The microfinance industry (MFI), which was pioneered in 1970 with pilot micro credit programmes for providing small loans to poor and low income households, has seen a remarkable growth in Asia and the Pacific Region over the last three decades.

In Pakistan, over a period 1999-2008, it has expanded from a client base of just 60,000 to a 1.5 million borrowers. This is an outcome of a focused strategy and investment on the part of the government and a pro-active response by stakeholders including donors, regulators, wholesalers, retailers and clients.

According to a recent survey report on “HR challenges and solutions in microfinance”, issued by the Microfinance Insights India, people-related issues are most challenging, as compared to financial and technological matters. After recruitment, the training and capacity-building turn out to be a predominant factor in preventing human turnover in an MFI. Hiring and retaining good quality human resources is also one of the most important responsibility of the industry.

Human resource development challenges in an MFI are not all that different from those of other companies; however, working with populations at the bottom of the pyramid, particularly in a country with varying political and economic environment is bound to generate challenges unique to MFI. Performance metrics indicate that any MFI which facilitates the learning of its staff, constantly transforms itself. The learning has a lot of implications on future profitability, delivery of services, and role of people development in an organisation.

Since the concept of human resource development is still in infancy stage, mimicking organisational structures, processes and styles, will not help and mangers must encourage employees to draw on their experience, question the existing approaches in terms of efficacy, and allow airing of conflicting ideas without reproach.

Staff learning is an ongoing process throughout the entire relationship between employees and the MFI. Ongoing learning involves planning to identify new skills that employees need to fulfill personal and corporate objectives. Learning may also involve cross-learning so people can perform a variety of jobs. This can reduce the business’ vulnerability to absenteeism and attrition and creating flexibility. Cross-learning can also enhance the ability of staff to participate meaningfully in redesigning work procedures to spur growth because employees can see the work environment from various perspectives. Staff rotation is another instrument which can facilitate the transfer of innovations between branches and assist in preventing fraud.

In an MFI, line manager has a major responsibility for development of their subordinates. This is possible by promoting an environment at workplace where the people search for the knowledge, through routine exchange of information, peer group learning, coaching, mentoring, on the job training. Role of line mangers is profoundly important because they are intimately involved in skill gap identification of subordinates. Since the performance appraisal is vital for employees’ development, line mangers should use the tool effectively. In an appraisal process, the manager should concentrate on the future instead of past, provide feedback on behaviour rather than personality, focus on improvement rather than punishment, base comment on information instead of belief, secure commitment instead of compliance, extend active support instead of being directive with a philosophy of “how can we benefit” instead of “what I get from this” process.

Management communication style is another factor in the growth of employees. This aspect again reinforces the earlier theme of strengthening the role of line manager as an institution. Line manager is expected to act as a facilitator rather than boss, seen as a “servant leader” helping subordinates in achieving results and devoted to their personal development. This is doable by focusing on guiding, energising, motivating, mentoring, facilitating, problem solving, and empowering employees to reach their potential.

When an MFI increasingly expects line managers to undertake learning and development activities, there should be rewards for doing so readily. Chief executive’s visibility in training sessions has very positive implications, sharing with employees, the vision for the business, how employees role fits into the bigger picture, and what benefit they would draw if they are committed to making that vision a reality.

In a rapidly changing and increasingly knowledge-based economy, competitive advantage is built where individuals actively seek to acquire the knowledge and skills that promote the organisation’s objectives. MFIs that have the capacity—including a proven lending methodology, a well-managed staff learning programme, an effective information system, access to large volume of loan capital, and the administrative capacity to process volumes of applications efficiently are probably ready to achieve economies of scale. Human resource development interventions are explicitly linked to MFI business requirements.