Risk Management Practices in Indian Microfinance Sector

Abstract

Microfinance institutions (MFIs) are exposed to a great number of risks such as institutional risks, operational risks, financial management risks, and external risks that threaten effective services to clients, financial stability, and future sustainability. In this background, the objectives of the chapter are (1) to understand the concept risk and risk management of MFIs and (2) to examine the risk management practices of select MFIs in West Bengal. Based on the objectives, a structured questionnaire has been prepared to examine risk management practices of MFIs and problems associated with implementing risk management tools and techniques. The study found that most of the MFIs have not adopted risk management tools and techniques so far in their institutions to minimize risks. The study also found that the small MFIs are lacking qualified and professional persons in management and hence facing more strategic and governance risks.