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Library » Risk Management: Optimizing Performance and Efficiency Series

Risk Management: Optimizing Performance and Efficiency Series
2010, MicroSave

Providing microfinance practitioners with practical and actionable advice

This booklet guides MFIs on risk management.

Microfinance lacks traditional risk mitigation mechanisms like collaterals and guarantees. MFIs need to manage various risks, such as:

Credit risk, which can be managed by assessing group stress, detecting early warning signs of likely default, and loan portfolio audit;
Operational risks that include failure of a particular process, staff and client frauds as well as failure of an MFI’s management information system;
Financial risks that include interest rate, liquidity and foreign exchange fluctuation;
Strategic risks caused by the failure of the MFI’s strategic choices, which include mission drift, competition, product development and governance.

The identification of risk and adoption of an appropriate mitigation strategy can be a complex task that needs skill, preparation and commitment. The booklet is divided into four categories, namely, institutional risk management, operational risk management and process mapping, credit risk management and loan portfolio audit and financial risk management.

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Publisher(s):
MicroSave