Staff Incentive Schemes for Deposit Mobilisation

Topic :

After highlighting that staff incentive schemes for microfinance institutions (MFIs) usually focus on maximising the performance of the loan portfolio, the main purpose of this brief is to discuss the question: Now that many MFIs are becoming licensed deposit taking institutions, how can staff incentive schemes be designed to encourage deposit mobilisation.

It is noted that deposit mobilisation is important for several reasons. The small entrepreneurs and salaried employees who form an MFI’s typical clientele have a high demand for accessible and affordable deposit facilities. This is even true for very poor people, whose capacity and willingness to save are often underestimated. These locally mobilised funds help to reduce the dependence on (foreign) donors, and they mitigate exchange rate risks. Successful deposit mobilisation can help to increase an MFI’s outreach dramatically, and the savings business that clients conduct with their bank can serve as a useful market research tool for later offering credit services to the same customers.

The brief also stresses that the key for successful deposit mobilisation is trust – and trust in an institution can only be built if its staff members are also trustworthy. Hence, in order to mobilise savings, staff should be open and friendly to all clients, and they should be willing to work in a team. Good interpersonal skills are much more important for staff members in this area than are highly developed analytical skills or a background in economics or accounting.

It is suggested that in savings mobilisation it can often be difficult to discern exactly what (and who) caused the customer to entrust the institution with his or her funds; and furthermore, for branch operations in particular, it is difficult to match the results achieved with an individual staff members. As such the brief argues that it is much more useful to pay incentives based on team results.

The act of designing a simple bonus formula is discussed and a suggested calculation provided. The brief then looks at situations under which the basic formula can be refined before providing advice on the distribution of group bonus pools.

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