence, the tasks of microfinance are the promotion of greater financial inclusion and, in the process, improve the social and economic welfare of the poor

Microfinance is defined as an “attempt to improve access to small deposits and loans for the poor households neglected by banks” (Schreiner and Morduch, 2001). Morduch (1999) explains Microfinance Institutions as specialized financial institutions, consolidated under the banner of microfinance, sharing the responsibility to work for financial inclusion. The main objectives of Microfinance Institutions are financial inclusion, poverty reduction, women empowerment and sustainability.

Over the period of time Indian Microfinance Sector has shown an impressive growth in terms of client coverage. Microfinance sector is a labor intensive sector. Human resource is the backbone of any MFIs. However, finding and retaining skilled manpower, to manage its growth is among the major challenges of the Indian Microfinance sector. There are several reasons for failure to attract competent personnel in microfinances sector by the MFIs. Firstly, different organizations such as banks, welfare organizations, NGOs and financial organizations have entered in this sector and have implemented diverse business models to run the show (Basargekar, 2013). Creating a leading MFI takes more than charging the right price and knowing how to design a financial offering. Secondly, indicators to measure the performance of human resources is varied, and it takes into consideration social performance along with profitability, which does not give clear picture of the industry to the bystander (Basargekar, 2013).

Workforce diversity encompasses race, gender, ethnic group, age, personality, cognitive style, tenure, organizational function and education of the employees in the organization. Understanding how HR responsibilities change during growth, communicating effectively with the expanding workforce, finding best people to join team, providing training opportunities, supporting staff performance and transferring institutional culture to establish work expectations and values are important in supporting a MFI’s growth. Supporting diverse workforce in MFIs creates a powerful and sustainable tool for economic growth. According to Ikeayibe (2010) inappropriate Human Resource may serve as major havoc to the sustenance of MFIs and argued that staff of MFIs is fundamentally relevant towards the success or otherwise of MFIs.

This chapter presents a brief overview of the Microfinance Industry its Objectives, and current status of Microfinance Industry in India. The chapter also explores key issues and challenges faced by Microfinance Institutions (MFIs) in India. Finally, this chapter discusses Human Resource Management, and its present scenario in Indian MFIs.