This article complements what was written some time ago in: “The problem of poor goal setting for credit analysts in microfinance” (http://elanalista.com/?q=node/13).
The business of Microfinance Entities (read: Municipal Banks, Rural and Financial Banks) not only covers placements, reduction of arrears, increase in the number of clients, etc.; but also, the capture of deposits and the sale of collaterals; and it is precisely in these last two areas where the greatest weakness is observed.
It is not clear to whom the goals of attracting deposits and collaterals should be assigned (read: micro-insurance, among others).
The usual thing is that Credit Analysts are only measured by loans and related activities, but not by deposits or collateral; and promoters are hired to attract deposits. The disadvantage of this modality is that many times the function of the promoter is distorted, when savers are captured in the entity's own yard or are directed by the rest of the staff, generating the payment of an incentive, without any effort. Hence, in many Entities the figure of the Funding Promoter has been eliminated.
At other times, the goal is assigned to the back - office (operations staff). However, many times it does not work, because the Heads of Operations do not identify with the goal, because they are not part of the comprehensive evaluation of their management. One way out would be the allocation of a bonus to the back office staff, for the achievement of results.
However, the current trend is to include deposit and collateral goals within the Credit Analysts Incentive Plan. Therefore, it is now increasingly common for Analysts to place, take deposits and sell insurance.
My recommendation is for a combination of the Incentive Plan described above plus a deposit goal for the back-office, which would be in addition to the deposits assigned to the Credit Analysts, in order to avoid duplication of commission for the same clients.
Regarding the distribution of the incentive for each type of goal, it will depend on the strategic objectives of the organization, which will be based on its appetite for risk.
Finally, I do not wish to overlook an important issue, related to determining the placement goal of Credit Analysts. If there is no segmentation and specialization, it should be divided by types of credit and product, according to the placement and profitability structure that is sought.
The same should apply in the case of arrears. There must be a default goal by type of credit (for micro and small businesses, for example). Let's not forget that there is currently a clear trend in Microfinance Entities to place more loans to small businesses. Therefore, by increasing its participation in the total portfolio, the participation of microcredits is reduced. Consequently, the delinquency of microcredits is not reflected in the total delinquency, since their contribution is marginal. Situation that causes carelessness in its monitoring.
Hard work, but not impossible.
