Motivating Loan Officers to Improve the Provision of Financial Services to the Poor

This study explores how information on incentives can influence the performance of loan officers of Microfinance Institutions.


Microfinance Institutions (MFIs) face various organizational challenges such as reducing employee turnover and designing effective incentive schemes for workers becomes more urgent as MFIs are growing. In order to increase performance, MFIs have started applying established management tools. However, the nature of MFIs, their mission and vision for their customers, may interact with monetary-based incentives and must be considered side-by-side. The demanding job of a loan officer calls for a careful recruitment process to find suitable candidates. Despite the best efforts, loan officer turnover is high for most MFIs, increasing costs for recruitment and training. Furthermore, classic incentive schemes that mostly condition on repayment rates may be detrimental, resulting in excessive pressure put on customers. Performance measures may also interfere with the MFI seeking to serve remote communities where customers are especially vulnerable but the return of a loan officer’s effort is comparably small, making compensation based on effort difficult.

This study explores how information on incentives influences the performance of loan officers. Information is delivered through an app and the study hypothesizes that clarity on incentives will lead loan officers to work harder and improve their performance in order to avail a higher bonus.


Due to the disruptions caused by the COVID19 pandemic, the scope of the project has been revised. A baseline survey has been completed, and the midline data collection is underway.

Thematic Area

Financial Well-being and Social Protection

Project Leads

Kristina Czura, Lisa Spantig


Uttar Pradesh


Sonata Microfinance