Human resource (HR) & social challenges faced by microfinance in India: a framework.
| Author | Jha, Jatinder Kumar |
Introduction
Microfinance is provision of financial services to marginal and poor borrowers including the self-employed (Ledgerwood, 1999). Schreiner and Colombet (2001: 339) define microfinance as "the attempt to improve access to small deposits and small loans for the poor households neglected by banks. "It was introduced in Bangladesh by the well-known economist, Muhammad Yunus in the seventies. Microfinance institution gives loans to the weaker sections of the society for economic development of those who do not have any physical collateral to offer. Even after the introduction of financial inclusion in 2008 in India, a large chunk of the marginal famers and poor people do not have access to financial services. Microfinance has tried to fill the lacuna of the demand and supply of the financial services.In this paper we have discussed the various Human resources (HR) challenges faced by MFIs, small and medium scale enterprises (SMEs) and informal sector.
Batra (2011) has identified some HR issues faced by MFIs such as high turnover, lack of training capacity, effective recruitment policies, competition etc. Under social challenges we have discussed challenges faced by MFIs in poverty alleviation and women empowerment. Laha and Kuri (2014) found that women empowerment is correlated to microfinance outreach among the poor households. Women empowerment has been suffering from social discrimination of widows and dalits (Deshpande, 2002). Lombe et al. (2012) found that marginalized women when became the part of the group (SHGs) felt empowered and got energy to face their poor situation in society. Despite the financial inclusion initiative by RBI in 2008 in formal financial institution only 54.4 % Indians have access to banking industry. One of the major causes of poverty in developing countries is the lack of productive capital, as formal financial institutions mostly exclude the poor from its lending activities (Chirwa,.2002) Karlan (2007) found individuals with stronger social relationships with other group members are more likely to repay their loans. We have proposed social capital formation between SHG members, between employees and SHG members and between employees and management of MFIs to address all the HR and social challenges faced by MFIs.
HR Challenges of MFIs
MFIs have large base of borrowers availing very small loans (Hulme, 1996). This large number of borrowers overburdened the staff at MFIs (borrowers/total staff in MFI)and productivity ratio of each staff decreases (Rashid et al., 2013). Hence MFIs have to invest huge resources to serve the borrowers giving very low volume to the business of MFIs. Hiring of more personnel decreases the productivity of MFIs in India. Group lending can be the solution of this problem. Human resource management (HRM) contributes substantially towards the success of MFIs. HRM has been a challenging (Hudon, 2010) but least explored an area. Human resource issues include recruitment policies, staff incentive and training, competencies of HRM and assessment of employee's performance in MFIs. Apart from HR issues the deficiency of skills (technical and leadership) and knowledge (MFI market and its operation) of top management team is another area of concern (PLaNet ratings).Lack of proper incentive plans for staff is another HR challenge; MFIs would have to focus on the formulation of effective incentive plans for their staff if they want to explore new market (Schreiner et al., 2001). Training and development is another area of concern for the MFIs as they need to train their staff in financial domain, management, and professional information management system to improve their efficiency (Schreiner, et al., 2001).Women employee participation in MFIs is very low. Female borrowers constitute the major part of total borrowings of any MFIs (Armendariz & Morduch, 2010). As MFIs are lending, to a major part, to women through group lending and women are a big market for them to grow women participation in management team and at managerial level in offices can increase the MFIs performance as leadership style of female matches with market condition of MFIs. This matching of traits (gender of leader/managers in MFIs) with borrowers is popularized as Becker's (1973) marriage market. Women are more supporting and oriented towards maintaining good relationships than men; therefore women in managerial position enhances the organizational learning and performance (Shrader et al., 1997). In India too, there is inadequate literature exploring the HR challenges faced by MFIs. Batra (2011) has identified some HR issues faced by MFIs such as high turn-over, lack of training capacity, effective recruitment policies, competition etc. MFIs are really labor intensive and these HR issues can worsen their operations and retard their growth. There is need to address these HR issues for the development and growth of MFIs in India. From the literature review it can be inferred that for sustainable growth and prosperity MFIs need qualified and skilled staffs having knowledge about MFIs operation, (fund sources, delivery channels etc.), regulations, financial management and they must have good interpersonal skills to develop and maintain the relationship with clients. Raghav (2012) identified reasons for high attrition rate in MFIs and found communication gap between top and operation management, lack of MFI experience, work-life balance, other career options, over-work load to new employee, misbehavior by supervisors etc. are the main reasons for the high attrition rate in MFIs in India.
HR Challenges of SMEs
SMEs do not follow the formal HR practices like its larger counterparts. Importance of SMEs for the development of an economy and further importance of HR practices on SMEs performance make it very useful to study the HR challenges faced by the SMEs. Singh and Vohra (2004) found that 20 percent of Indian SMEs has formalized their HR practices. In SMEs owner-managers are responsible for the human resource management (Mataley, 1999). Singh and Vohra (2005) found that SMEs are facing problems in attracting and retaining skilled and motivated employees since they do not have resources to pay good salary and training to their employees like...
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