the microbanking bulletin - Microfinance Information Exchange

BULLET HIGHLIGHTS AND TABLESIt is expected that high wages would positivelyaffect staff productivity—more inputs (salaries)should produce greater outputs (loans). But inmicrofinance, striking regional differences meanthat you do not necessarily get what you pay for.Asia has the lowest relative remuneration and thehighest productivity ratio, whereas the lowestproductivity comes from the region with the secondhighest wages (Eastern Europe). Althoughproductivity in Africa is relatively high, salaries aremuch higher than anywhere else (relative to GNPper capita) to the point that they were notadequately covered through interest income. Thispartly accounts for that region’s low self-sufficiencyratio (see Figure 6).Figure 6: Average Staff Salaries, Productivityand Self-Sufficiency *Avg. StaffSalary /GNP percapitaStaffProductivity(no.)FSS(%)All MFIs (n=124) 5.8 122 90Africa (n=26) 12.4 154 83Asia (n=24) 3.6 177 93Eastern Europe (n=14) 7.3 63 90Latin America (n=54) 4.6 125 97* Data are calculated by dropping the top and bottom percentiles for eachregion and the top and bottom deciles for All MFIs.Staff TrainingThe fourth productivity driver is staff trainingobtained through apprenticeships and formaltraining provided inside and outside of the MFI.One would presume that the more an MFI invests intraining (up to a point), the more productive its staffshould be. This result should come from the directinvestments in skills that enable staff to be moreproductive, as well as the expectation that traininginvestments should reduce the detrimental effect ofstaff turnover on productivity.About 60 MFIs reported the budget spent ontraining their staff. Regional differences, however,made it difficult to demonstrate a link betweentraining investments and productivity. On average,African MFIs spent over 250 percent more thanLatin American MFIs on training, and yet theirproductivity levels were almost the same.Furthermore, a clear relationship between productivityand staff training was difficult to establish dueto limited standardization in the reporting of thetraining budget. Underestimation is possible sincethe training budget may not include the cost of inhouseapprenticeships. Similarly, overestimation ispossible if data are contaminated with trainingbudget for clients.Productivity TrendsThis section provides information on the historicalpattern of productivity changes in MFIs and itseffect on institutional performance.Is the Industry Headed in the Right Direction?Microfinance institutions are improving their levelsof productivity and profitability over time, albeitslowly. Since 1998, the Bulletin has accumulatedfinancial information from 95 MFIs for at least twoconsecutive years.Of these 95 MFIs, 61 percent raised their financialself-sufficiency, 73 percent experienced an increasein staff productivity, and 61 percent showed adecline in their administrative costs relative to loanportfolio. Average change in productivity was about24 percent.1Figure 7: Effect of Positive Change in Productivity on Change in FSSChange in FSS0.80.60.4R 2 = 0.02680.200 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Change in Staff Productivity38 MICROBANKING BULLETIN, APRIL 2001