MICROFINANCE PUBLICATION WRAP-UP: “FinDev Azerbaijan: Retaining Key Staff Through a ‘Pay for Performance’ Culture;” by Sevda Huseynova, Jalal Aliyev, Kinga Dabrowska; published by Microfinance Centre

“FinDev Azerbaijan: Retaining Key Staff Through a ‘Pay for Performance’ Culture;” by Sevda Huseynova, Jalal Aliyev and Kinga Dabrowska; published by the Microfinance Centre; March 2014; 7 pages; available at http://www.mfc.org.pl/sites/mfc.org.pl/files/FinDev_SP_Fund_ENG.pdf

The authors of this paper describe Finance for Development Limited Liability Company (LLC) (FinDev), an Azerbaijan-based institution that offers economic opportunities for poor people, particularly the evolution of its “staff performance appraisal system and salary compensation scheme.” Additionally, the authors identify areas in which the appraisal system might be improved.

The first section of the paper offers background information on FinDev, which was established in 1997 in Baku as the “Savings and Credit Program of Oxfam GB,” a UK-based NGO. In 2002, the institution was transformed into an LLC and commenced operation as a non-banking microfinance institution (MFI). In 2006, FinDev commissioned an audit of the social value of its operations and received a “BBB-” social rating, approximately the fourth highest rating on an eight point scale, from MicroFinanza, a rating agency specializing in microfinance. As of 2014, FinDev offers groups and individuals loans for microenterprise, land and household items as well as for expenses such as education, home construction and medical care.

The authors of the paper note that FinDev used Oxfam’s policies and procedures up to 2008, at which time it formalized its own policies and established an independent human resources (HR) system. An incentive scheme for lending staff was established in 2011, and the organization also established a bonus system, which is linked to “performance” for loan officers and to “staff evaluation” for non-lending staff. The scheme includes guidelines regarding training for staff members. In 2012, it was upgraded with the addition of an HR manager.

The new performance management system includes the following steps: “performance objectives planning,” “interim performance review” and “full performance appraisal.” Detailed guidelines for each step were established, and tools to implement the guidelines were identified, including an “activity plan” and forms for purposes such as: “self-appraisal,” “salary review request” and “needs assessment.” The performance appraisal system enabled line managers to award a performance rating to each employee. Based on their ratings, employees may receive a salary increase, bonus or promotion; or they may be terminated. Incentives are offered to loan officers depending on several metrics, including attracting new customers; outreach to rural communities and women; quality of client interaction; quality of social data gathered; client retention rate; and loan portfolio quality. Also, an appeals process was put in place through which staff members can contest poor evaluations.

The authors add that FinDev regularly conducts surveys in order to receive feedback from staff members on the work environment, management processes and – from those who resign from service – reasons for leaving the organization. With regard to the performance appraisal system, the following areas of potential improvement have been identified: creating a “joint employee-management working group” to encourage ongoing feedback, creating a non-discrimination policy to ensure gender equality and incorporating additional social performance indicators into the appraisal system.

In summary, the authors conclude that – in the experience of FinDev – the performance appraisal system contributes to better employment loyalty and higher service quality.

By Alíz Crowley, Research Associate

About Finance for Development LLC (FinDev)

Finance for Development LLC (FinDev) is an Azerbaijan-based financial institution that began operations in 1997 as a savings and credit project of humanitarian organization Oxfam Great Britain. Registered in 2002 as an independent entity, it provides a variety of group and individual loans for microenterprise, land and household items as well as for expenses such as education, home construction and medical care, mainly in rural areas of Azerbaijan. As of 2012, FinDev reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 18.7 million, a gross loan portfolio of USD 16.9 million and approximately 10,600 active borrowers. As of December 31, 2011, FinDev reported return on assets (ROA) of 8.08 percent and return on equity (ROE) of 28.7 percent. FinDev does not offer deposit services at this time.

Sources and Additional Resources

Microfinance Centre, March 2014, “FinDev Azerbaijan: Retaining Key Staff Through a “Pay for Performance” Culture”

MicroCapital, January 25, 2013, Grameen Crédit Agricole Microfinance Foundation (GCAMF) Loans $666k to FinDev of Azerbaijan, $320k to Phoenix+ of Tajikistan

MicroCapital, January 17, 2012, responsAbility Invests $2.3m in Microfinance Institutions Arnur Credit of Kazakhstan, FINCA Armenia, FinDev of Azerbaijan

MicroCapital, November 21, 2011, Grameen Crédit Agricole Microfinance Foundation Lends $2m to Microfinance Institutions Hekima of Congo; Findev of Azerbaijan; Chamroeun, TPC of Cambodia

MicroCapital Universe Profile: Finance for Development LLC (FinDev)

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