Improving Employee Performance in Microfinance Institutions: Incentive Remuneration

Topic :

Performance-based incentive remuneration can be used by institutions to encourage increased productivity and to help achieve other goals. The paper puts forward four main questions at the outset:

  • Beyond the challenge of motivating staff, on what foundations should incentive policies be based to ensure a positive impact on institutional performance?
  • What parameters are necessary to define an appropriate incentive remuneration strategy?
  • How does a remuneration system take into account the specifics of an individual organisation?

The overall aim of this paper is to offer guidelines for designing an incentive remuneration system and to identify the factors or elements influencing the choice of an appropriate scheme. The paper aims to set out the principles to be observed, the conditions for optimum use and the various options all in relation to an incentive remuneration strategy. As well as describing the major stages for designing such a scheme, this guide also introduces practical experiments undertaken by various Dévelopment international Desjardins (DID) partners and by various other MFIs.

The paper begins by considering the objectives, principles and conditions required for success. It then follows with a study on designing an incentive remuneration system, which includes highlighting the key advantages and precautions at each stage. The latter half of the paper sets out a series of 8 case studies. The idea is to compliment the theoretical aspects discussed earlier in the paper by drawing on the experience of actual MFIs that have adopted an incentive remuneration system. Each case study is usefully accompanied by a summary table setting out the main reasons for adopting the system as well as its key aspects and how it functions.

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