HR issues faced by MFIs such as

 high turnover
 lack of training capacity
 effective recruitment policies
 competition

HR Challenges of MFIs

MFIs have large base of borrowers availing very small loans. This large number of borrowers
overburdened the staff at MFIs (borrowers/total staff in MFI) and productivity ratio of each staff
decreases. 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. Group lending can be the solution of this
problem.

Human resource management (HRM) contributes substantially towards the success of MFIs.

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.

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.

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.

Women employee participation in MFIs is very low. Female borrowers constitute the major part of total
borrowings of any MFIs. 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.

Sectoral level challenges: as a sector, microfinance has extraordinary growth potential. But it is
recognized by few players who involved in this business and few strategists who know the potential
only. Other people are largely unaware and skeptic about opportunities that lie before them.
Microfinance being employees' intensive industry, their interpersonal relationship and service quality to
customers will make large difference in developing the organizational wealth. Otherwise it will effect on
shrinking margins on business and discourage the spending on human resources and finally result both
quality and quantity of human resources suffer.

Organizational level challenges: when organizations are growing rapidly, the human resources are not
increasing accordingly. It leads to improper ratio of clients per officer to keep costs down. Finally it will
impact on low morale, beginning of turnover, MIS backlogs and decline in portfolio quality. Sometimes,
to scale-up operations and portfolio, it demands recruitment of new staff in large numbers. Usually the
hiring process found with cost in mind and thus hires less qualified people. This may tolerate up to
certain extent, thereafter the organization faces the growth crisis.

Individual level challenges: Most of the talent particularly youngsters are reluctant to work in remote
areas. Initially few may work with small MFIs and then move on to higher paying jobs with bigger
employers. MFIs at rural places function with limited requirements and the lack of induction, training
and skill enhancement remains a challenge. Employees may struggle for growth and increments, limited
exposure as compared to city environment.

Advantages:
 Human Resource Mobilization – initiation is extremely easy when it comes to moving masses,
like in the case of video the beggers were used as extended human resource without
employee/employer relationship, but on the basis of mutual advantages.
 CSR – as a social business with no profits