Top The outcome of various programs on poverty alleviation and the development of microenterprises does exhibit its weaker performance. Microcredit project for women is one of the foremost programs in the harmony of poverty alleviation and microenterprise development in the country. The effectiveness of the program could be recognized on the basis of its performance analysis.
We proofread, edit and make the paper upto mark without any flaws. Starting Rs for 10 pages. Strategies adopted by microfinance institutions in India to mitigate risks By Deepti Sharma and Priya Chetty on April 11, Being in business for about more than 30 years, microfinance institutions still have to face risks.
There is a need to build strategies to mitigate risks. Some of the major reasons include: Even though avoiding risk is not possible but its mitigation is possible. Therefore, microfinance institutions in India have started using innovative risk management strategies. This article will discuss various risks and strategies that are used by these institutions.
Classification of risks in microfinance institutions The types of risks faced by microfinance institutions are categorized into: Mismanagement by staff, failure of functioning of a process, frauds by staff and clients, insecurity in portfolio management are some reasons for operational risks.
Strategic risks arise due to poor leadership which lead to inefficient decision making. Furthermore, poor governance leads to the improper implementation of policies and inappropriate business strategies Subburajan and Reuben, The diversification of these institutions as commercial banks has also increased the risks.
Some of the issues such as liquidity risk, volatility in the exchange rate, interest rate, cash movement are also major problems. Consequently, credit risk in micro-financial institutions is due to their policy of having no collateral during the lending process.
This led to a high rate of defaulters MicroSave n. Existing measures adopted by the microfinance institutions of India Microfinance institutions being the game changer for the rural sector by uplifting them from existing poverty level are not free from risks.
General risk management strategies are in use and some examples from other microfinance institutions are: Quantitative assessment coupled with incentives and penalties to mitigate credit risk This involves default risk and delayed payments which come under individual loans.
Similarly, another is portfolio risk which arises when clients deposit the money in unreliable or weak institutions that are in on the verge of solvency. In order to prevent credit risk, microfinance institution perform: In the case of agriculture loans, credit officers are trained for credit appraisal and management.
It is now in practice that loan is preferably given to the individuals having a various source of incomes. Group lending is one of the innovative tools used to mitigate credit risk.
The outstanding feature of group lending is that no collateral is required to lend loans but the group is responsible for the payback of the loan EY Thus, peer pressure act as a collateral in this case. An excellent example of these strategies is given by the Association of Social Advancements ASA a microfinance institution of Bangladesh which include building a strong credit culture, reporting of activities where credit is being used and strict organizational control.
Mitigation of operational risk by focusing on the recruitment process Due to increase in diversification, geographical expansion offices far from the head office, remote area offices and positioning of officers from a long period in microfinance institutions in India, operational risks have increased over time.
Microfinance institutions in India facing operational risk use various strategies to mitigate risks. Some of the most used strategies include: Number of staff recruited by microfinance institutions in India Source: The Bharat Microfinance Report, Training of staff towards client-centric work not only improves efficiency but also leads to a loyal base of employees.
Technology intervention has also proved to be helpful in reducing human error. Diversified portfolio to mitigate market risk Many institutions are exposed to market risks, mainly interest rate risks which arise due to two major reasons. Firstly, due to the slow adjustment of institutions towards variable interest rate in the market.ACHIEVEMENTS AND CHALLENGES OF MICROFINANCE INSTITUTION IN ETHIOPIA THE CASE OF ADDIS ABABA Rahel Hurissa Bachelor’s Thesis December Degree Programme in .
Microfinance institutions may also design their credit programs to fit specific villages or specific groups and screening may be based on criteria that influence outcomes of interest (Berhane, ).
The Role of Micro-Finance Institutions to the Growth of Micro and Small Enterprises (MSE) in Thika, Kenya (Empirical Review of Non- microfinance service to the growth of MSEs in developing countries.
The study sought to and microfinance institutions that are meant to disburse Government funds are charging high interest. the contribution of microfinance institutions to poverty reduction at south district in zanzibar haji yussuf haji a dissertation submitted in partial fulfillment of the.
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Although, some of the microfinance institutions provide insurance and payment services, but the main approach of financial services is to provide credit and raise the savings. Rather than a banking function, it comprises a developmental tool.
This thesis argues that microfinance institutions must first accept the limitations of. Microfinance Institutions 39; Transparency, Governance and Risk in Sub 39; Transparency, Governance and Risk in Sub-Saharan Africa (Thesis, Doctor of Philosophy). Financial sustainability of rural microfinance institutions – Greenwich (MFIs) in.
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