Dimensions of Risk in 21st Century Microfinance

Faculty:
Sanjay Sinha

During the past few years, managing microfinance graduated from being perceived as a moderate growth, low risk activity for the benefit of the poor to one that was seen as a fast growing industry for the delivery of financial services to low income clients. The pursuit of high growth, client numbers and MFI valuations brought with it problems of multiple lending, over-indebtedness, mission drift, over-stretched internal controls, governance challenges, client protection issues, liquidity concerns and exposed weaknesses in information technology. The net result of this has been a substantial loss of credibility for the industry as seen in its near collapse in one major country and the need for crisis management in a number of other countries. This course will discuss the issues indicated above from a management perspective. It will cover the nature of the risks arising from the problems that have emerged and will enable participants to consider how they and/or their MFIs can create a risk culture in their organisations to enable the management of market risk, credit risk, interest rate, and other risks associated with all aspects of operations leading to the institutionalisation of a risk framework that incorporates measures to mitigate the risk factors.