Staff Incentive Policies for Credit Officers: An analysis of their effects within heterogeneous firms and contexts and across multiple tasks

This paper explores how changes in monetary staff incentive contracts affect the productivity of credit officers within microfinance institutions. The study uses a unique data set from five microfinance institutions that includes productivity data at the credit officer level for several months before and after a change in the incentive schemes. In each of the institutions, the monetary incentives were increased from a relatively weak-powered scheme to a moderately strong-powered scheme. The effects were quite significant on various measures of productivity but were notably heterogeneous across tasks, individuals, branches, and institutions. The results are consistent with an expanded principal-agent framework that also accounts for noncontractible differences in local market conditions.